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Recently, the Zimbabwean Minister of Finance, Mthuli Ncube, joined the BizNews Power Hour to discuss his role and future plans four the country’s economy. While he remained optimistic about Zimbabwe’s economic future, there are two sides to every coin. Joining Alec Hogg on the BizNews Power Hour is John Robertson. Now retired, Robertson served as the financial editor of the Rhodesia Herald and worked at a merchant bank in Harare. He gives the other side to the optimistic story that is being propagated. He shares how he’s reading the economic recovery of the country. – Jarryd Neves
John Robertson on the Zimbabwean economy:
There has been some improvement. But a recovery, I’m afraid, is still some distance away – mainly because the government is refusing to fix what they broke. They took land off the market. At that time, the land had been a principal form of collateral that supported applications for bank loans, especially for the farmers. But because the farmers were able to finance their activities, the manufacturing sector benefited enormously from having dependable supplies of agricultural raw materials – that would support the food, textile, paper and the timber industries.
It is a very important linkage between agriculture and manufacturing. Then the further important linkage into the export sector. A great many other manufactured consumer goods were quite good enough to export and earn money for the country. When the land was taken off the market, the link between the farmers and the banks was broken – and that breakage is still there. The government is trying to take over by saying, “well, you can borrow money from the government,” or the government is going to try and guarantee loans that the banks are being asked to give to people who no longer have title to their land, but are on a lease agreement.
To the banks, that is very tenuous and difficult to work with, especially if you have to recover money from a defaulting borrower. Banks are very reluctant to lend to the farming community. As a result, we have been dependent on imported food for the last 23 years. This year, because of an exceptional rainfall season, it’s possible that we might feed the nation with locally grown food – but there’s no reason to hope that we’re going to have exceptional rains yet again in the coming years. We will be back to importing food, because the farmers cannot function under circumstances that prevent them from obtaining the money they need.
On why this is happening:
The government seems to feel that if people gain access to title to their land, they will be less easily manipulated. The government doesn’t want to empower the population to the extent that property rights would achieve. Empowerment is considered by the government something to be cautious about and avoid. As a result, the government’s got a whole policy of central planning now – something which does not get debated because nobody seems to want to pick up the subject.
The whole government philosophy, these days, used to be that we must live in a command economy and the commands have got to come from government – because government has got to portray itself as being the central sort of power and authority for every productive sector. They don’t see themselves there as to facilitate the requirements of the productive sectors. They’re shooting themselves as having to be the productive sector for the economy. I feel this is taking us down the wrong road and every other country in the world that has tried this has failed. I don’t see any reason why we might succeed.
On the reality of Zimbabwe’s economic situation:
Of course, they can say things are better. That’s because things were considerably worse before – but they haven’t been fixed. They remain difficult. We’ve still got one of the highest inflation rates in the world, even though it’s much less than it was. We’ve got a very unstable exchange rate, but it’s better than it was. Most of the things that government can talk about are things that are yet to come. There’s lots of promises about things that are going to be built and new investments that are going to come in. A great many of them are Chinese and that is sometimes cause for more concern than pleasure.
I’m sure that a lot of these investments will come in. We almost certainly will redevelop our ability to produce steel, for instance – but as a result of the Chinese investment. We have so many different ways of improving further our services sector – electricity, transport, for example. It would be wrong to say that we have actually sorted out the base upon which we are to build this new economy. That base, I would argue, is still missing. Investors are not actually coming. The amount of foreign direct investment inflows; we are one of the worst performers in Africa – and that’s where we remain.
A great many of the investors who have come in to say, “yes, we are interested in doing a project,” and then they go into the process of getting project approvals and discover they’ve got to work through a couple of dozen separate agencies and government – each of which says you must get from us some kind of approval before you can go to the next one to get a license from them. It is a seriously controlled investment environment, which is very difficult to work with. So although a lot of the projects are finally approved – and we’re expecting an inflow of 500 million for this or that project – it never happens. The people don’t actually come. Having even obtained their license, they are still saying, “well, we are waiting to see what will happen next. Now that we’ve got our approval, we’re still thinking.” We’ve had very little actual inflow. We’ve had lots of inquiries, but the actual enclosure makes not the slightest difference to our balance of payments.
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