18 December 2012

Zimbabwe: Squabbles Continue As Economy Slides


If the state of Zimbabwe's inclusive Government in 2012 was to be described in one word, then "dysfunctional" would tersely explain the relations among the three governing parties. While since 2009 the leaders had pretended that all was well within their marriage, things came to a head in 2012 as their patience with each other ran out and the spectre of new elections became a reality.

Zimbabwe will have to go to elections next year following the end of the five-year life of the current Parliament which began in 2009. Although the marriage has subsisted this long, the differences characterising it have been dramatic.

A minister from one of the three parties in the Government would say one thing, only for another minister from a different party to say something else to the contrary. Among the best examples is the US$750 million deal between the Government and Indian company Essar Africa for the acquisition of state-owned steelmaker Ziscosteel.

Industry and Commerce Minister Welshman Ncube, who is also leader of the smaller MDC party in the inclusive Government, has been squabbling with Mines and Mining Development Minister Obert Mpofu over operations at the renamed NewZim Steel, value of deal and ownership of ore claims which Ncube had allegedly ceded to the new company.

The Mines Minister has refused to transfer the ore claims and to allow the company to export ore without any beneficiation. Mpofu is a member of President Robert Mugabe's Zanu-PF party, which is in a Southern African Development Community-brokered coalition with two MDC factions following inconclusive elections in 2008. Finance Minister Tendai Biti, who is from the larger MDC party led by Prime Minister Morgan Tsvangirai, has also been at loggerheads with Indigenisation Minister Saviour Kasukuwere from Zanu-PF over the intended taking over by blacks of shares in foreign-owned banks, saying that the move would be disastrous.

In fact, the two MDC factions in the Government are against Zanu-PF over indigenisation policy of forcing foreign-owned companies to cede 51 percent of shareholding to black Zimbabweans.

President Mugabe's party, however, remains adamant that this is the way to go in empowering the previously marginalised majority and will use it as a campaign tool during the 2013 elections. It also accuses the other parties of seeking to protect Western interests by ensuring that the indigenisation programme does not succeed.

Squabbles over the constitutional process continued to dominate Zimbabwe's political landscape throughout the year, with President Mugabe recently threatening to dissolve Parliament and call for fresh elections using the current Constitution which does not find favour with his rivals. An all-stakeholders' conference held in October to review the draft constitution only satisfied one of the provisions of the Global Political Agreement in as far as the process towards a new constitution is concerned but did not move the process towards a referendum.

While the purpose of the conference was to discuss and take the constitutional process to another stage, delegates met to disagree and left the Constitution Parliamentary Select Committee (Copac) spearheading the process with a lot of outstanding issues to deal with.

There had been hope among political analysts that a new constitution would have been in place before the end of the year, thus paving way for fresh elections, but partisan interests have apparently superseded the contributions of the general populace.

The three governing parties are now deciding the way forward following disagreements over some of the contents in the draft constitution. Away from the constitution, a slowing economy amid uncertainties over the pending elections has not made the situation any easier, with potential investors staying away.

Industrial capacity utilisation, which had been improving since the formation of the inclusive Government in 2009 and had risen to around 60 percent, took a dip to around 40 percent owing largely to capital constraints. More than 10 companies in the second city of Bulawayo have been placed under judicial management as a result of financial problems, according to the Zimbabwe Congress of Trade Unions.

At least seven textile companies in the city closed down - permanently for now. In Harare, two major food manufacturing companies -- Cairns Holdings and Blue Ribbon Industries - were also placed under judicial management. Finance Minister Biti in July revised the 2012 national budget downwards by 600 million dollars to 3,4 million dollars in the face of the under-performing economy and suppressed revenue collection.

He also revised downwards the projected GDP growth from 9,4 percent at the beginning of the year to 4,4 percent due to the economic under-performance.

Biti identified various political, infrastructural, economic, human and natural challenges which continued to affect the economy.

Presenting the budget statement before Parliament in November, Biti said electricity was the biggest challenge facing the economy with negative effects on production and productivity across all sectors, including households. The country requires 2,200 MW of electricity at peak demand but has only managed to generate an average 1,010 MW during the year.

Power utility Zesa Holdings tried to cover the deficit by importing mainly from Mozambique's Hydro-electrica de Cahora Bassa. Biti also highlighted low domestic savings which were manifesting through liquidity constraints, high lending rates and short-term loans; the absence of foreign direct investment; uneven and non-inclusive growth; de-industrialisation; limited fiscal space; and decayed infrastructure as some of the factors that continued to impede economic growth.

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