by Joseph Ngwawi – SANF 07 No 9
Zimbabwe has embarked on an economic recovery programme that pins the nation’s hopes on mutual understanding among all sectors of society and has the potential of putting the country on course to attaining southern Africa’s economic targets.
In a monetary policy statement presented on 31 January, the Reserve Bank of Zimbabwe (RBZ) set the tone for what could be a watershed year for the southern African country that has endured a crippling economic crisis.
RBZ governor, Gideon Gono, said 2007 will be the turning point in the country’s quest to come to grips with its economic situation, characterised by rising cost of living, runaway inflation, foreign currency shortages and falling investment.
“The year 2007 has to be a year for our renewed self-confidence as a people, renewed investment drive, renewed efforts towards greater unity of purpose; and a year for healing efforts between and amongst us as a people than has been the case since our economic decline started 10 years ago,” Gono said.
The new economic revival programme will be split into two phases, with the first phase running from March to June and phase two from July to December. Decisions are to be made and targets set during February, including agreement on capping of wages, prices and services.
The first phase will involve the establishment of a “social contract” among labour, government and the business sector, as well as civil society and political parties; and the mobilisation of foreign exchange through offshore lines of credit and exports.
A transitional package is being proposed under the social contract, underpinned by “well-sequenced, complementary economic policies backed up by unwavering political support and commitment as a basis for an economy ready to take-off, free of artificial controls, free of rent-seeking opportunities, and one ready to receive new investment inflows from across the globe.”
It is envisaged that business, government, labour and civil society will be important stakeholders in promoting a shared vision of attaining a Zimbabwe with single digit inflation by December 2008, where macroeconomic policy is underpinned by fiscal prudence and a tight monetary policy, and able to feed itself at all time with surplus for export.
Zimbabwe currently has the world’s highest inflation rate, pegged at 1,281.1 percent in December 2006.
Citing the example of Brazil – which managed to reduce its inflation from more than 6,000 percent in the early 1990s to single-digit figures by the end of the decade – Gono said Zimbabwe could attain the same feat, with the cooperation of all sectors of society.
Gono said Zimbabwe’s inflation should end 2007 pegged at around 65 percent before declining further to single-digit levels in 2008 in line with the Southern African Development Community (SADC) target.
Zimbabwe, with well-developed human capacity and infrastructure, is a key member of the SADC economic bloc, whose target is to have single-digit inflation by 2008. The SADC vision is to have all the 14 member states registering inflation figures of below five percent by 2012 and three percent by 2018.
The inflation target is part of measures being pursued by the region as it moves towards macroeconomic convergence and the creation of a Free Trade Area next year.
Other macroeconomic targets are on the ratio of budget deficit to Gross Domestic Product, levels of publicly guaranteed debts, and the amount of import cover.
Gono announced that one of the programmes proposed under the transitional package is the restoration of confidence in the economy, which will involve honouring all the existing Bilateral Investment Protection and Promotion Agreements (BIPPAs) and instituting corrective measures on previous violations of bilateral investment agreements.
Zimbabwe has signed a number of BIPPAs with countries from the region and other parts of the world, which are meant to safeguard investments by nationals of those countries.
There has, however, been concern in the past few years about the safety of such investments, particularly after Zimbabwe embarked on its land reform programme.
“By its nature, investment capital is a highly timid wind, which swiftly changes course at the slightest signal of disrespect for private property rights,” said Gono.
A government team will embark on a global investment promotion drive in February and March to assure the investor community of Zimbabwe’s commitment to the sanctity of private property rights.
The Zimbabwean authorities will also set up the Zimbabwe Investment Authority during the first phase. President Robert Mugabe signed the Zimbabwe Investment Authority Act on 29 December 2006.
The Act provides for the merger of the Zimbabwe Investment Centre and the Export Processing Zones Authority, resulting in the establishment of a one-stop organisation with the responsibility of processing, planning and implementing investment promotion strategies.
Zimbabwe is a signatory to the SADC Protocol on Finance and Investment.
Approved by the region’s leaders at their annual summit in Lesotho last August, the protocol aims to harmonise financial and investment policies of member states and ensure that changes in policies in one country do not affect other countries.
The protocol is an important stepping stone for a region whose target is to become a free trade area by 2008 and a customs union two years later.
Key elements of the protocol include the creation of a favourable investment climate within SADC; attainment of macroeconomic stability and convergence; cooperation in taxation matters; and coordination and cooperation on exchange control policies.
