Financial Gazette (Harare)
Juniours Marire
27 September 2008
opinion
CONGRATULATIONS to Zimbabweans for arriving at a bloodless political settlement. Many thanks to the political leadership and the Southern African Development Community role in brokering the power-sharing deal.
In previous articles, I made it clear that it was "crisis of confidence" in the then political leadership that was undermining every attempt to check economic meltdown.
I also alluded to the importance of political rights, economic rights and civil rights reforms, as these have empirically been found to cause economic growth both in the short and long terms. It is gratifying to note that the agreement to which the party principals appended their signatures is a comprehensive stance to, among other things, reform politico-civil-economic rights and come up with an economic recovery plan.
Essentially, the agreement has three broad tentacles, namely: political legal reforms, economic reforms and social reforms, with an intended end of alleviating poverty and abating falling living standards and buttressing sustainable economic growth and development.
Political reforms
Pursuant to the breaking of the political polarisation that has been going on for a decade, parties have chosen to bury their differences and work together. That in a bigger way should help create a conducive policy and investment environment that will engender sustainable economic recovery, growth and development. This is what empirical analysts have found, chiefly that a reform in political rights, by and large, will contribute to economic gro-wth. Now people have freedom of assembly without persecution.
Legal reforms
At the heart of a safe and sustainable investment environment is a robust legal and regulatory framework.
Empirical analysts have consistently found a robust relationship between economic growth and development with constitutional reforms that essentially promote political rights, economic rights and civil rights.
Both domestic and foreign investors will find the investment climate safe following constitutional reforms that would buttress sanctity of property. It was for lack of property rights that investors shunned Zim-babwe away. However, with the new era, we anticipate a surge in real investment portfolio inflows.
True, democracy is the mother of all good. It should be emphatically stated that the judiciary system should be ostensibly reformed to facilitate development of good cannons of the judiciary -- fairness, equity, impartiality and unbiasedness.
I also believe that an economic crimes court should be set up with experts in economic crimes sitting over it to judge. This will, by and large, promote economic sanity and root out the cancerous rot of economic indiscipline, corruption, illicit trading, and smuggling of minerals and externalisation of foreign currency.
In fact, before any new economic policy is implemented, there is need for an extensive and comprehensive national economic audit of all state resources. The chief reason for this is that the period of violent political insurgences has been characterised by economic plunder and corruption. The audit will create a level plane for economic correction and take off.
Restoration of economic stability and growth
ZANU-PF and the Movement for Demo-cratic Change principals agreed to develop an economic recovery strategy and implement it fully. The focus of the recovery programme will be to foster full utilisation of production capacity. This would lead to restocking of shops and in a way that will reduce inflation and increase foreign currency generation.
Nonetheless, the programme will work if goodwill created in the donor community and international finance institutions is maintained. There is need for a huge rescue package in aid if the recovery plan is to materialise.
Moreover, the signatories agreed to restore food security. This is against a backdrop of worsening global food crisis largely being driven by global warming.
The battle against food shortages already has a starting point -- the farm mechanisation programme. Enough seed and other essentials and good rains will do it for the season at hand.
It is quite heart warming that SADC is already working a farming inputs pooling plan for Zim-babwe to kick-start the process of recovery and conquering of food inflation.
Yet still another litmus indicator of the degree of confidence of economic agents in the new-look political leadership is the revelation that Zimba-bweans in the Diaspora are planning to invest about US$50 billion in the country.
Capital flows are bound to, in a similar fashion, flow in to the country. That should stabilise the exchange rate. Given rampant dollarisation in the economy, stabilisation of the exchange rate will instantaneously break the hyperinflation inertial.
Party principals also agreed to institutionalise a National Economic Council (NEC). It shall be made up of all economy-wide sectoral representatives. The council will play an advisory role to government and will also formulate and recommend economic programmes to government for approval. In fact these sectoral representatives are best positioned to formulate correct policies that will instantly address their woes. Such institutional reforms as NEC are relevant for economic take off.
Sanctions and measures
They agreed that financial sanctions imposed by the international community had crucified the economy. The disputed election, governance ills and differences over the land reform attracted the sanctions. The reversal of sanctions can lead to availing of technical macroeconomic policy assistance, financial aid (from unilateral, bilateral and multilateral lenders), balance of payments support and access to off-shore credit lines. The result we anticipate is an immediate stabilisation of the currency and increase capacity utilisation. For-eign direct investments are expected to flow in to the economy.
Institutional reforms
They also agreed to de-ZANUNISE/de-politicise all state institutions. At the heart of these reforms is the need to root out corruption bec-ause:
Corruption hurts the poor most severely. It diverts public services from those who need them most and strangles private sector growth
Corruption undermines public support for development assistance by creating an enormous perception that all assistance is affected by corruption
Corruption can impede Zimbabwe's access to increasingly discriminating international private capital flows
In conclusion, I solemnly believe that the following central points should also be carefully considered:
A stable unified exchange rate backed by tight fisco-monetary policies
Increase public sector revenues, via tax reforms and improve public sector prices
A reduced public sector wage bill, through civil service rationalisation and reduced real rates of compensation
Debt restructuring, rescheduling and cancelation
Resumption of concessionary foreign financial assistance from both multilateral and bilateral aid.
Disclaimer: The views expressed in this article are solely those of the author and not of the Zimbabwe Economics Society. The articles are coordinated by Mr Lovemore Kadenge, president of the Zimbabwe Econo-mics Society.
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