Zim Asset: A blueprint so flawed it is difficult to take serious

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By Hillary M Chindodo on December 11, 2013.

OPINION (Zimbabwe Investor) – Ever since independence in 1980, Zimbabwe has crafted several policy documents meant to spur the country forward. All the policy documents have always been loaded with colourful promises and high sounding narrations but have all failed to deliver. The main reason for the failure to deliver has largely been to do with poor implementation, management and monitoring.

After the election of 31 July 2013, the new Zimbabwe government released a new blueprint which is expected to drive the country’s economy over the next five years. The document entitled Zimbabwe Agenda for Sustainable Socio-Economic Transformation or Zim Asset for short was published in October 2013.

The policy document premises its success around four areas or “strategic clusters” of Food Security and Nutrition; Social Services and Poverty Eradication; Infrastructure and Utilities; and Value Addition and Beneficiation. These undoubtedly, like previous propositions, all sound noble and intentionally well-meaning targets. The problems for how to get there start with the very opening lines of the document which read: “Zimbabwe experienced a deteriorating economic and social environment since 2000 caused by illegal economic sanctions imposed by the Western countries”.

This article does intend to not join the rather tired debate of whether the sanctions imposed by the Western countries were real or not but instead questions the government’s use of the same as the main cause of the economic decline.

Wrong diagnosis, wrong prescription

In 1999 before the sanctions were imposed, Zimbabwe’s output or Gross Domestic Product (GDP) stood at US$6.8 billion. This compares to a figure of US$6.6 billion in 1980 at independence representing a mere 3% growth in a period of 20 years when the population of the country doubled. Zimbabwe’s economic woes need to be analysed in this period to understand causes of the free fall between the year 2000 and 2008. The sanctions imagined or real, only laid bare the inherent management issues that were being glossed over by political rhetoric.

Particular attention should be paid to the period between 1996 and 1999 when the economy contracted by 20%. This period coincided with two major events; Zimbabwe’s involvement in the war in the Democratic Republic of Congo (DRC) and the un-budgeted pay-out to the liberation war veterans. By the time the sanctions were imposed, Zimbabwe’s economic output was already 5% below 1980 levels and on a downward spiral.

By choosing to clutch at sanctions as the core cause of Zimbabwe’s economic ills, the government in Zim Asset has produced a policy document that doesn’t address the problem. Failure to diagnose the cause of one’s illness will result in the prescription of wrong medication. Zimbabwe’s biggest problems for decades have been and remain over expenditure by central government and corruption in both public and private sector. Any proposal to revive Zimbabwe’s economy which fails to recognise these two areas cannot be taken serious.

The meaningless obvious

Zim Asset document proposes a range of financing mechanisms to ensure the plan is funded for success. These include the setting up of a Sovereign Wealth Fund, issuance of bonds, securitization of remittances and re-engagement with the international and multilateral finance institutes among others. It must be pointed right away that a Sovereign Wealth Fund needs to be funded itself therefore cannot be considered a financing option from the onset. A Sovereign Wealth Fund is like a dam wall whose construction needs to be financed first before the water captured by it may be used to generate income.

There is no further explanation on the securitization of remittances other than that the government intends to encourage flows from the Diaspora. Firstly the idea of securitization from the world of finance involves the packaging of any kind of income streams from an asset owned. This could be interest payments on a loan, rental income or lease fees. It is therefore difficult to understand what Zim Asset means by the securitization of remittances. Secondly, the remitting of money by the Diaspora community does not need any encouragement from government as it has already been happening. The document should be talking about how it intends to tap into the funds already streaming into the country from Zimbabweans outside.

The issuance of bonds and re-engagement with international community are just words without spelling out the how. Everyone has known for a very long time that Zimbabwe needs to reengage with Western countries and their financial institutes. The issuance of bonds, on local or international markets, is a normal sovereign government practice. Zimbabwe’s economic blueprint should be spelling out how the country will ensure any debt issued will find any takers. Already, the government is struggling to convince local institute to take up Treasury Bills issued by the Reserve Bank of Zimbabwe. If companies already operating in the country don’t rate a central government well enough to lend some money to it, what are the chances on the international markets?

Every line of the Zim Asset document suggests that not enough thought was put into its crafting. It merely states the obvious but fails to give meaning to it. The Medium Term Plan (MTP) which was launched during the inclusive government term was also a very flawed document but it was miles better than Zim Asset. If Zimbabwe needs to be taken serious by the international community it seeks to reengage, it must take itself serious first. Zim Asset is by far no signal that Zimbabwe takes itself seriously.