Zimasset is stillborn

The question of who killed the economy has been cropping almost everywhere. Every now and then.

The truth is that MDC and Tsvangirai did not kill the economy because they do not know what the economy is and what to do with it.

The truth is Zanu PF and Mugabe killed the economy because they do not know what the economy is and what to do with it.

So those in Zanu PF who claim to know why the economy died should not point fingers at MDC. And those in MDC who point fingers at Zanu PF for killing the economy should not because they are as idiotic as their counterparts in the ruling party.

Maybe to understand this, one has to go back to as early as 1990s when the economy started but slowly to give in.

It’s a fact that at independence in 1980, Zimbabwe spent a lot of money in health, education and various other sectors to bridge gaps created by an unfair and unjust system.

Spending on education rose from Z$227,6m in 1979 to Z$628m in 1990 while health expenditure went up from Z$66,4m to Z$188,6m.

A huge public service sector, subsidies, the 10-year involvement in the Mozambican civil war from 1982 to 1992 and then subsequent drought years further debilitated the economy such that by mid 90s prices had become unstable. The budget operated on a deficit and taxes became high. This drove public debt higher.

To recover lost economic growth, the government accepted the Enhanced Economic Structural Advancement Programme (Esap) in 1991. The programme that ended in 1995 meant that all subsidies had to go; public enterprises either be nationalised or privatized to enhance growth; streamline government by cutting down on expenditure.

Esap was supposed to be a short term programme that would first snuff out some jobs in order to create more. But it did not work. The privatisation or nationalization of PEs without better management led to further decline in productivity. Government did not reduce expenditure. No jobs were created. And deficit went further up. Instability chipped in.

A few black business people operating as advocates for black empowerment demanded their entitlements and government acknowledged them by giving contracts and concessional loans.

This further put pressure on government forcing it to borrow domestically thereby causing even more instability. Consumer prices skyrocketed.

Under Esap, government was also forced to fall into heavy debt and international donors refused to write off the debts because the Zimbabwean government had failed to honour its part of the deal.

After the failure of Esap, government cooked up the Zimbabwe Programme for Economic and Social Transformation (Zimprest) in 1996. Zimprest was supposed to be implemented by government, business, labour and civil society through the National Consultative Forum (NECF). 

Although Zimprest was promising in the first two years when growth reached 7%, the depreciation of the Z$ because of low tobacco and minerals’ prices hit the economy hard. This was followed by a disastrous 1997/ 98 rainfall season. Inflation took its toll and most industries did not perform as expected.

One major event that drove the economy onto to its knees was the ex-combatants’ payouts in 1997 when government was forced to fork out Z$4b as compensation to former freedom fighters.

Since the money had not been budgeted for, the Z$ lost with a record 72% against the US$ and the stock market crashed by 46% on 14 November 1997 signaling the economic meltdown that is still haunting the country today.

The payouts depleted foreign reserves which according to Kingdom Financial Holdings statistics at the time fell from US$760m early 1997 to US$255m by November of the same year. This exposed the local currency which at the time was worth US$1,315.

The Reserve Bank of Zimbabwe was also exposed because it meant that with such low foreign reserves, it could only underwrite imports for a month.

Government’s debt in 1997 was more than $60 billion and it was estimated that servicing the debt cost more than a billion a month. Servicing this debt ate into resources that could otherwise have been channeled towards education and health which started to decline.

In response to the crisis, the government increased bread, sugar, soft drinks, combi fares, milk and mealie meal prices and the consumers rioted in protest.

As if that was not enough, Zimbabwe was sucked into the DRC civil war in 1998 resulting in the IMF and several other donors suspending financial assistance.

By 1999, it was clear that the economy was heading west. The final nail was the haphazard takeover of farms by ex-combatants as part of their demands. This drove agricultural input down.

With the birth of the Movement of Democratic Change (MDC) and political violence, economic sanctions – the Zimbabwe Democracy and Economic Recovery Act (Zidera) - were imposed in 2001 by the US. This meant no loan extensions, no credit guarantees and no debt reduction or cancellation.

The fact is that the sanctions came to haunt an already battered economy and in a bid to revive the economy, Gideon Gono was appointed the RBZ governor in 2003.

This is the man who could have saved Zimbabwe had all the money he gave out been utilised for the benefit of the nation at large. His policies are not in any way different from those of US president George Bush and his successor Barack Obama and indeed other government elsewhere.

The only difference is that Gono’s biggest enemy was corruption. Most of the people who received money, diesel or machinery from the central bank misused them. Up to now, there has not been any audit to bring to book people who squandered the resources.

The other factor was that some Zanu-PF members thought they were entitled to enjoy the gifts from the reserve bank while the opposition stood by - criticising.

In an interview years ago, Gono admitted that his programmes failed because of farm under-utilisation and disruptions; rampant corruption; indiscipline as well as lack of law and order.

Maybe the start would be dealing with corruption.