1 August 2014

Zimbabwe: I'm Not Sleeping, Says Chinamasa

IN a move that shows government has failed in its plans to turn around the economy, Finance minister Patrick Chinamasa has called on captains of industry to bring forward concept papers on how to revive the economy.

Addressing captains of industry at the just-ended Institute of Chartered Accountants of Zimbabwe (Icaz) winter school in Victoria Falls, Chinamasa said the state of the economy requires an inclusive approach where everyone brings forward ideas on how to turn around the economy.

"I am inviting you to bring concept papers through your council because you have strong links with foreign investors who have capital which we do not have here," Chinamasa said.

"I am not sleeping because I am trying to come up with ideas that may help revive this economy. We have a challenge because wherever we go investors are saying there is need for policy clarity, especially on indigenisation. We are currently reviewing the policy so that it is clear because investment security is important for the economy to take off.

"No one wants to lend Zimbabwe money anymore because we have defaulted in the past. Whether we go to Zambia or to Malawi, it's the same thing because we are indebted to these countries. We are on our own and we have to be more innovative."

He also said he would continue re-engaging the international community to try and attract foreign direct investment.

Since his appointment as Finance minister, Chinamasa has made many foreign trips and met potential investors as Zimbabwe seeks a loan to fund its ambitious Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset), a policy document pitched as the panacea for economic revival by the Zanu PF government. ZimAsset requires about US$27 billion to implement.

In his address, Chinamasa said he was shocked to discover that the Senegalese government was awarded a US$7 billion loan after they requested US$3 billion from the European Union.

"Three weeks ago, I went to Senegal and discovered that they were offered a US$7 billion loan from the EU after they requested US$3 billion. They were oversubscribed and imagine how that can help our economy if we were to get such an amount," he said.

A heightening financial squeeze is forcing Zimbabwe's administration to broaden its options for an emergency bailout and the country has now turned to Russia. Chinamasa and Mines minister Walter Chidhakwa left for Moscow on Sunday to plead with various investors for cash injections.

Apart from the liquidity constraints, Zimbabwe is also saddled with a US$10 billion debt.

Economic analysts say with Zimbabwe's poor debt payment record, it would be difficult for any international lender to extend credit lines to the country which is suffering from a severe liquidity crunch.

Economist Godfrey Kanyenze, director of labour and economic development for Research Institute of Zimbabwe, said Zimbabwe is facing deeper structural challenges.

"The country is experiencing a deeper structural malaise as companies close shop everyday resulting in a highly informalised economy," Kanyenze said. "This results in shrinking liquidity as money is not getting into the banking sector. The economy cannot grow when 84% of all jobs are informal."

During heated debate in Victoria Falls, a Zambia-based Icaz member Elisha Tsindikidzo took Chinamasa to task over what government is doing to attract investors.

"What is government doing with regards to boosting investor confidence because there are promises which do not materialise in the end?" Tsindikidzo asked.

Chinamasa's response centred on the controversial indigenisation policy.

"As I have already indicated, cabinet and (the Zanu PF) politburo tasked Indigenisation minister Francis Nhema to review the policy so that there is clarity," he said. "The one-size-fits-all has failed to entice investors. We are synchronising our policies and, besides, we have a problem with our wage bill which takes up a large chunk of our budget, 78%. That does not need an international economist to tell us that our wage bill is not sustainable."

However, Nhema has denied he is reviewing the indigenisation policy.

Chinamasa's call for help from captains of industry comes at a time when the country's economy has underperformed in the first half of the year with the country's gross domestic product growing by a mere 1,8% in the first six months of the year amid indications the second half will be worse.

Chinamasa's plea to captains of industry appears to contradict recent statements by Mugabe that the economy was on the rebound.

Addressing guests at the 2014 President's Medal Shoot Competition prize-giving ceremony in Harare, Mugabe said the Zanu PF government had employed several strategies to get the economy out of the woods.

"Let me assure our people that the country's economy is on a recovery path. Government is going to employ several measures aimed at achieving desired results. Key among such strategies is ZimAsset," he said.

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