eBusiness Weekly
It is sometimes difficult in a sea of conspiracy theories, wild statements and confused business leaders to see what is actually happening in the Zimbabwean economy and to realise that at the base the reform programme announced last year as President E. D. Mnangagwa was inaugurated is basically on course.
Economic reform is rarely exciting for the general public. To be blunt it tends to be boring except to the economically literate. And Zimbabwe’s reform programme is no better or no worse than other successful similar programmes in other countries that now smirk at the top table in economic matters. We have heard of, without actually studying, Deng Xiaoping; his incredible reform of the Chinese economy had little support at first but then because he addressed fundamentals suddenly turned China into the flourishing economy of today. Germany had serious economic problems in the 1990s, very serious problems in fact. In a boring programme of fixing fundamentals and changing a whole economic culture Chancellor Angela Merkel, now in her fourth consecutive term as head of the government, has become the acknowledged de facto leader of Europe simply by running its most successful economy after playing a leading role in digging that economy out of a modest swamp.
The mess facing President Mnangagwa as he won his first presidential election was very easy to define. For most of its existence the Zanu-PF post-independence Government had a loose fiscal policy and was unwilling to stick to even that half-hearted effort. It continually drifted into gross over-borrowing, chewing up the bulk of pension and life-insurance funds in the process, before turning to the printing presses to create money out of nothing. Unfortunately, as you cannot create something out of nothing, the medium term result was inevitable. The created money was worth precisely nothing.
So something more serious and far more real had to be done.
And it was. A technocratic team was appointed. At centre was one of Zimbabwe’s undoubted top economists, Professor Mthuli Ncube as Minister of Finance and Economic Development. Leading the civil service team of advisors and economists was the new Permanent Secretary, Dr George Guvamatanga, who as a civil servant is not allowed to talk in public, although he was a lot chattier as a top banker, but has a critical role. And kept on was Reserve Bank of Zimbabwe Governor, Dr John Mangudya; the RBZ boss has some independence but it would not have been difficult to ease him out if it was thought he would not measure up.
So for the first time in decades Zimbabwe has a highly competent top economic team. All three have known each other for years, two having actually been at school together. All three have run real banks in a real world, so are hardly economic theorists sitting in an ivory tower studying chapter 3 of an advanced textbook although ll three have the academic background to apply theory to the real world. We do not know, and are never likely to, what debate goes on behind the scenes but out of this has come the reform programme, which does involve a period of austerity at the beginning. We cannot spend our way out of this because we first of all have to earn the money we want to spend, rather than try and create it out of thin air.
And looming behind this team is the President who, regardless of whether you like or dislike him, is acknowledged as probably the most astute political operator in Zimbabwe and someone prepared to back his team fully. As was said during the appointment period, there had to be double trust between the technocrats and the President from the start; the President trusting his team to deliver and the team trusting the President to back them as they drain the swamp, always a nasty, messy and somewhat miserable process.
It is also fairly obvious, when you think about it, that results have to come through in finite time. The actual austerity programme has a time limit, next year, but regardless of any other theoretical considerations there is the practical one of elections in 2023. There must be a very strong evidence that quite spectacular progress will have been made by that time.
So it is not much use listening to the conspiracy theories or trying to parse Presidential, Ministerial or RBZ statements for hidden meanings and secret messages. As we have seen the President and his team face down every challenge to their programme, sometimes at considerable cost in short-term popularity, it would seem sensible to accept their programme at face value.
This might explain the delay in the monetary policy statement. Part of the panicky mess in October last year was caused by people seemingly deliberately trying to read far more than anyone could imagine into a simple incentive scheme for all producers to start earning some of their own foreign currency instead of hanging around the RBZ tower with their hands out. What was meant to be just a minor change to ameliorate a particular problem was seen as a huge policy switch by a lot of people who should have known a lot better but preferred to follow like a herd of dumb sheep a panic-stricken economic illiterate.
In many ways there is not much to say on monetary policy at the moment anyway. The main problem, a loose fiscal policy pumping up the money supply, has been fixed. So emergency monetary measures to try and get round that major problem are not needed. On the other hand it is a bit early to move onto the next steps in monetary policy; trust still needs to be built up and some basic requirements fulfilled before we can even plan for a new local currency.
What has always amazed us is that a fairly large group of business people who have the skills and expertise to run large businesses very successfully, paying out dividends and generally doing a good job, suddenly trying to read the tea leaves in Twitter messages, and messages from people who are very far from the centre of decision making at that.
