eBusiness Weekly
Editor
Zimbabwe’s second executive President since independence in 1980, Emmerson Mnangagwa, is expected to be sworn in today amid optimism that the new dispensation will usher an era of optimism and accelerated economic development. The former Vice President, 75, left the country two weeks ago after being sacked by former President Robert Mugabe on allegations of having “consistently and persistently exhibited traits of disloyalty, disrespect, deceitfulness and unreliability.”
His dismissal followed an offensive launched by the former President’s wife, Grace, who tore into the former VP and Justice Minister for fanning factionalism within the ruling Zanu PF party. President-designate Mnangagwa flew back into the country on Wednesday, a day after the former President – who had led the country since independence from Britain in 1980 – resigned following military intervention and massive public demonstrations against his rule.
Mired in untold economic challenges, the country was is on the precipice, and the coming in of President-designate Mnangagwa, who is viewed as pro-business, is now expected to transform the country’s economy.
During his time as VP, President-designate Mnangagwa was mandated with overseeing the economic clusters, with Command Agriculture – an import substitution programme he oversaw – being one of his major successes.
President-designate Mnangagwa had also carved good working relations with several captains of industry and participated in several economic workshops as he sought to understand – from close range – the problems bedevilling industry in particular and the economy in general.
This gives him a head-start in his seemingly gargantuan task of transforming the economy. He must ensure quick wins through fixing the obvious business hurdles, like the Indigenisation laws. Other challenges include but are not limited to, infrastructure deficits, poor performance of State Enterprises, budget and current account deficits, loss of correspondent banking relationships and a highly uncompetitive environment.
He is also burdened with the task of normalising relations with the international community after years of isolation, and nipping corruption in the bud.
Corruption has become the biggest cancer in the country with virtually no investment deal passing before the payment of a kick-back.
China, the fastest growing economy in the world, has anchored its recovery on a ruthlessness campaign against corruption and President Xi Jinping, has declared that “flies and tigers” will all be jailed if convicted.
The same is expected in the country if President-designate Mnangagwa’s tenure is to be marked with some measure of success.
A confident start key to success
The choice of team that the new leader will start with is key in gaining public confidence. In the past, Government has been poor in identification of the right people to put in various key positions and analysts believe that this was not only limited to ministers. Fiona Chigwida, a financial analyst believes that already the President-designate has come saying the correct things that identify with what the economy is going through. “Based on that, his team would be key.”
Much of course depends on how many people with a ‘tainted’ past are accommodated into the new order. For the world to believe there will be a new economic dispensation, with serious best practice intentions that wants to attract global capital, none of the old guard can remain in important roles. The alleged $15 billion disappeared during a minister’s (Dr Obert Mpofu) watch, while Zimbabwe’s liquidity crisis was worsened when a decision (made under Patrick Chinamasa) was made to pour Treasury Bills that put the economy in the RTGS/cash mismatch that the country faces today. The world will read “unconvincing” change if the people who were in charge of these two ministries at that time are given key ministries as ‘rewards’ for support.
Arrears clearance key in unlocking FDI
A pre-condition to international financial support would be re-engagement with the international community through the clearance of just over a $1 billion arrears owed to the World Bank and the African Development Bank.
According to the pari passu rule, Zimbabwe has to first clear all its arrears with the rest of multilateral lenders in order for it to get fresh lending.
An arrears clearance strategy agreed on in Lima, Peru is taking time to be implemented and set deadlines have not been met since 2015. While Zimbabwe says it has secured funding to clear the arrears through a syndicated facility arranged from four financiers by Afreximbank, the Reserve Bank of Zimbabwe says that it intends to first work on reforms such as dealing with deficits (current account, trade and budget) before the money can be repaid.
“The only way to deal with the current account deficit is to unlock the capital account through foreign direct investments. That way you also deal with the prevailing liquidity crunch (foreign currency shortages) and the high unemployment rate,” said an analyst who requested anonymity.
FDI is also critical in addressing infrastructure deficits.
New dispensation attracts business goodwill
Dean of social studies at the University of Zimbabwe, Professor Charity Manyeruke believes the departure of former President Mugabe will open a fresh chapter for the country.
Prof Manyeruke said his resignation means “a lot for the international community” which feels a new and sustained period of democracy is in the offing.
“It is important that people are able to express their will freely. Yes, Zimbabwe can take positions because it is important to put national interests first and respect those even as you engage with other countries, but what is very clear is that the country is willing to open a new page and engage other countries to open the economy and bring investors.
“There was industrial stagnation in the country, so it is now important that as the country opens a new page it becomes a priority to industrialise create employment,” she said.
Confederation of Zimbabwe Retailers (CZR) director for marketing and stakeholder relations Alouis Burutsa said the coming in President-designate Mnangagwa was a welcome development to business because “he is a man we have come to respect because of his business ideas.”
“The man is pro-business and most of the time we engaged as business with him, his message has always centred on economic growth.
“He is an action man who thrives for results in everything and we are looking forward to working with him,” said Burutsa
Industry is also pinning its hopes on the new Government for an industrialisation boom while further encouraging dialogue to conclude some deals that should enhance the manufacturing sector.
Confederation of Zimbabwe Industries (CZI) – which is the country biggest body representing industry – says the change in Government is expected to bring fresh impetus to economic revival.
CZI president Sifelani Jabangwe said industry had already discussed several issues that affect their competitiveness and hopes are high that the matter will be addressed.
It is expected that once the competitiveness of local industry is solved, more foreign currency would be generated as manufacturers will export more.
Currently, locally produced goods are not competitive in other markets because of high production costs driven by high labour costs and high charges for utilities, particularly water and electricity.
Jabangwe also challenged the new leader to address foreign currency shortages, which have throttled the operations of business as foreign payments for raw materials and spares are taking long to be processed.
“There is a lot of issues we have brought forward as we have been lobbying to promote production because this is how we can grow.
“As industry we need to get foreign currency and we hope the new Government can address this, not only for the manufacturing sector but other key sectors of the economy,” he said.
However, some of President-designate Mnangagwa’s work is cut out for him.
Government, through the Office of the President and Cabinet, is already working towards reducing the cost of doing business in the country.
Several strides have been recorded in so far as addressing improving the doing business environment is concerned.
Eight out of 14 laws pertaining to improving the ease of doing business have been passed.
Some of the laws that have been passed include the Public Procurement and Disposal of Public Assets Act; the Movable Property Securities Interests Act.
Efforts are currently underway to conclude the Companies Act, which is being done from scratch.
Furthermore, the President-designate has the task of ensuring that the revival of major steel manufacturer, Ziscosteel, and the National Railways of Zimbabwe (NRZ).
Moves to resuscitate the country’s key companies has gathered momentum with Cabinet recently approving a $400 million offer tabled by the Diaspora Infrastructure Development Group (DIDG) and South Africa’s Transnet.
A Chinese firm, R & F Company has also dangled a $2 billion deal to revive Zisco.
The resuscitation of NRZ and Zisco is expected to drive the country’s re-industrialisation agenda.
Jabangwe said: “We also hope the new Government will prioritise anchor projects that have a bearing on the economy.
“For instance, the Zisco deal should be concluded because it has a huge bearing on the manufacturing sector and other downstream industries.”
Financial analyst Alexander Gonese said there was perception that the new President is a man of action. Command agriculture implementation showed that he was a man of action. The market is waiting to hear his inauguration speech and the size and calibre of his cabinet to see if there is a break from the jobs-for-boys culture of the previous Government. “He will start with a lot of goodwill. It’s up to him to use that or squander it.”
Economist Tapiwa Mashakada said the new President stands a chance to successfully turn around the economy and the nation at large.
“He has got a huge chance, he has got an opportunity to ride on the public sentiment that was shown at the solidary March where all political parties, social groups and individuals came together in support showing the public mood of good will. This was a different scenario from what we are used to seeing,” said Mashakada.
