By Tererayi Rushwaya| This article was penned in January 2018 when Mnangagwa was travelling to Davos and was booming about the billions of dollars worth of trade deals and investment he would cultivate from the Swiss economic jamboree.

Do not be bamboozled by economic terminology.

The state media and in various other Zanu leaning publications, Mnangagwa’s trip to Davos was touted as some sort of pilgrimage from which he would return with billions of dollars and millions of jobs which would transform the fortunes of the many Zimbabweans languishing in poverty.

A lot of the coverage was juiced up by commentators who spewed up slogans about Zimbabwe being “open for business”, bolstering the atmosphere of hope with economic terminology like “productivity”, “exports”, “FDI”, “GDP”, “purchasing power” and the rest of it.

But the reality of the matter is that Mnangagwa did not go on a pilgrimage, he will not return with billions of dollars lined up or millions of jobs in the pipeline.

He went to Davos so that the big investors and money lenders could have a close look at the man on the world stage. Oh, yes, there were plenty of photo opportunities, hand shakes – some cold, some firm and Mnangagwa and his team soaked it up nicely.

The people back home were joyous to see their leader mixing with other world leaders at such a prestigious event. Two of our chaps from the IS-wt writing team were present in Davos on “business” and they witnessed the nothingness of the whole thing from a Zimbabwean perspective.

I’ve tried to remove industry terminology in my discussion of the Zimbabwean economy, the facts are clearer when one removes “fancy” terms about economics.

What were the majority of Zimbabweans seeking from Davos?

It’s as clear as day that a majority of Zimbabweans are living tough lives befuddled with mass unemployment, expensive health and education, high commodity prices, cash shortages, malnourishment, cannot access clean water, enhanced exposure to cholera and other waterborne disease, to name a few problems.

However, the power of propaganda can actually make some in this demography assume that most of their problems would be solved when Zimbabwe is “open for business”.

For a working class person, equating “open for business” or “engagement with the international community” to a significant improvement in their quality of life is a false consciousness.

Equating business activity to improved quality of life for the majority is one of the lies sold to the poor by proponents of trickle down economic theory which has frustrated millions of working class people in the west in particular the USA.

The trickle down economic theory is a school of thought which proposes that the very rich people should be allowed to make as much profits as they can without government hindrance of high taxes and regulation because after they make all this money they will release some of these gains to the millions of people in desperate need.

Very much like a pyramid scheme, we all know about the fairness of those scams. But such is the dire socio- economic situation in Zimbabwe that an increase in the number of jobs – any jobs – and solutions to the cash shortages will be a welcome improvement. We will touch on this again a little later in this post.

So, what was Mnangagwa seeking from Davos?

Every leader wants to be seen to be delivering some benefits to their voters, even the vilest Viking kings wanted to enact some forms of social benefits to their soldiers and subjects. Mnangagwa is no different.

He has been hammering home the notion that Zimbabwe is open for business, which is fine and dandy on the surface. Some may find it strange that he has not spoken much about policies like improving health and education access or explicit intention to improve the quality of life for ordinary Zimbabweans languishing in poverty.

But Davos is a place where government spending to improve lives is frowned upon, so Mnangagwa may have been playing to the gallery.

Investors’ Concerns

The main concerns for any investor eyeing up business opportunities in Africa include political instability, populist government interventions, high taxes and high tariffs, government fiscal spending – anything that puts their money at risk.

In the case of Zimbabwe the sight of rampant men with axes and sticks invading white owned farms is still etched in memory for some of these chaps. They raise the issue whenever the Zimbabwean question is raised in the western media.

They will be thinking how can we trust this guy when he was a key figure in the government which called for the invasion of those farms. Another source of concern is the Indigenous Act.

As a rule of thumb, globalist investors detest any policy or legislation that has the word “indigenous” unless it’s a vanity PR campaign which they initiate themselves in order to ingratiate their businesses with the locals.

Finally, the issue of the upcoming general election would have featured greatly in discussions behind the scenes. Investors wouldn’t want the embarrassing feat of having to defend Mnangagwa when his party is beating up opposition party members during a general election, events of which many people in the world would be closely monitoring.

How come Rhodesia managed to have a vibrant economy?

First of all lets not fool ourselves by looking back in awe at Rhodesia. Yes, it had a vibrant economy and built fantastic infrastructure, but it was a racist state and the people who benefited most from its economic gains were the white Rhodesians.

But for those interested in how Rhodesia managed to build a successful economy we will summarize some of the actions they carried out. The main difference between the political economy of Southern Rhodesia and the African colonies south of the Sahara desert (with the exception of South Africa) was that the foundation of the economy was built by white farmers and miners who intended to stay in the colony and make it their home.

In the other African colonies the foundation of the economy was merely huge multinational companies (mainly from Europe) hoovering up natural resources and then leaving the scraps for small time white businessmen.

Of course, in Southern Rhodesia the BSAC (a huge multinational company) still played a part, but it’s influence on the overall political economy was limited. Anyway, in Southern Rhodesia, these white farmers and miners were spread out throughout the country forming a rock solid middle class which influenced the government to make socio-political decisions aimed at creating a developed society – for whites – with adequate infrastructure.

After further industrialisation which resulted in an increase in manufacturing and service industries including in the urban areas, more white Europeans arrived because of the attractive wages, and they formed a white working class who still earned a lot more than the blacks they worked with.

Even after the economic sanctions imposed on Rhodesia after UDI, the country managed to plough on and create a vibrant economy, with government fiscal discipline and an entrepreneurially minded and stable middle class.

The point I am trying to make here is that the people spearheading the economy of Rhodesia were spread out throughout the country and it was in their interest to maintain a functional society.

That’s typical of a stable middle class – they defend the system, they are against government corruption, they are against government indiscipline in spending; they recognise the last 2 indiscretions diminish their financial security and that of their children and grandchildren.

It’s the absence of a stable middle class which led to the demise of the Zimbabwean economy. It was the ZANU government which made a conscious political decision not to have a stable native middle class. The following paragraphs relay how this happened.

How did Zimbabwe end up in such a dire economic situation, anyway?

In order to understand why our economy tanked, it’s important to carry out a chronological analysis of the political decisions made by the government since 1980.

1980s-

When ZANU came into power in 1980 they inherited a vibrant economy with adequate infrastructure in place. They admirably tried to reduce economic inequality between whites and blacks which had been a permanent feature in the Rhodesian era by employing a raft of socialist policies.

These policies of course required increased government spending in health, education, minimum wage and requisite employment numbers for companies.

ZANU like Southern Rhodesia also distrusted international capitalism of huge multinational companies, and this was evidenced by their policies on dividends, and their habit of buying shares in companies owned by foreign investors.

For a while these policies did not harm the economy of Zimbabwe which did relatively fine in the 80s with improved quality of life for the native Zimbabwean populus.

In order to consolidate this status and prevent future reliance on government spending for economic growth, the government was advised to foster a class of native Zimbabwean entrepreneurs who would be captain of various industries including manufacturing and services.

This would have then created a stable middle class of Zimbabweans many of who would be employed in the private sector. But ZANU refused to follow this advice, they feared that this entrepreneurial class would become too powerful and as such pose a threat to their political power in the country. Instead, they decided to control every sector of the economy from government.

This caused more wastage of government money in two major ways. Firstly, some ZANU members high up in government and army top brass took some of the money and set up their own businesses which did not perform well.

Heck, there was no incentive for these companies to perform well because the owners could simply take more money from the central bank. One of these big companies was the Zimbabwe Defence Industries (ZDI), a Zanu cash cow which dealt in arms and state procurements.

ZDI was headed up by a certain Mnangagwa and an army general. Secondly, the government kept buying shares in foreign owned companies, and continued to spend hugely on education and health.

Inevitably, there was a huge government deficit (government spending was more than government takings). Exports were down leading do a shortage in foreign exchange.

The government still maintained a bloated civil service which kept haemorrhaging money. But what then happened in the 90s was quite fascinating.

Early 1990s.

In the early 90s, because of government overspend, ZANU went cap in hand to the World Bank and got loans. The World Bank as we know is a poster boy of International Capitalism, and more specifically neo-liberalism.

Neo-liberalism is an ideology which proposes that governments should privatise state owned institutions by selling them cheaply to huge companies mainly from the west, and that these governments should allow these companies to operate with very little regulation, low corporate tax, low wages and diminished workers protections.

And if these companies go bankrupt the host government would have to bail them out using taxpayers money. In the early 80s, ZANU distrusted these people (World Bank and neo-liberals) and rightly so, but this time they had no choice, they had screwed up the country’s finances.

Now when a government receives loans from the World Bank, they are required to follow a number of “cost cutting” measures such as reducing public sector spending and cheaply selling off government assets to client companies of the World Bank. As part of the loan, the World Bank also demands “liberalisation” of markets which in other words means lowering of regulation and corporate level taxes.

A result of this is increase in unemployment, huge downsize of the public sector (many civil servants losing their jobs) and the people working in the private sector will see a lowering of wages and very little worker protection (meaning they could be fired easily without compensation).

So anyway, in the early 90s ZANU got the loans from the World Bank and tried to meet the neo-liberal demands – cometh Economic Structural Adjustment Programme (ESAP).

ESAP didn’t go to plan, there was a drought, government spending cuts were not as thorough as the World Bank had demanded, more and more people were borrowing because of lower wages, interest rates shot up, and government ministers and ZANU top brass kept syphoning taxpayers money to bankroll their faltering companies, foreign exchange for companies was still difficult to get hold of, many local companies were being pushed out of the market by the incoming international companies.

To make matters worse, in 1995 the Mandela regime in the new South Africa increased export tariffs which pretty much led to the closure of local exporting companies in Zim. Being a landlocked country, Zim needs favourable tariffs to ship goods to and from the coast which is off another country. Because of deindustrialization, the government struggled to pay its debts.

1996-

In 1996/7 the most ill advised foreign policy was taken by government and this was the decision to participate in Kabila’s war in Zaire. The war cost a heck of a lot of money, increasing government expenditure on the balance sheet. From then onwards, the economy tanked incredibly.

The Zim dollar fell 10 times against the US dollar between 1997 and 2000, previously it had taken the our dollar 14 years to fall 10 times vs the US dollar. ZDI (headed up by Mnangagwa, Sekeramayi and General Zvinavashe) was reportedly worth US$5m, in the 1980s it was worth US$300m.

Because of a failing economy, there was a wide spread of poverty which was worsened by very high mortality rate from HIV/AIDS, ZANU became unpopular. In 1997 the war veterans association (a key constituent of ZANU) expressed their disgruntlement towards the government by carrying out demos in Harare.

They managed to get ZIM$50 000 each and ZIM$2 000 monthly payments. This of course increased the government deficit even further. Within ZANU there were rumblings about where the ZDI money had gone. Ministers became unhinged in their syphoning of taxpayers money, the governor of the Reserve Bank went off on a bender of his own by printing more money leading to further inflation of the Zim dollar.

In the early 2000s, the war veterans were still aggrieved by the land issue and the government threw them a bone by allowing violent invasions of white commercial farms.

Between 2005 and 2006 the ZIM dollar fell from 10 000 to at least 500 000 against the US dollar. Another “miracle” source of revenue fell on Zimbabwe’s lap – diamonds. Between 2008 and 2015 it is reported that diamonds worth US$15bn were mined in Chiadzwa.

The chaps who oversaw the whole thing were our fellow chaps from the ZDI. This time though, the chaps did not trust each other and mined the diamonds as different companies owned by the different pillars of power in ZANU which were Mugabe, CIO and the military. Because of the illicit nature of the diamonds and the fact that our chaps were subject to economic sanctions, these companies were fronted by shady foreign businessman.

Out of the US$15bn real value of the diamonds mined, about US$2bn were exported out of which only US$300m was accounted for. Admittedly, these numbers are quite skewed but such was the whole Zim diamond mining caper.

What does all this mean?

1. Zanu are in awe of the war veterans and the military, and will not hesitate to pay these 2 groups be it in cash or assets in order to gain political support.
2. Businesses run by ZANU ministers and military top brass have no incentive to perform well because they can easily acquire government funds. This causes continuous government deficits which lead to shortages in money for public services.
3. Even if the government are given US$10bn in unconditional loans, the money will first go to the military, ministers and war vets via various schemes which give money and resources to dysfunctional businesses of their own which haemorrhage money. A huge chunk of the remainder of these loans will go to salaries and pensions of an already bloated civil service which has zero productivity.
4. But the reality is that if the Zim government were to receive loans from the IMF/World Bank, they will have to adhere to neo-liberal policies which include firing many many people in the public sector and selling off government assets to clients of the IMF/World Bank.
5. ZANU will not allow the flourishing of an independent entrepreneurial class of Zimbabweans unless it pledges allegiance to the party.
6. Zanu has a history of failing to reduce the size of the civil service.
7. The governor of the Reserve Bank of Zimbabwe has a habit of making daft monetary policies.
8. The only way to end this is by regime change. Zimbabwe can never be a functional state so long as the red mouthed knuckle dragging old men of Zanu are at the helm.

@irreverencesuit