Eric Bloch: RBZ sees realities
http://www.theindependent.co.zw/
Thursday, 11 August 2011 19:15
THE Monetary Policy Statement (MPS) recently presented by the Governor of
the Reserve Bank of Zimbabwe, Gideon Gono, was like several breaths of
fresh air. It demonstrated an awareness of the innumerable constraints still
impacting upon Zimbabwe’s economy, in striking contrast to the recurrent
contentions by so many in the political hierarchy, that all is well save for
the alleged, highly misrepresentative, impact of the so-called “illegal
international sanctions”.
Whilst there has been a minimal economic upturn as evidenced by a marginal
increase in Gross Domestic Product (GDP), the reality is that almost all
economic sectors continue to be confronted by many major restraints in terms
of real and lasting growth, something not acknowledged and admitted by those
politicians.
In contrast, the MPS recognises that most Zimbabweans continue to be plagued
by intense poverty and concomitant hardships, and that reversal of the ills
of the majority of the populace necessitates substantive actions to address
the countless growth restrictions of the many afflicted sectors of the
economy. Some of the realities highlighted in the MPS included:
That notwithstanding growth projections for the mining sector are 44%
in 2011, the sector continues to face challenges of lack of funds for
recapitalisation and refurbishment of mining equipment, unsustainably high
costs of production, an uncompetitive investment environment and skills
shortages.
Apart from being underfinanced, the prevailing political uncertainties
around compliance with Zimbabwe’s Indigenisation law requirements, cast a
dark shadow on the sector.
That the manufacturing sector faces major challenges of antiquated
plant, equipment and machinery, low effective demand, liquidity constraints,
high competition from imports, and high costs of borrowings.
That the tourism sector enjoyed improved performance in 2011, but that
performance is expected to be weighed down by non-implementation of an open
skies policy, the deteriorating road and rail network, congestion at
Beitbridge border post, lack of access to Visa card facilities at some
tourist sites, and unavailability of lines of credit to improve the quality
tourism products, and many other factors.
The financial sector has witnessed the manifestation of structural and
operational deficiencies since 2004, including a shift from core banking
business to speculative transactions, abuse of bank holding company
structures to evade regulation via a web of sinister companies, poor
corporate governance and management practices as well as insider dealing and
abuse of depositors’ funds in pursuit of incestuous self-aggrandisement
schemes.
Their holding companies have wafer thin capital bases, and engage in rapid
local and regional expansion with no proper internal controls and adequate
capacity, and disregard of prudential laws and regulations.
The MPS emphasises that going forward, Zimbabwe needs effective debt
management policies to curtail accumulating debt to unsustainable levels,
concurrently with encouraging mobilisation of domestic savings and foreign
direct investment into the key export and productive sectors.
The statement reinforced the Reserve Bank’s very forthright and commendable
recognition of these and other realities by calling for a diverse range of
positive and constructive policies and programmes to address the myriad of
the economic ills, and to progress a meaningful economic recovery.
Amongst the measures emphasised as necessary was that Zimbabwe must have a
holistic programme covering the entire production chain in agriculture.
That programme needs to encompass security of tenure for farmers, financing,
distribution mechanisms, constructive marketing and pricing, contract
farming, realistic measures for loan recoveries, dispute resolution
mechanisms, and a state role in rural community agricultural production.
In particular, emphasis was placed on the need for security of land tenure
to ensure long-term agricultural planning and access to financing, with
99-year leases being market valued, registrable and executable, enabling
them to be used as collateral for financing of farming operations.
Currently, farmers have no effective and assured ongoing, secure tenure, and
therefore they have no substantive collateral needed in order to obtain
working capital funding.
The Reserve Bank issued a 35 page, comprehensive supplement to the MPS,
urging a constructive sectorial approach to economic empowerment and
indigenisation. At the outset of the supplement, Gono emphatically stated
that whilst the Reserve Bank is unreservedly supportive of Zimbabwean
indigenisation and economic empowerment, its pursuit must not be “any
attempt to hide behind the indigenisation law in order to commit or justify
acts of economic banditry, expropriation and or unfair practices that
suggest that we are not a law-abiding citizenry, or any attempts to parcel
out pieces of the economic cake and opportunities to a few connected cliques
of people, whilst the majority of intended beneficiaries remain with
nothing”.
Moreover, the governor said that the “law must not be used to multiply
pockets of inefficiency, in as far as utilisation of national resources and
opportunities of the country of the country is concerned”. He added that
“the empowerment strategy should also take account of the fact that, in
terms of ownership” 73,5% of GDP is already indigenised or under
governmental control. That statement will undoubtedly be viewed sceptically
by most of the population, and by almost all of Zimbabwe’s political
leadership.
However, the governor did not rest only upon that statement, but
corroborated it with a detailed tabulation. It demonstrates the GDP
contribution of those governmental or predominantly indigenised enterprises
as including agriculture, hunting and fishing ventures that have a 17,6%
share in GDP, those in the distribution, hotels and restaurants sector
having an 11,1% share, transport and communication enterprises having a 7%
share in GDP, education with a 9,2% share and many other sectors’
enterprises and operations (also predominantly indigenised or under
governmental control) also participating materially in GDP.
The supplement contends that the indigenisation and economic empowerment
thrust must be to improve basic welfare of the nation and reduce poverty in
line with the internationally recognised United Nations Millennium
Development Goals. It also calls for awareness that “the acquisition of
equity and majority shareholding in companies have minimal short-term
benefits to the indigenous people and should therefore be the medium to
long-term national goals”, instead of being pursued with undue haste.
Hopefully, these sage advices will be heeded by the politicians in general,
and by the Minister of Youth, Indigenisation and Economic Empowerment,
Saviour Kasukuwere, in particular.
the Reserve Bank of Zimbabwe, Gideon Gono, was like several breaths of
fresh air. It demonstrated an awareness of the innumerable constraints still
impacting upon Zimbabwe’s economy, in striking contrast to the recurrent
contentions by so many in the political hierarchy, that all is well save for
the alleged, highly misrepresentative, impact of the so-called “illegal
international sanctions”.
Whilst there has been a minimal economic upturn as evidenced by a marginal
increase in Gross Domestic Product (GDP), the reality is that almost all
economic sectors continue to be confronted by many major restraints in terms
of real and lasting growth, something not acknowledged and admitted by those
politicians.
In contrast, the MPS recognises that most Zimbabweans continue to be plagued
by intense poverty and concomitant hardships, and that reversal of the ills
of the majority of the populace necessitates substantive actions to address
the countless growth restrictions of the many afflicted sectors of the
economy. Some of the realities highlighted in the MPS included:
in 2011, the sector continues to face challenges of lack of funds for
recapitalisation and refurbishment of mining equipment, unsustainably high
costs of production, an uncompetitive investment environment and skills
shortages.
around compliance with Zimbabwe’s Indigenisation law requirements, cast a
dark shadow on the sector.
plant, equipment and machinery, low effective demand, liquidity constraints,
high competition from imports, and high costs of borrowings.
performance is expected to be weighed down by non-implementation of an open
skies policy, the deteriorating road and rail network, congestion at
Beitbridge border post, lack of access to Visa card facilities at some
tourist sites, and unavailability of lines of credit to improve the quality
tourism products, and many other factors.
operational deficiencies since 2004, including a shift from core banking
business to speculative transactions, abuse of bank holding company
structures to evade regulation via a web of sinister companies, poor
corporate governance and management practices as well as insider dealing and
abuse of depositors’ funds in pursuit of incestuous self-aggrandisement
schemes.
local and regional expansion with no proper internal controls and adequate
capacity, and disregard of prudential laws and regulations.
The MPS emphasises that going forward, Zimbabwe needs effective debt
management policies to curtail accumulating debt to unsustainable levels,
concurrently with encouraging mobilisation of domestic savings and foreign
direct investment into the key export and productive sectors.
The statement reinforced the Reserve Bank’s very forthright and commendable
recognition of these and other realities by calling for a diverse range of
positive and constructive policies and programmes to address the myriad of
the economic ills, and to progress a meaningful economic recovery.
Amongst the measures emphasised as necessary was that Zimbabwe must have a
holistic programme covering the entire production chain in agriculture.
That programme needs to encompass security of tenure for farmers, financing,
distribution mechanisms, constructive marketing and pricing, contract
farming, realistic measures for loan recoveries, dispute resolution
mechanisms, and a state role in rural community agricultural production.
In particular, emphasis was placed on the need for security of land tenure
to ensure long-term agricultural planning and access to financing, with
99-year leases being market valued, registrable and executable, enabling
them to be used as collateral for financing of farming operations.
Currently, farmers have no effective and assured ongoing, secure tenure, and
therefore they have no substantive collateral needed in order to obtain
working capital funding.
The Reserve Bank issued a 35 page, comprehensive supplement to the MPS,
urging a constructive sectorial approach to economic empowerment and
indigenisation. At the outset of the supplement, Gono emphatically stated
that whilst the Reserve Bank is unreservedly supportive of Zimbabwean
indigenisation and economic empowerment, its pursuit must not be “any
attempt to hide behind the indigenisation law in order to commit or justify
acts of economic banditry, expropriation and or unfair practices that
suggest that we are not a law-abiding citizenry, or any attempts to parcel
out pieces of the economic cake and opportunities to a few connected cliques
of people, whilst the majority of intended beneficiaries remain with
nothing”.
Moreover, the governor said that the “law must not be used to multiply
pockets of inefficiency, in as far as utilisation of national resources and
opportunities of the country of the country is concerned”. He added that
“the empowerment strategy should also take account of the fact that, in
terms of ownership” 73,5% of GDP is already indigenised or under
governmental control. That statement will undoubtedly be viewed sceptically
by most of the population, and by almost all of Zimbabwe’s political
leadership.
However, the governor did not rest only upon that statement, but
corroborated it with a detailed tabulation. It demonstrates the GDP
contribution of those governmental or predominantly indigenised enterprises
as including agriculture, hunting and fishing ventures that have a 17,6%
share in GDP, those in the distribution, hotels and restaurants sector
having an 11,1% share, transport and communication enterprises having a 7%
share in GDP, education with a 9,2% share and many other sectors’
enterprises and operations (also predominantly indigenised or under
governmental control) also participating materially in GDP.
The supplement contends that the indigenisation and economic empowerment
thrust must be to improve basic welfare of the nation and reduce poverty in
line with the internationally recognised United Nations Millennium
Development Goals. It also calls for awareness that “the acquisition of
equity and majority shareholding in companies have minimal short-term
benefits to the indigenous people and should therefore be the medium to
long-term national goals”, instead of being pursued with undue haste.
Hopefully, these sage advices will be heeded by the politicians in general,
and by the Minister of Youth, Indigenisation and Economic Empowerment,
Saviour Kasukuwere, in particular.