Zim: No money for revival plan

The new economic ­transformation plan, ZimAsset, presented by ­ Jonathan Moyo promises, among other things, the building of seven new dams across the country, funded primarily by mineral resources. (Gianluigi Guercia/AFP)

The new economic ­transformation plan, ZimAsset, presented by ­ Jonathan Moyo promises, among other things, the building of seven new dams across the country, funded primarily by mineral resources. (Gianluigi Guercia/AFP)

President Robert Mugabe has hugely ambitious plans for reviving and running the economy over the next five years, but there are doubts about how the government will raise the funding to back it up.

The plan, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset), reflects that Zanu-PF is already looking towards the elections in 2018 with lofty promises to overhaul social services and rebuild the country's ­broken infrastructure.

ZimAsset also reflects how secure in power Mugabe feels after his big election win, as Zanu-PF is now free of a coalition partner and can easily squash any opposition to the huge state spending the plan will need.

ZimAsset has been launched to the Zanu-PF politburo, Mugabe's top council, and was approved at a Cabinet meeting this week. It will now form the basis for running the economy over the next five years.

"Approval paves way for immediate implementation of the economic blueprint by government," said Finance Minister Patrick Chinamasa.

The policy was presented to the politburo by Jonathan Moyo, who now heads Zanu-PF's policy unit, a role that also marks his growing influence in the party.

Broad promises
The plan's promises are broad and ambitious, ranging from cheap housing and better access to identity documents to ensuring that all government buildings run on solar energy by 2015.

In the next two years, the document says, key industries mothballed for years will reopen, there will be a "massive” investment in social services, and new roads will be built.

By 2018, a "blitz” in infrastructural development will have resulted in millions of new homes, power plants, mines, a diamond cutting centre and even seven new dams built across the country.

The plan even promises to wipe out $6.1-billion of the country's debt by 2018. The government is looking to its mineral resources to fund the plan.

In a foreword to the document, Mugabe says the spending will be backed by the "judicious exploitation of the country's abundant natural and human resources”. The document itself says Zimbabwe could earn an additional $5-billion each year from its exports if it adds value to minerals.

Apart from taxes, funding will also come from partnerships with new investors, remittances from the diaspora, securitisation of state assets and the issuance of bonds on foreign markets.

Raising money
But investment analyst Richard McCawley says raising money on international markets will be tough.

"Other countries in the region have issued bonds successfully, but they don't come with the baggage we have here,” he says.

Economist Charles Makina doubts even mineral sales can cover the bill for the plan.

"I don't imagine even the diamond companies are remitting enough at this stage, given [that] most began production only over the past three years,” Makina says.

Under the programme, economic growth will reach 9.9% by 2018. The government will also pour money into state institutions such as state farm lender AgriBank, and the Grain Marketing Board, whose failure to pay farmers for grain has cut production.

More money will be put into a presidential input scheme, which will hand out seed and fertiliser to growers.

No early return to the Zim dollar
There will be funds for the Infrastructural Development Bank of Zimbabwe, which will be "recapacitated to enable it to strategically fulfil its mandate in infrastructure development”.

Zanu-PF, once again, is careful to stress that there will be no early return to the Zimbabwe dollar, saying that there will be "continued use of the multi-currency regime to consolidate macroeconomic stabilisation”.

A sovereign wealth fund "will be given priority under this plan to provide predictability and sustainability to government innovative funding”.

In his foreword to the plan, Mugabe concedes that for his grand plan to succeed, there will need to be some financial reforms.

"Given the resource constraints, government will come up with robust and prudent fiscal and monetary measures to buttress and boost the implementation of ZimAsset,” he says. But there is little detail on what these reforms may be.

While the government remains stridently opposed to the West and its lenders, the new plan proposes to "accelerate the re-engagement process with international financial institutions and creditors”.

The planned spending binge is despite Zanu-PF admitting in its policy document that deficits are widening due to rising spending against a weakening tax base.

This will be countered by "fiscal reform measures in order to improve fiscal policy management and financial sector stability”, according to the policy.

Mining and platinum
Key to raising export earnings will be to compel mines to add value. The government has pressured platinum producers, for instance, to build a refinery in Zimbabwe.

The companies previously said this was not commercially viable, but it appears they are now relenting.

It was reported this week that the three big mining investors in Zimbabwe, Impala Platinum, AngloPlats and Aquarius Platinum, are now considering a $3-billion refinery in Zimbabwe.

Mining, and platinum in particular, is at the centre of the plan.

Already, the government is negotiating to form a platinum joint venture with Eurasian Natural Resources of Kazakhstan and Norinco, a Chinese firm. Production will start in the first quarter of next year. The plans have been met with scepticism.

Movement for Democratic Change secretary general Tendai Biti, who as finance minister in the unity government struggled to grow the economy due to lack of capital, said Zanu-PF was being "irrationally optimistic” in its new plan.

"Many Zimbabweans would not have lifted their heads over the announcement of Zanu-PF's latest economic blueprint. We are, in fact, suffering from constipation of the same,” Biti said.

Analysts said some of the proposals, especially those calling for re-engagement with the world, might show glimpses of a reformist wing within Zanu-PF hoping to mend the economy. But critics doubt such quarters will prevail.

"It is self-evident that there is a small voice within the system that recognises that things must be done well. Unfortunately, this is not possible.”

Economic plans
Since the early 1990s, the government has come up with dozens of economic plans. Many of these were long on talk, but short on implementation. Many, too, never ran their course and were abruptly dropped midstream. Among them:

• The Economic Structural Adjustment Programme (1990-1995);
• The 1998 Zimbabwe Programme for Economic and Social Transformation;
• Vision 2020;
• The Millennium Economic Reform Plan;
• The 6 point plan;
• The 2003 National Economic Revival Plan;
• The Medium Term Plan;
• The Government of National Unity's short-term Emergency Recovery Programme Step 1 and 2;
• The National Economic Development Priority Programme.

‘Free for all' may lead to debt hangover
One state newspaper described it as "an early Christmas present”. It was free electricity for everyone – and the latest in a string of surprise freebies that the government has doled out to Zimbabweans over recent months.

For every new recharge of prepaid power, customers last weekend noticed that the Zimbabwe Electricity Supply Authority (Zesa), the debt-ridden power company, had given an unannounced extra $160 worth of electricity to customers.

This was just a month after the company announced it was writing off all debts it was owed by customers.

It is the latest in a series of surprising acts of benevolence by the government – writing off council bills, phone bills, and power bills have been added to the usual fare of free agricultural seeds and fertiliser to farmers.

Critics say the decisions will leave state enterprises in even deeper trouble and, that in its rush to please, the government may have damaged its plans to attract investors to partly take over state companies.

"The effect is that the private investors – especially those in power generation – now wonder whether, after a few years, they too will be forced to cancel bills,” said Dinesh Anand, who is consulting for two investors negotiating to enter the energy market.

Play for next elections
But Zanu-PF already seems to be making a play for the next elections, in which it hopes to drive the opposition out of its urban strongholds, whatever the cost to state companies.

It all started in July. Just weeks before the elections, the government decreed that all the debts owed to local authorities since 2009, when Zimbabwe started using the US dollar, would be written off.

The announcement was met with derision. It was a cheap ploy by Zanu-PF hoping to snare a few elusive urban votes, some said. But a total of $330-million was written off by the Harare city council, and 92 other smaller councils soon followed.

It was popular but the effects are beginning to tell. Harare has failed to pay its staff their September salaries, although the town clerk Tendai Mahachi insists the city "can still manage if residents pay their current bills”.

But residents are now reluctant to: why be a good citizen and pay your bills when, months down the line, the government may get another bout of generosity?

On Wednesday this week, Mahachi said the city has begun "a blitz to disconnect water supplies” to residents refusing to pay their bills.

Bills scrapped
A week after the elections, while the write-offs were still being celebrated, vice-president Joice Mujuru suggested at a dinner that, if water and power bills were scrapped, even those in Harare who didn't vote for her party would benefit.

The next day, a state news­paper carried a screaming headline: "Electricity bills to be scrapped”. It snowballed from there and Zesa soon cancelled all debts.

Then last week, state-owned TelOne, the country's only fixed-line phone operator, announced it was crediting the accounts of all customers with $260 each.

This, the company said, was "in view of the cash-flow challenges currently facing our clients”. In total, TelOne is giving away nearly $80-million.

It doesn't matter that TelOne itself is deep in debt and seeking at least $120-million from investors to come out of the hole. TelOne is owed over $275-million, its chief executive Chipo Mtasa says.

There were even threats to "name and shame” debtors. This was always unlikely though, given that the big shots are said to form the bulk of TelOne's little black book. But, instead, it was TelOne paying out.

Freebies
More freebies are being announced. The government is giving away $161-million worth of freebies for farmers – two bags of fertiliser plus a 10kg pack of seed for every one.

What is more, Agriculture Minister Joseph Made is now floating the idea that bank loans taken out by farmers in recent years be frozen as they cannot afford them.

When Charles Taffs, head of the Commercial Farmers' Union, which represents mostly white farmers, suggested freezing loans would discourage new lending, the Herald columnist, Nathaniel Manheru, rounded on him, asking, "Why is CFU still registered?” Was Taffs ignoring the "historical reality that white farmers had their loans rolled over in succession”?

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