BSR: Mthuli's Plea
A leaked letter written by Zimbabwe’s Minister of Finance and Economic Development to international financial institutions details of which were first revealed by respected continental journal, Africa Confidential reveals a desperate government which has run out of both cash and ideas.
The message is that unless there is an urgent rescue plan from the international community, the long-ailing economy is facing a risk of imminent collapse, resulting in serious social consequences.
The letter was written at the beginning of April 2020, in the context of the global COVID-19 pandemic, and the plea for debt relief and assistance packaged as a response to that catastrophe. However, given Zimbabwe's longstanding problems, the government is using the pandemic as an opportunity to make a case that has otherwise been on the table for more than a decade.
The letter makes several significant revelations. Even if they are not, strictly speaking, revelations, they are nonetheless, confirmations of things that the Zimbabwean regime has previously refused to openly acknowledge. Ordinary Zimbabweans can, for the first time, read the truth from the horse’s mouth. There are not things propagated by the country's detractors or saboteurs, as the regime is fond of alleging, but admissions made by a government minister.
Finance Minister Mthuli Ncube confirms that Zimbabwe's economy “contracted sharply in 2019” and forecasts that, as a result of the current pandemic, it could “contract by between 15 to 20 per cent in 2020.
This would be, by his admission, “a massive contraction with very serious social consequences”. He advises that with 8.5 million people already food insecure, and an inadequate health system, natural disasters and rising poverty levels, these “indicators are expected to worsen” in 2020. It is against this background that he pleads that "Zimbabwe desperately needs urgent international support".
While claiming to have developed a “comprehensive response strategy” to the COVID-19 pandemic, he says the government “is short on the resources required to implement this strategy”. Indeed, the government's response to the pandemic has been slow, erratic and incompetent. While it has copied measures used in other countries, such as lockdowns, it has lacked the means and willpower to enforce the lockdown and to do tests on a wider scale. Social distancing in high-density urban areas has been illusionary as people are forced by economic circumstsnces to gather in large crowds, queuing for food and water all of which are in short supply.
Admitting that there is “very limited fiscal space” for more spending, the Minister says without external funding, the government will have to resort to domestic financing. By this, he is referring to borrowing and printing money. By now, most people know that this path causes drastic consequences. He does not mention that they have been printing money anyway, by generating billions of electronic RTGS dollars. The Minister officially confirms that annual inflation is currently over 500%, an indicator of the already dire state of the economy. In recent weeks, the government has resorted to old methods by announcing price controls on essential goods.
In short, the minister paints a dark picture of looming health and economic catastrophe. That was at the beginning of April, a long time ago in light of the pandemic and the on-going economic crisis.
Admission of "policy missteps"
While the government usually likes to sugar-coat its performance, painting a deceptively bright picture, in this letter the Minister admits that they committed “policy missteps during late 2019” and that these are a cause for concern for the IFIs. This point is reiterated when the Minister says “The Zimbabwean authorities duly acknowledge their responsibility for the recent policy missteps during late 2019”. This is not something the government would readily admit to the Zimbabwean public.
In truth, the Minister had little choice but to accept these so-called “policy missteps” since they were raised as a matter of concern by the IMF at the end of its last Staff-Monitored Programme. This admission makes remarkable reading for Zimbabweans who are otherwise accustomed to their government habitually painting a rosy and unblemished picture of its performance. These so-called policy missteps include inconsistencies, where a policy is announced one day and reversed the next day. This has been the disconcerting pattern concerning the currency policy since 2016 when Zimbabwe adopted the bond note.
Of note is that there is not a single mention of “surplus” in the letter, even though the Minister regularly drops it in his speeches to the local audience. He probably knows that no one at the IFIs would take him seriously if he tried.
Arrears, not sanctions
The Minister acknowledges that the “policy missteps” are “rightfully a cause for concern” among the IFIs as he pleads for a rescue plan. But more significantly, he confirms that Zimbabwe’s exclusion from debt relief that has been offered to other Low-Income Countries (LICs) so far is not because of sanctions but its arrears status. “Despite its needs and low-income country status, Zimbabwe is not eligible to benefit from these initiatives because of its official external debt arrears,” admits the Minister.
This is the stark reality that is often ignored by ZANU PF politicians and their supporters who use the sanctions the same way a person armed with a hammer sees every problem as a nail. Surprisingly, even those who should know better believe the propaganda. In this letter, Minister Ncube makes it clear that the cause of ineligibility for these debt relief schemes is "external debt arrears".
So what does the government propose to do in return for the emergency rescue package?
The government makes the usual pledges to implement economic and political reforms. However, these proposals bear the hallmark of the broken-record syndrome. They have been mentioned so many times, without any seriousness and without any implementation to the point that no one takes them seriously anymore.
For example, concerning political reforms, the letter says the government will “continue with the process of engaging in National Dialogue”. But this no more than empty political rhetoric. No serious actor takes its Political Actors Dialogue (POLAD) seriously beyond the participants and a few gullible parties. The political impotence of POLAD makes Minister Ncube's undertaking vacuous and insincere. It smacks of a bulletpoint that was copied and pasted in fulfilment of a box-ticking exercise; without any seriousness or respect for the audience. Far better would be a show of enhanced efforts to engage the main political opposition party, the MDC Alliance with which the ruling party has an impasse.
Legislative changes aren't the only reforms
The Minister also refers to legislative changes to security and information legislation as well as the realignment of other legislation to the 2013 Constitution. The government still erroneously equates political reforms to changes to legislation. Legislative changes may be part of political reforms but political reforms are far more than changes to legislation.
Instead, political reforms include implementation of the legislation and the reform of institutions which play a critical role in the political space. The conduct of these institutions such as ZEC and the ZBC, for example, has shown that it is not enough to amend the Electoral Law and tick the box of political reforms. Legislative reforms without reforming the "human factor" in those institutions are meaningless.
In one more hollow claim, the Minister says the government will “adopt an ambitious Governance and Anti-Corruption Strategy, with time-framed reforms to address the Governance vulnerabilities” in various areas including public procurement and central bank operations. What ambitious anti-corruption strategy? This is yet another gimmick from Minister Ncube and the regime's anti-corruption strategy has been a total farce.
From the day that President Mnangagwa took over after the coup in November 2017, he has been making grand promises concerning anti-corruption. He even set up an anti-corruption prosecution unit in his office. He sacked members of the old Zimbabwe Anti-Corruption Commission and replaced them. He also replaced the Prosecutor General with his preferred candidate. He announced an asset-declaration policy. However, there is nothing to show for all these changes. They have all been political stunts.
The current Prosecutor General, Kumbirai Hodzi, who was brought in to do what his predecessor had allegedly failed to do recently expressed exasperation with the incorrigibly corrupt system, claiming the key players in the anti-corruption drive were themselves captured by cartels. These cartels are backed by politicians who run the government. So what "ambitious governance and anti-corruption strategy" is Minister Ncube talking about?
Same old problems
The Minister’s letter confirms that old problems persist, despite the rhetoric. In promising to “eliminate discretion in the allocation of foreign exchange by selling to the highest public bid rate” Ncube is simply confirming that the government still control the foreign exchange market and that the RBZ is still using elite-driven allocation methods, a practice that has fed grand corruption schemes involving political elites and their associates.
In undertaking to eliminate quasi-fiscal operations of the RBZ and its direct lending schemes, the Minister is merely confirming that the central bank continues to behave imprudently by engaging in matters beyond its legal remit. The involvement of the central bank in direct lending schemes seriously distorts the markets and fuels corruption. It is often the government, state-owned entities, political elites and businesses associated with them that benefit from such direct lending schemes and quasi-fiscal schemes. Confirming that the government does not learn from past misdeeds, this is precisely what was happening just over a decade ago when the country was plunged into record hyperinflation.
Indeed, Minister Ncube confirms that Command Agriculture continues to impose serious costs on public funds with nothing to show for it considering how the nation is facing food shortages. The government reforms will “limit the fiscal costs of the financing of agriculture, ensuring transparency and resolve all the related governance issues”. Ncube knows Command Agriculture has been an economic disaster, what with the looting by elites and the capture of the state by Sakunda Holdings, whose relationship with government is mired in opacity and dubiousness.
In a nutshell, the Finance Minister’s letter paints a gloomy picture of a broken nation facing desperate times. This is not the picture that he or the government often presents to the nation.
The admissions of missteps are a far cry from the self-adulatory statements of surplus and other phantom successes during the course of 2019. The government may fool its supporters and the gullible, but it can’t maintain this show in front of experts who can easily tell when someone is waffling.
Nevertheless, the insincerity and sugarcoating continue, with high-sounding promises of reforms. It sounds as if the government is asking for a bribe from the international community to carry out reforms. The experts can see through the cheap use of the COVID-19 pandemic as an opportunistic attempt to plead for a rescue package for weaknesses that pre-date the pandemic.
Nevertheless, the failures of the Zimbabwean regime should not stand in the way of humanitarian assistance for ordinary citizens who are facing a bleak future in light of the Minister's letter. This is why the proposal by telecommunications billionaire Strive Masiyiwa for an independently-run humanitarian fund deserves serious consideration.
He, more than most, has a fair idea of the desperate state of the country’s health-care system. A charity that he runs with his wife Tsitsi Masiyiwa, Higher Life Foundation, has already been paying wages of healthcare staff before the pandemic struck. They intervened in 2019 when doctors and nurses went on a prolonged strike which paralysed the public healthcare system.
As for Zimbabwe itself, it’s time to give serious consideration to a radical transitional bridge between the broken present and an uncertain future. That bridge more than anything is what the country needs.