PRESIDENT Robert Mugabe’s administration faces a major economic challenge as it enters the final stretch of its seventh tenure before next year’s general elections with economists and accountants warning that a lack of stewardship in government is at the heart of the current economic crisis.
Speaking to The Financial Gazette at the Institute of Chartered Accountants of Zimbabwe (ICAZ)’s annual indaba held in the capital last week, analysts said the current challenges are immense and cause for considerable alarm as the economic crisis threatens to escalate further ahead of the elections.
They said greater effort was urgently needed both to understand better the growing dangers of worsening economic conditions and to engage a broader array of actors with the capacity to effect positive change.
Several companies have closed shop, throwing thousands of workers onto the streets, resulting in the unemployment rate spiking. It is generally estimated that about 94,5 percent of Zimbabweans defined as employed are now working in the informal sector.
“Essentially, our problem is not sanctions as our government always wants to say, but stewardship crisis,” said Godfrey Kanyenze, who is an economist.
Kanyenze, the managing director of Labour Economic Development Research Institute of Zimbabwe, added: “We are not even accountable. We are not accountable for the money that we receive and spend. I worked in Rwanda, a very small country, but the country has an integrated approach. The Rwandese are not as educated as we are, but because of visionary leadership, Rwanda has developed.
“Zimbabwe’s economic system has a fragmented approach system. We need to double our efforts to have an integrated approach. Going forward, we need to wake up. We are not a war zone, but the only hurricane is the human being in Zimbabwe. We have everything. We have plenty of resources. You can imagine what we can do with the resources. We need to wake up. What is needed is the ability of the State to use its autonomy to consult, negotiate and build.”
Commenting on whether or not the country has gone back to 2008 hyperinflation, Kanyenze said: “I think there are similarities in terms of drivers such as corruption and fiscal discipline. There is need to eat what we kill not to be salivate when we haven’t killed anything. Due to the rising or run away fiscal deficit, there are raids on bank accounts. Trust goes. If I put my money in the bank, then someone will reach out. What is happening is that we are digging a hole to fill another hole. The market requires discipline. If government has discipline, the problem is fiscal or our appetite for expenditure.”
Clive Mphambela, Bankers Association of Zimbabwe’s advocacy and marketing manager, concurred with Kanyenze.
“Hyperinflation is very real. Ignore it at your own peril. There is evidence pointing to that we are in hyperinflation already. In April this year, total capitalisation at the Zimbabwe Stock Exchange was around $4 billion -$5 billion. Now, it’s around $15 billion. The question is, are these United States dollars. If it is real, what is driving it? Is it the expectation of a bright future for Zimbabwe or are people taking a flight of fancy?” he asked.
Following nearly four years of sustained expansion after the country’s introduction of a multi-currency regime, and ditching its own currency to escape hyperinflationary pressures, Zimbabwe’s growth began to lose steam in 2013. In 2013, 2014, 2015 and 2016, gross domestic product (GDP) contracted by over 3,5 percent.
Public debt and the fiscal deficit rose, unemployment and poverty grew — eroding the social gains of the previous decade.
Martin Makaya, the ICAZ president said: “It’s important that we build a better economy. There are several characteristics of better economies, including economic growth as economic policies are implemented as planned, there should be significant capital inflows, and low corruption levels. As an economy, we have been facing challenges and corruption is quite rampant and there is need to deal with this if we want to develop this economy.”
Taurai Chinyamakobvu, a partner at Flocash Zimbabwe said: “To say we are in hyperinflation or we are entering hyperinflation is not important. The issue is that we are on that path and it is coming. Whenever you are planning, do it with hyperinflation in mind. We must now plan with that reality in mind. Over the next 12 months, we need to plan with the worst case scenario, because it’s going to accelerate the conditions we are seeing now.”
Stanbic Bank Zimbabwe’s chief finance officer, Solomon Nyanhongo said: “Yes, hyperinflation is there but we don’t need to aggravate it by creating artificial demand.”
Independent Member of Parliament for Norton, Temba Mliswa, said the economic crisis will most likely to “get worse”.
“During the government of national Unity, there was discipline but now, there is indiscipline in government. The whole mood is election. We can’t move. Expenditure by government is expected to increase to ensure they remain in power,” said Mliswa.
Nelson Chamisa, MDC-T Member of Parliament for Kuwadzana East and the party’s vice president said: “It goes down to values. I have worked with the President (Mugabe) as minister. They have a system, a certain mind set.”
Reserve Bank of Zimbabwe’s deputy director international banking, Ernest Matiza called for “fiscal discipline”.
“But, on the issue of hyperinflation, I beg to differ. We have not reached the levels of 2007, 2008. There is no company at the moment that can afford a wage increase,” he said.