Why Mnangagwa doesn’t have the answers to Zimbabwe crisis

This only shows desperation. If implemented, it could yield twice as much revenue as is derived annually from VAT. But that losing manoeuvre has already helped drive commerce underground. It has also undermined what little confidence consumers and financiers have in their current rulers.

The Mnangagwa government has also reimposed import and exchange controls, thus creating additional incentives to avoid regular channels of commerce. Those controls also permit officials to allocate “scarce” resources and licenses to import, export, and so on. These are well-known occasions for corruption and for giving rent-seeking opportunities to cronies.

It wasn’t always this bad. Despite the massive loss of formal employment that occurred under Mugabe, the informal sector flourished and Zimbabwe’s poor probably benefited.

This was partly because under the unity government of 2009-2013, when Tendai Biti of the Movement for Democratic Change was Finance Minister, there were no such controls and there were plenty of US dollars and no questionable bond notes and Treasury bills.

Hard currency (the US dollar) permitted Zimbabwe to start growing economically after the long Mugabe slide, and individuals and businesses to prosper. The country ran a budgetary surplus.

But this all came to an end when the government of national unity collapsed in 2012. [Ed: The GNU ended in 2013]

To begin to restore the economy, the government needs to acknowledge corrupt dealings and repatriate the huge amounts of cash that have fled the country as laundered money.

The regime could also try to take ill-gotten gains away from Mugabe and Grace Mugabe, as Malaysia’s new government is doing to its previous kleptocratic prime minister and his wife.

Gestures in that direction would help to begin to restore confidence, a step towards eventual prosperity. So would promises to restore the rule of law.

Investors might also return if a sound currency was likely. But that would only follow shedding of ministers, civil service layoffs, military reductions, and many other indications that Mnangagwa and his minister of finance were serious about reducing the debt hangover.

Cutting some sort of deal with the IMF would also be worthwhile, but that could mean giving control over the Treasury to foreign advisors. Zimbabwe is and, since Biti’s day, has been, a basket case.

It’s time to acknowledge that fiscal reality and to do something about it.

By Robert Rotberg for The Conversation

Ed. I do not agree that Mnangagwa has no answers. It is just that too many people want him to fail. But Zimbabwe will never collapse. Mnangagwa and his team will triumph. It is only a matter of time but as he and his Minister of Finance Mthuli Ncube have repeatedly said, the people will have to go through a period of pain. I welcome debate on this issue and will publish your comments especially if they are story length.

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