Zimbabwe

Will Zimbabwe's Medium-Term Recovery Plan work?

The document published as the successor to STERP, the Short Term Emergency Recovery Programme, is the MTP, or Medium Term Plan, the Zero Draft version of which has now been released by the Ministry of Economic Planning and Investment Promotion. The document's 133 pages carry detailed and well-prepared descriptions of the current state of the economy's major sectors and go on to describe how much more effectively each sector will perform when policies that will overcome current handicaps have been adopted.

However, descriptions of current problems and assurances of how much better things will work in the future do not constitute a plan.

- Various ideas can be assembled to define or describe a plan, such as:

- A detailed proposal for doing or achieving something

- The preparations made to handle an expected event, or to deliver an intended result

- The most sensible course of action.

- An organized programme of measures taken in order to achieve a goal.

- An outline of the steps required to reach an objective by making the best use of available resources.

Other concepts might need to be considered, such as scale, or urgency. Every country has to occasionally make momentous decisions - the sort of decisions that affect the entire destiny of the country for years to come. These decisions have to address the biggest and most important issues facing the country's population, so a definition of strategic planning must encompass the need to take big decisions and the ability to follow through in good time.

In this document, many of the descriptions of the success awaiting Zimbabwe are based on assumptions, such as that the country's relations with those international bodies that can support development plans will become normalised, and that their offers to Zimbabwe of Balance of Payments support will therefore become a major source of funding. But when the document is examined to find the backing for such assumptions, they cannot be found.

- Policies to restore manufacturing output assume that:

- Manufacturers will have access to facilities for re-capitalization as well as affordable working capital;

- The agricultural sector will be revived and grow for the duration of the plan period;

- ZISCO will be rehabilitated and perform efficiently;

- The liberalized pricing regime will be maintained for the entire medium term plan period;

- Manufacturers will have access to imports without foreign currency restrictions;

- Institutional mechanisms will be in place to facilitate foreign direct investment in the sector;

- Investment in physical infrastructure, especially for the key enablers will be given priority, given the importance of water and electricity in the manufacturing process; and

The liberalized trade regimes in the regions such as COMESA customs union and SADC Free Trade Areas will be maintained, meaning there will be no tariff protection. Local firms will have to rely on productivity and competitiveness.

Points (iv) (v) and (vii) are within government's power to stipulate, but the other assumptions could be more accurately described as wish-list items that will remain a long way out of reach until other wishes have been fulfilled. The plans needed to make them come true are missing, despite the frequent references to their importance. Without question, they are recognised, but despite being recognised under headings such as Proposed Strategies and Policy Measures, the references to them do not become strategies or policies and no Plan to ensure their achievement can be traced.

Zimbabwe's need to become a low-cost globally competitive country, says the MTP, will be achieved through increased productivity, quality products, economies of scale, and appropriate technologies. These, it states, will be realized through:-

- Provision of affordable working capital facilities;

- Promotion of value addition and export competitiveness;

- Maintenance of multicurrency business environment;

- Maintenance of a competitive pricing policy;

- Increase in investment in both the small and large scale industrial sectors;

- Promotion of the acquisition and development of technologies that are appropriate for local conditions;

- Increased research and development skills in the sector; and

- Capital Market Development.

While these are all valid requirements for success, the government's recognition of their essential nature does not convert them into components of a Plan.

Some blunt statements invite the reader to assume the existence of facts, but when examined, these claims turn out to be nothing more than questionable opinions. For example, on the Land Reform Programme the MTP states:

The GPA identified the completion and rationalisation of the Land Reform Programme as one of the first steps towards resuscitating the agricultural sector. In this regard, the Government will carry out a comprehensive non-partisan land audit for the purposes of establishing accountability, gender equity and eliminating multiple farm ownerships as well as ensuring restoration of full productivity.

But because the Land Reform Programme did the damage to agricultural output, no possibility exists that completing it will help resuscitate agriculture. In economic terms, the Land Reform process permitted the State to gain ownership of land that had been previously owned by private individuals or companies. Before that happened, these properties could be used as collateral for bank loans and, backed by a robust land market, these loans helped fund Zimbabwe's largest productive sector.

The completion of a non-partisan land audit and attending to accountability, gender issues and multiple farm ownership will not restore productivity to the land because these steps will neither unlock flows of funds, nor will they provide the needed environment in which farmers can make difficult and expensive medium to long-term plans.

Currently, Zimbabwe's broader options can be placed into three categories:

The first is that the country remains committed to its efforts to make about a million small-scale farms work, despite their limited access to modern methods. Their relatively low yields in average to good rainfall years would keep Zimbabwe dependent on food imports, and in bad years imports would be needed even for basic consumption. In both cases, imports would be needed to keep most industrial processing plants in operation.

Also, small farms need subsidies. Even the brilliantly equipped and expertly run farms in Europe need subsidies because farms almost throughout Europe are small. Zimbabwe, as a developing country, cannot afford subsidies.

Subsidies that rescue farmers from inadequate performance, if not bankruptcy, also relieve them of the need to improve their operating techniques. Therefore subsidies help perpetuate low yields, and this they do at very high cost.

Zimbabwe is currently on this track and it has carried the country into ever-deepening deprivation and poverty. The longer Zimbabwe stays on it, the more certainly will the rural areas in Zimbabwe become patchworks of derelict farms. More people will migrate to the already over-crowded cities in which uncertain levels of industrial investment will inhibit employment growth. Social pressures will carry Zimbabwe into worsening chaos, increasing conflict and deepening political instability.

The second possibility is that Zimbabwe could try to make its new farmers productive under the discipline of State-run central planning authorities that depend upon the considerable involvement of the military, other uniformed services and prisons. At best, these management methods might lead to gradual improvements in output, but subsidies will remain essential. From the experience of other countries that have tried the same policies, it can be argued that Zimbabwe's economy will still be floundering in years to come.

The third option is to restore large-scale, expertly run agro-industry farms. For these, Zimbabwe will have to encourage experienced farmers to return to the land. These people would set tough requirements, but international assistance that would certainly be denied under the first two options would undoubtedly become available if this third route were chosen. To succeed, Zimbabwe would have only to re-install the components needed to make commercial farming function as a big, successful industry in a modernising economy.

These components are property rights, title deeds, security of tenure and legal procedures to permit the transferability of land in an open market.

Between them, these essential elements will give the land the collateral value the farmers need to access essential bank funding and they will give the farmers the confidence to make long-term commitments to create a productive and profitable, subsidy-free industry.

The skills and experience that had been accumulated over several generations by Zimbabwe's commercial farmers were vital national assets and their investments over the years had resulted in intellectual as well as physical capital. However, when government believed it had successfully legalised the confiscation of all their assets, the farmers still walked away with their biggest assets of all - their knowledge and experience.

As it was many of the recent political policy decisions that destroyed investor confidence, the major changes now needed are political, not economic. Property rights were major casualties of political policy choices, so if the country's fortunes are to be changed for the better, property rights have to be restored.

Zimbabwe could start the recovery process almost immediately by re-engaging farmers who know what to do now. With government's acceptance of the need to harness the available skills as well as economies of scale, the knowledge, experience and dependable output of large-scale farmers would soon become principal driving forces in Zimbabwe's economic recovery.

The balance of the needed Medium-Term Plan to establish a workable economic recovery process should, first, concentrate on the policy changes needed to place the Rule of Law onto a sound footing and to repeal all laws and regulations that interfere with the acquisition, ownership and marketability of property, whether these be areas of land, mining claims, company shares or financial instruments.

Secondly, the Medium-Term Plan should identify the sequences of events needed to restore Zimbabwe's physical and social infrastructure to acceptable levels of efficiency and dependability. Preliminary estimates could be made of the scale of restoration work needed to bring existing roads, railways, airways, power, telecommunications, municipal water supplies, hospitals, schools and colleges back to acceptable operating standards.

With further estimates of the time and funding that would be needed by each of these, formal proposals could be drafted to invite the participation of local and international bodies. If Zimbabwe were considered to be deserving of assistance by virtue of extensive policy changes, its prospects of floating syndicated long-term loan stock issues on international capital markets would improve once the first signs of success had become evident.

For some of the challenges, proposals for the privatisation of certain parastatal organisations could be presented in correctly drafted prospectuses. Others might require work to be put out to international tender to meet the requirements of funding organisations or donor countries, while for certain projects the main concern might be the contracting of skilled personnel.

A Medium-Term Plan that contained these elements would be totally unlike all the other plans that have been issued, each of which has been forgotten about within months of its date of issue. Political problems will no doubt remain and will present other challenges, all of which will deserve careful thought and special attention. But Zimbabwe must prevent these from derailing efforts to achieve full recovery.

Undiluted attention has to be focused on actions that can deliver recovery and growth. Achieving success and restoring dependable flows of income from the efforts of people with proven technical and managerial skills will leave Zimbabwe far better placed to deal with the challenges caused by past errors of judgement.

Investors will hopefully have confidence in their own abilities already, but they will also seek reasons to feel confident that they will not be derailed by issues over which they have less, or no control. They will want to feel that the investment climate within the country and region concerned is acceptable and will remain acceptable.

They will also want assurances that the conduct of other people who can influence the investment climate will not be too unpredictable and that the investment incentives on offer will provide the needed protection.

However, people who take the initiative to accomplish something usually behave very differently. They show energy, vision, enterprise and courage in initiating a process that is intended to lead to something new.

They are innovators or originators and therefore in a class of their own. They will often cause the changes they want, if necessary by becoming directly involved in creating the environment that is needed to fulfill their ambitions.

As investors can range from housewives to multinational corporations and as their conduct can be influenced by anything from supermarket loss-leaders to syndicated sovereign debt yield curves, they are always ready to let people try to persuade them with incentives.

In the context of economic development, the incentives are supposed to overcome the investors' reluctance to move into unfamiliar territory, or lessen the investors' misgivings about performance prospects in the country concerned.

Initiators of development projects are working from an entirely different base, even if they appear to be very much the same as any other investor. People who seize the initiative usually see potential that others missed and they create opportunities for themselves. They certainly do not wait for others to identify them, repackage them with enticing incentives and then offer lists of them at development conferences.

Disincentives of many kinds come to mind, but in referring to them, I feel it necessary to make the point that they are equally discouraging to local investors as they are to foreign investors.

The fact that so many African administrations permit conduct that is resented by their own people needs to become an accountability issue on every agenda. The following list of disincentives is far from exhaustive:

From its own officials, Zimbabwe's government tolerates conduct that would be considered entirely unacceptable in the developed world.

Government takes for granted that its officials will derive significant incomes from bribery and extortion.

Government accedes to traditional leaders' demands that their rights and privileges should take precedence over the requirements of citizens.

Governments imposes layer after layer of irrelevant controls on the movement of goods, money and people.

Government imposes hidden taxes through licensing laws, project approval regulations, exchange controls and price controls, and through the proliferation of regulatory authorities who have to be bought off before investors can make headway.

Corruption in Zimbabwe appears to have been authorised and institutionalised, and the conduct is defended on the grounds that senior party officials are merely exercising their privileges of office. They therefore do not accept the corruption accusations.

However, the perceptions of investors, who see their own hard-earned capital as the principal target of eager wealth-redistributing officials, have been negative in the extreme. They have mostly chosen to take their knowledge, or go to other countries with their knowledge, plus their ambitions, money and investment plans, and this has brought economic growth in Zimbabwe to a stop. The Medium Term Recovery Plan is supposed to be a plan that will revive economic growth. I regret that it does little more than describe what needs to be fixed.

So what should the Zimbabwe government do?

- Restore the Rule of Law

- Restore an independent judiciary

- Repeal the Indigenisation and Economic Empowerment Act

- Repeal POSA - Public Order and Security Act

- Repeal AIPPA - Access to Information and Protection of Privacy Act

- Remove the restrictions against the formation of independent broadcasting companies and newspaper publishers

- Restore Property Rights

- Restore the efficiency of the institutional support needed to survey land, register properties and register ownership, and of the procedures needed to legally change ownership of property.

What about the previously disadvantaged?

We have to recognise that most of the problems we face today have arisen from the decisions taken to restore historic imbalances, to correct past inequities, or to rectify past injustices.

But I would argue that the decisions taken have not improved the situation for the previously disadvantaged. They have not corrected inequities or brought justice to those who suffered injustices because they have so badly damaged the base upon which all of us are trying to stand.

The unintended consequences have been enormous. The population's wealth has been cut by half, employment is down to its level of forty years ago, all the social services have been damaged and the list of problems could take hours to get through. So the decisions taken were the wrong decisions. Government has to correct its wrong decisions.

Clear and urgent distinctions must be made between what might eventually help to make amends for past failings and what is needed right now to ensure future success.

But this is just a draft. We must all get involved now and add the lines that will turn this document into a PLAN.