Prof Mthuli Ncube
The elections came and went but the challenges facing the Zimbabwean economy continue to endure. The discourse of change before the elections was broadly connected to ideas of change in the ways in which the country was being governed.
By Tinashe Nyamunda
Following the removal of President Robert Mugabe in November 2017, many believed that either a new dispensation was on the horizon through President Emmerson Mnangagwa, or change was imminent if the opposition ultimately under the leadership of Nelson Chamisa were to attain power. Both sides spoke to the problematic ‘gospel’ of development and each had ideas about how they were going to turn around the economy from the ruin it experienced under Mugabe’s rule.
The horrors of Zimbabwe’s recent hyperinflation and ultimate dollarisation turned towards a liquidity crunch as foreign exchange shortages worsened. Then, as throughout the country’s postcolonial history, the discourse heavily weighed in on fiscal and monetary authorities to solve this problem.
Ministers like Simba Makoni in the late 1990s, Herbert Murerwa and later others in the Finance portfolio, or Reserve Bank of Zimbabwe Governors such as Gideon Gono, all tried, and failed to reign in an economy which appeared to have a mind of its own and a negative momentum that continues to endure. Yet all those appointed were technocrats, until after their technocracy was deconstructed following their departure from the portfolio, and as fate had it, all failed.
Now that the historic, post-Mugabe elections are behind us, even as the crisis continues, the attention turned to the Mnangagwa government and its cabinet choices. As usual, most attention was given to the question of who would occupy the Finance portfolio.
The conversations around Harare all seemed to encourage a technocrat who could bring traceable and ‘appropriate’ credentials to the job. Mnangagwa, presenting himself as a listening President, gave the public what they seemed to want, an economist of proven credentials with an excellent track record; Mthuli Ncube. His credentials have been well-covered by the print and social media and there is no need to repeat them here. In short, the man is accomplished.
But accomplishment in the world of Commerce, Banks and academia does not necessarily guarantee success when it comes to managing the much more complex politics of the national purse. The title, “politics of the national purse” is borrowed from Jonathan Moyo’s book published in 1992 by SAPES Trust. The full title, for those interested in buying it is: “Politics of the National Purse: Public Budgeting as Public Policy in Zimbabwe”.
Although published in 1992, the basic issues examined speak to the ways in which public budgeting in Zimbabwe was done, and the Professor’s assessment of the way forward. Although a product of its time, the book provides a glimpse into what the budgeting process is, but as the title suggests, that budgeting is also very political.
Anyway, I listened to one of the first interviews given by Ncube about his aspirations for the Zimbabwean economy. In this interview, he stated that he was encouraged by the President’s ‘open for business approach’. This is a very typical neo-liberal statement equivalent to his stated desire to make billionaires out of Zimbabwe.
He was criticised for being elitist in social media circles, whereby the stated aspiration would alienate the poor working class, unemployed and peasants who form the majority of Zimbabweans. Questions are emerging around whose business and for whose benefit is Zimbabwe working for. So if Ncube is encouraged by this rhetoric, then we certainly differ ideologically.
In that interview, Ncube went on to discuss how, before being appointed to the Finance portfolio, he had considered the benefits of joining the rand monetary area until such a time as the Zimbabwean economy stabilised.
He then stated that among his objectives was the need to get rid of the bond note, which admittedly is a pseudo-currency, and replace it with a currency basket. Thereafter, he would pursue a monetary policy that would steer the Zimbabwean economy towards a certain level of stability.
What Ncube suggests resonates with many and certainly addresses the elephant that has been in the room since 2013, the wisdom of introducing bond notes to the Zimbabwean economy under Governor John Mangudya.
However, despite the short sightedness and lack of imagination of the outgoing authorities in the finance portfolio with regards to monetary policy, I wonder whether Ncube is fully prepared for the task ahead of him.
To suggest the withdrawal of bond notes in Zimbabwe’s current state of economy would require a plan that I doubt he is set to lay out. How does Ncube hope to achieve this withdrawal without causing a worst liquidity crunch as most of the foreign currency has been withdrawn from the banking system into the informal market.
To borrow the adage, he used, ‘bad money drove out the good’, in other words, the introduction of bond notes drove out foreign exchange. In what ways is driving out bad money going to attract the ‘good’, – whatever that means -, back into circulation?
Only after this has happened, Ncube suggests, and he has stabilised the economy, will he then consider proceeding to introducing the Zim dollar which was demonetised in 2009.
Nowhere in the clips that I have accessed did the new Minister of Finance mention the buzz word for national economic development; ‘production’. If he has, it has been far outweighed by his reference to monetary policy. It seems, at least from what I have seen so far, that Ncube’s diagnosis of the problem in Zimbabwe is monetary. I disagree!
Monetary problems, as we have experienced them, are only symptoms of a much more fundamental problem; production. Treating symptoms does not resolve the problem, it only delays its excesses which like a cancer, when they relapse, can be even more lethal.
Here, the Zimbabwean experience under Gideon Gono and Quasi-fiscal based monetary policy should be a point of reference. He addressed the symptoms and not the problem, and the result was the disaster of the first hyperinflation experience of the twenty-first century. In short, like then, we were not producing enough to earn sufficient foreign exchange to sustain the value of our own currency and therefore manage prices and stabilise the economy.
In a dollarised economy, the liquidity crunch can only be resolved if we earn our keep, but if not, the shortage of foreign exchange remains a reflection of this problem. In an economy structured like that of Zimbabwe today, monetary policy has very little relevance.
As simple as the solution sounds, ‘Take care of the production side of the economy and all will be given unto you’, there is also a certain amount of politics involved. Before delving into this, Zimbabwe is operating on deficit budgeting because of very limited tax returns because of poor economic capacity; there just isn’t sufficient formal economic activity in the country!
Anyway, the whole concept of production should be complicated further. First, where there is production taking place, say in the mining sector, for example, is it well-regulated or are there so many leakages that what goes out of the country is largely not reflected in the fiscal accounts?
In other words, is the country realising enough revenue from fiscal receipts where there is so much under-declaration of what is produced. Secondly, what is the extent of smuggling in and out of the country that prejudices the state of income? Thirdly, how many of these mining enterprises have been captured and are operating irregularly to the detriment of the economy.
In this context, even the proceeds of the sale find their way to off-shore accounts, therefore prejudicing the country of capital accumulation. How do you regulate all of this? These issues are the major challenges that Ncube faces.
Although there is much expectation on Ncube because of his impeccable credentials, economic revival cannot be left just to him. If this is the expectation, then he is being set up to fail. Governing the economy is about coordination.
I discussed the mining sector and the need to regulate it to curb under-declaration, irregularity, and other practices, but again, this portfolio does not fall within Finance. Other line ministries would include Trade and Industry as well as Agriculture. Only through coordinated planning and governance can society begin to even imagine what a reformed economy could look like.
Then there is the small problem of a very dominant informal sector whose main survival is in direct competition with the formal, which Ncube has been appointed to manage, and the informal economy also operates on the basis of high irregularity in terms of taxation, imports and other things.
So, although happy about this appointment, I suffered some loss of confidence when the new Minister of Finance spoke about targeting monetary issues and remained largely silent about these other issues.
My suggestion is that production in all its manifestations, with its challenges as briefly hinted upon here, is the main challenge of the Zimbabwean economy under the current, still problematic structure.