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Before re-engagement, Zimbabwe needs to regain lost trust

 

 

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The Zimbabwean government’s flagging international re-engagement roadshow continues this week as top officials attend the annual meetings of the World Bank and International Monetary Fund in Washington.

They are promoting the government’s agenda of economic reform that they hope will bring the desperately needed external finance potentially available from international financial institutions and global investors. But the initial enthusiasm, at home and abroad, for President Emmerson Mnangagwa’s ‘new dispensation’ and the potential of its economic reform programme have subsided in the wake of repeated political unrest and social protest.

Fiscal austerity and the rapid devaluation of the new currency have added pain to lives of citizens already living in a deepening economic crisis. Those earning in RTGS/ Bond/ Zim Dollars have seen their real wages fall to 5% of what they were a year ago.

Decades of economic mismanagement has weakened resilience. 8.5-million people are now food insecure as a result of a drought which has also exposed the country’s dependence on hydro-electricity from a single source, Kariba, and highlighted the lack of investment in new generation. Factories operate for only a few hours a day — or often at night.

Reform is clearly necessary, and the Mnangagwa government has promised it. But the challenge of making it happen is daunting. The ambition to transition to a private sector economy, where the government is a ‘referee’ and not a ‘player’, is a significant shift for a country with a long history of government intervention in, and management of, the economy.

Reforms to encourage private sector growth have been attempted since the 1980s but have been undermined by inconsistent implementation of legislation and policy, deep-seated corruption, and politically expedient and profligate state spending.

So unlocking urgently needed international assistance will depend on reform that moves beyond the economy, and takes on entrenched patterns of political behaviour and generations of bad governance.

Put simply, the government needs to rebuild trust and confidence with businesses and citizens if its latest plans are to succeed.

Zimbabwe’s long-suffering businesses and communities will drive recovery. More the stubborn succulents that have survived, rather than new green shoots of growth.

Chatham House research has brought private sector players together to identify policy options to support economic growth to 2030.

Many Zimbabweans currently rely on small scale agriculture, or informal mining as a means of survival. These offer critical opportunities for growth and upscaling through formalisation. However, formalisation cannot be forced, and will only happen when people have faith in government.

An important first step in re-building this relationship is to improve people’s everyday interactions with the state, including clamping down on low level corruption and improving service delivery. It is imperative that economic reform does not increase the reach of an already-bloated civil service, both for efficiency and to limit opportunities for rent seeking.

Trust must also be built on adherence to the rule of law. Businesses need to have confidence in court orders and dispute resolution mechanisms.

Cutting red-tape and state bureaucracy is also crucial for improving the business environment. Hotels, for instance, currently must obtain a license for each individual TV, rather than a single one to cover the whole premises.

In the wake of the fast track land reform programme, security of land tenure is key to reviving agriculture. But it is also critical for clarifying usage rights for other competing economic activities such as mining and conservation for eco-tourism. In mining, for example, there is a need for clarity on compensation for holders of land absorbed for mine expansion or where new discoveries are made.

The government must also develop a fair tax and royalty regime for business, most importantly mining, that protects companies and encourages investment at the same time as demonstrating real benefits for Zimbabwe’s people. For example, the government has dropped its controversial policy to push local ownership of the mining industry, but cannot return to the status quo of a nationally-dominant industry that contributes little to the public purse, or the common good.

Transforming the relationship between state and citizen will not be easy. Pushing back the state’s predation of the economy faces opposition from vested interests who benefit from the opportunities for graft.

Zimbabwe is deeply politically divided. The establishment of a multiparty Political Actors Dialogue has created a space for dialogue between ZANU-PF and smaller parties but has so far been boycotted by the Movement for Democratic Change. And the ruling party itself remains divided between military and civilian elements, as well as the remnants of the G40 faction formerly aligned behind Grace Mugabe.

Crucially, whatever choices it makes, the government must get better at communicating with the Zimbabwean people and engage in a renewed and sincere conversation with businesses and citizens. In particular, the private sector must have a greater voice in policy formation. The Presidential Advisory Council and Tripartite Negotiating Forum have opened avenues for businesses to input into policy making. But these must be extended to small businesses and ordinary citizens. 

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