22 August 2014

Zimbabwe: Looking East Alone Won't Salvage Economy

Photo: Nehanda Radio
Robert and Grace Mugabe.

opinion

THAT the economy is in crisis is indisputable.

Just last week statistics showed that more than 4 600 workers have been retrenched since the beginning of the year with as many as 1 000 people facing the prospect of being laid off by the end of next month, as the economy continues to deteriorate at an alarming rate.

Statistics show that between 100 to 400 employees are being laid off weekly. All this in a country where about 90% of the population is unemployed.

More worrying is the fact that these are just official figures.

The unofficial story could be much more depressing.

The continued economic decline, characterised by a severe liquidity crunch, downsizings, company closures and expensive debt has spawned massive retrenchments which threaten both the formal sector and the government's tax base which has translated into failure to schedule pay dates for the 236 000-strong civil service.

Zimbabwe Revenue Authority commissioner-general Gershem Pasi said recently government's tax revenue collections were shrinking as the economy contracts.

Yet the country's leadership continues to behave as if everything is normal.

For a government that is in so much economic trouble, it needs all the friends it can get. But apparently, Zanu PF does not realise no man is an island.

Instead of engaging with the international community, President Robert Mugabe and his Zanu PF remain parochial, putting all their eggs in one basket - China.

While Zanu PF continues with its Look East policy, economic developments in the country show Zimbabwe cannot go it alone; neither can it only look to the East for salvation.

Recently Sinosure, a leading Chinese insurance company, refused to guarantee loans from Chinese banks to Zimbabwean companies because of government's failure to repay arrears already owed to China amounting to over US$60 million. Sinosure is worried about the country's poor credit rating and high political risk, as are other investors and lenders.

Against such a background where a state-owned insurer refuses to guarantee Zimbabwe loans, it is clear China alone cannot be treated as the answer to Zimbabwe's formidable economic challenges.

Tomorrow a desperate President Robert Mugabe makes the long trip to Beijing to engage the Chinese on a possible economic bail out.

Despite the friendship between the two countries, there is no escaping the fact that in order to attract capital, the country must formulate policies and enact legislation that promotes investment and protects property rights.

In the words of Australian ambassador to Zimbabwe Matthew Neuhaus a few months ago: "Investing in Zimbabwe is like swimming in the Zambezi between crocodiles and hippos."

Mugabe and his hangers-on urgently need to realise this.

Zimbabwe's indigenisation policy, which compels foreign-owned firms to cede majority shareholding to locals, has been blamed for scaring away potential investors.

Lack of respect for Bilateral Investment Promotion and Protection Agreements and the continuing farm invasions have also been identified as unsettling investors.

But government will not go back on its indigenisation drive despite evidence that it is its Achilles heel.

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