Why the IMF is wrong about Zimbabwe’s 5% economic decline

Because we have a form of democracy there are always more consumers than producers in any society and this translated into neglect of the productive sector and massive subsidies for the consumptive sectors of our economy. We grew our GDP – but slowly and on a basis that simply could not be sustained. Many of our industries grew fat and lazy on subsidies and protection.

The new Government has dismantled all of that and in a matter of months, the whole basis of the economy has changed – our exporters are now receiving full value for their earnings, our consumers are slowly waking up to a new reality of just what things cost and it’s not pretty. Many firms and Banks have discovered the completely false basis on which they have been operating and are technically bankrupt. We are struggling to try and deal with this new reality.

Ours is a regime that has struggled with its own contradictions and conflicts since it came to power after the overthrow of Mr. Mugabe in 2017. In this context the reformers in the Government, including the President and the Minister of Finance have struggled to secure agreement to the changes needed to secure the future and have faced opposition on many issues. However, they are slowly gaining the ascendency and we must not, under any circumstances, allow the program of reform and change to be derailed.

We must recognise that we are in the process of shifting the whole basis of growth in our economy from consumption and import substitution to export led growth by the productive sector. Global revenues to the export industries have been increased from $3,5 billion to $15,5 billion, an increase of 4,4 times. They are just waking up to this new reality and are awash with local currency. One small exporter in the South West of the country asked me ‘what do you think I should be doing with my surplus RTGS?’. A year ago he was struggling with liquidation. I advised him not to buy foreign currency as I am sure that once we can get the crooks out of the game the rate is going to strengthen. He should invest in expanding his exports.

Our largest source of foreign currency is our amazing Diaspora – they pour at least US$3 billion a year into our economy – a year ago that was worth RTGS $4,2 billion – today its worth RTGS$12 billion. That is a growth of inflows greater than the national budget. It will take time for this new buying power to feed through to growth but it is coming and that is why I think the IMF forecast of a 5 per cent decline in our economy this year is nonsense. But because this growth has to come from production and not simply consumer spending – it will take time as there is a lag between the resumption of real earnings by exporters and their capacity to increase output.

Is this the right thing to do? You bet it is! You cannot increase the wealth of a nation by just taking in each other’s washing. You must produce things. The Tiger economies of the Far East have transformed the lives of their people and dragged billions of people out of poverty by exporting to the world. International Trade has expanded at 15 per cent annum since the Second World War and this has been the engine of growth for the whole world. We have not participated in this rush for growth and it is now our turn to do so. Just look at the astonishing transformation of the economies of Rwanda and Ethiopia, now among the fastest growing economies in the world.

For the first time in our history we have a government that is committed to backing the Zimbabwean population – we are a hardworking and enterprising people who have spent our lives trying to survive bad government. Now we need to get down to business, stop whingeing and make our own way into the future. I cannot think of another country that offers so much opportunity to a person who wants to ‘give it a go!’

Eddie Cross

Harare 13th April 2019

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