27 October 2017

Zimbabwe: Zim Govt Must Heed Warnings

editorial

Despite strenuous denials by deluded government officials, the economy is in dire straits and all the objective facts point to a catastrophic end to 2017, largely on the back of far-reaching structural deficiencies worsened by mismanagement.

While they continue burying their heads in the sand, the reality is that the economic malaise is untenable, unsustainable and could yet lead to a frightening end-game.

There have been unbelievable claims by government officials and some captains of industry (and these are people who should know better) that Statutory Instrument (SI) 64 of 2016 -- which sought to drastically curtail imports of basic groceries and other listed goods -- has been a commendable success.

However, this self-serving mantra was disproved yesterday by a Confederation of Zimbabwe Industries (CZI) report in the 2017 Manufacturing Sector Survey. The findings are startling, but they confirm what the Zimbabwe Independent has consistently stated ad neuseum: that the nation is faced with a terrible economic disaster and the government has no solutions.

The CZI survey reveals that the manufacturing sector has lost 15% of total jobs in the past year. Capacity utilisation has shrunk to 45,1% in 2017, from 47,4% in 2016. Amid such mediocrity, it will be remembered that capacity utilisation reached 57,2% in 2011 -- during the Government of National Unity.

These numbers tell a scandalous story. For starters, they show that, contrary to the fulminations of public officials, SI 64 and the trade protectionism it espoused have been a disastrous policy experiment.

Far from creating jobs and stimulating opportunities for growth, the ill-advised protectionism has left thousands of workers jobless, with no social safety nets to fall back on. The CZI now warns that 30% of all manufacturing companies are on the verge of collapse, with severe consequences for the imploding economy.

Protectionism does not work. In recent weeks, we have seen prices shooting up, eroding the buying power of long-suffering consumers. The Zimbabwean consumer is the biggest loser in this inflationary experiment. SI 64 protected companies and not consumers. This was tantamount to rewarding and promoting inefficiency and incompetence. As a result of the ill-fated protectionist experiment, business confidence was eroded and investment depressed.

The CZI survey has thrown up an interesting paradox: although capacity utilisation is falling, output is said to be on the rise. This is a damning indictment on some players in the manufacturing sector who, vulture-like, are seeking succour under the umbrella of protectionism.

Protectionism has seen prices increasing at an alarming rate. In tandem, the quality of some products has declined considerably. The economic principle at play is clear and straightforward. Companies are driven by the profit motive and, when they begin believing that skewed government policies assure them of a captive market, there is no incentive to play fair.

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