Running on empty: A year that promised nothing and delivered nothing

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By Perry Munzwembiri on January 4, 2017. No Comments

That 2016 was always going to be a tough year is beyond debate. The seeds had been sowed years prior, with the economy manifestly displaying signs of distress. Inflationary data was negative coming off 2015 into 2016 and banks tightened their purses barely lending at all leading to a severe liquidity crunch largely affecting big business. As the year wore on however, this crisis would eventually blow-up and start to severely affect the individual Zimbabwean on the street at a very micro level.

With some commendable level of foresight, finance minister Patrick Chinamasa had announced early in 2015 that it was government`s considered view that bonus payments for civil servants was a luxury it could no longer sustain, and hence bonuses were to be scrapped. However, at an Independence Day speech just a few weeks later, President Mugabe disavowed his minister`s pronouncements instead taking a populist stance of promising that government would continue to pay bonuses. All this despite revenue collections clearly showing that government had no capacity to fund bonuses. This was to be the ghost that would haunt government even in 2016 as it was forced to stagger civil service salaries for the better part of 2016. This unpopular move eventually culminated in the successful mass stay-away in July which coincided with the the social media campaign #ShutdownZimbabwe led by Pastor Evan Mawarire`s #ThisFlag movement.

As 2016, drew to an end, government still had not paid this year`s bonuses, having barely managed to pay salaries on time for the month of December. Unfortunately, this is a theme that will very much likely be recurrent in 2017 in the absence of any structural change in the country’s fortunes.

Among the year’s highlights was the President confessing in an interview to mark his 92nd birthday that $15 billion in diamond revenues had gone missing without a trace and that treasury had only received $2 billion since 2008. As the country starts the year, no action has taken as yet to recover the billions leaving many frustrated by the government’s unwillingness to tackle corruption unless it furthers someone`s political interests. The Reserve Bank of Zimbabwe governor later came in to try and water this down by claiming that the $15 billion the president had referred to was merely an “economic loss,” and not actual realized proceeds from diamond sales. The unwillingness to deal with graft would be on display later in the year when after a government minister was found to have ‘misappropriated’ the Zimbabwe Manpower Development Fund (ZIMDEF) funds, he simply defended himself by saying he was a Robin Hood before carrying on to serve in government.

Indigenization minister Patrick Zhuwawo finished the latter part of the year largely obscure, and unnoticeable, but this wasn`t the case when the year begun. The firebrand minister made headlines going after foreign companies compelling them to comply with the Indigenization Act`s requirement of 51% ownership to be in the hands local Zimbabweans. Earlier, he had announced the imposition of an Empowerment Levy on foreign owned companies equivalent to 10% of their annual turnover. When businesses ignored his demands, his response was to give foreign owned companies up to the 31st of March 2016 to comply with the indigenization law or else he would shut them down. The timing of the young minister’s clash with foreign owned business could not have been any worse. The country was reeling and even more desperate for foreign investment than ever before. His pronouncement all but sealed the perception that the government was not that in wanting to attract foreign investment despite the Finance Ministry’s reengagement efforts with the West.

Zhuwawo`s brash mannered approach would set him on a collision course with finance minister Patrick Chinamasa whose response further raised questions of coherence and consistence in government policy. How would an investor possibly invest money in a country where two cabinet ministers have a divergent view of such a critical policy publicly attacking each other? President Mugabe had to eventually intervene issuing a public statement that the indigenization law was “sector-specific” and not a “one-size-fits-all” policy. However noble this intervention might have seemed, it caused further confusion leaving investors even more concerned as the Indigenisation Law itself does not back the President`s statement.

Perhaps, the biggest quake to shake the economy in 2016 was the announcement in April by the Reserve Bank of Zimbabwe’s governor that government intended to introduce what it called Bond Notes. A form of specially design and printed note issued at par with the US dollar and backed by some loan facility from Africa Export-Import Bank (Afreximbank). To the average Zimbabwean, this all but screamed ZIMDOLLAR! This pronouncement served to only catalyze the worsening of an already dire liquidity crisis as panic withdrawals beset banks, mopping out the little currency that was circulating in the formal economy. It did not help matters, that the whole deal was shrouded in secrecy from the beginning as the central bank remained silent on detail. Again, given the general distrust of the public against local monetary authorities, the fact that the proposed release date of the notes kept being postponed also didn`t help matters and the uncertainty began to fuel speculation in the economy. The implications were several. Not least was the development of a two-tier pricing system where cash settlement for goods and services expected a discount of 10-15% off marked prices. Those paying using electronic transfers would pay the full price. The emergence of different prices for the same product depending on method of payment quickly brought memories of 2008 when the country reached record levels of inflation leading to the demise of the local currency. Bond notes appear to be holding their value against the greenback for now, but the key question is for how much longer? The year 2017 will surely be interesting in this regard.

The political landscape has been rapidly becoming predictable. Given the events of the previous year, the politics of Zimbabwe in 2016 was always going to be dominated by the internal party struggles of ZANU (PF). In the absence of a cohesive and effective opposition movement, the ruling party would dominate both the political and economic space save for the month of July when social media activists brought the country to a standstill.

Further ashore, the world was rattled too, first with the largely unexpected vote by Britons to leave the European Union in what has now become known as (Brexit). This would also see David Cameron quit as British Prime Minister. Further across the Atlantic, Americans went on to defied all predictions and expectation by choosing flamboyant business tycoon Donald J Trump to be the 45th President of the United States of America, and successor to Barack Obama. These two events would become the highlights of seismic shift towards populist politics in the Western world also seen in Italy, Poland and Austria.

Fidel Castro, once the longest reigning President eventually answered death`s knock, and the nonagenarian died at a time when frosty relations between Cuba and the USA were beginning to thaw.

In Africa, Angolan President Eduardo Dos Santos who has ruled the oil-rich country for nearly 40 years pulled a shocker by announcing that he would step down in 2018. In Ghana, elections were held peacefully, and a peaceful handover of power between John Dramani Mahama and Nana Akuffo Ado is on course, as the country further establishes itself as one of the most stable democracies on the continent. In The Gambia, what promised to be a peaceful transition was brought to a grinding halt as incumbent Yahyah Jammeh who had initially conceded defeat went back on his word and vowed to remain in power despite losing the election. This would serve to be a stark reminder that despite the occasional mirage of progress; Africa will always spring surprises.

After all has been said, for Zimbabwe 2016 promised nothing and delivered exactly that, nothing. As the nation remains fixated on the ruling party’s succession battles, it is hoped 2017 can still spring a welcome surprise or two for the distressed economy.