Zimbabweans are demanding immediate results. After decades of crisis, this is an understandable demand. The problem is Mnangagwa doesn’t have a magic wand to make the impact of close to four decades of economic blundering disappear in one flick of a wrist.
Unlike in 2009, when inflation disappeared virtually overnight because Zimbabwe switched to the US dollar, there are no instant results this time round. And unlike the unity government of 2009, Mnangagwa does not have the high commodity prices that cushioned the economy then.
Commodities have had a strong start but the outlook for the year is mixed, with Goldman, for instance, even predicting gold prices to fall to $1,200 this year. The World Bank sees metal prices down 0.7 percent this year but platinum up four percent. Minerals account for over half of Zimbabwe’s export earnings.
It would take a real shock to the world economy for us to see the spike in prices that Zimbabwean producers really need. Something like North Korea’s Kim Jong-Un sending a stray nuke or two across the ocean.
Just to get new financial support, Mnangagwa must clear $1.8 billion of arrears with multilateral lenders such as the World Bank. GDP has halved since 2000, and only some unprecedented act of economic wizardry can create millions of jobs in months.
“These things don’t happen overnight, and they have to really show they will implement what they say they will do. That is key,” according to Christian Beddes, the Zimbabwe representative for the IMF.
Political parties and their sympathisers like to imagine that they can cause a flood of foreign investment once in power. But that’s peddling false hopes. Zimbabwe has to compete with many other more attractive and less brand-damaged markets, and it will take a while, and lots of work, to push Zimbabwe to the front of the queue.
“There are 200 countries to risk my money in right now. And for now, Zimbabwe still has a lot of proving to do,” says Peter Major, director of mining at Cadiz Corporate Solutions.
Mnangagwa will be tested. The rains have been poor, and this will put pressure on the Government, especially in an election year. This may throw his widely praised spending cuts off course.
He opposes price controls, but the temptation to go that route will grow for Mnangagwa as price hikes continue. Inflation is officially projected at just over 3 percent in 2018, but it is more realistically going to rise much quicker given the trend of price hikes and the new and real threat of poor harvests.
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