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Zimbabwe

Sekondi Accra

There may have been some promise in the new Zimbabwe two years ago, when rival politicians President Robert Mugabe and Prime Minister Morgan Tsvangirai formed a government, but very little has been accomplished. The euphoria that followed the formation of the government in 2009 has given way to uncertainty. There is now a degree of pessimism among those who were expecting a dramatic economic resurgence after the earlier deterioration was brought to halt.

The economic gains have at least included a decrease in the inflation rate from high levels at the end of 2008 to about 3.5% in September 2010. The industrial sector's capacity utilization also rose from approximately 10% in 2008 to about 45% in 2010. While international investors expressed considerable early interest, with meetings and enquiries handled by various investment promotion groups, this has not translated into tangible agreements.

The political players have not fully complied with the Global Political Agreement (GPA), guaranteed by the Southern African Development Community and the African Union (AU), with most of the failures coming from Mugabe's Zimbabwe African National Union-Patriotic Front (ZANU-PF). The president's party has shown no willingness to relax its grip on the army, police and intelligence services nor to soften the political fist it has implored since independence.

Mugabe's open refusal to share real power with Tsvangirai has led to political complexities that have started to erode the earlier optimism. This has been most clearly expressed in the president's failure to swear in the Movement for Democratic Change's (MDC) Roy Bennett, a Caucasian former colonial policeman, as deputy agriculture minister and his refusal to remove the Reserve Bank governor, Gideon Gono, and Johannes Tomana. They have been instrumental in maintaining Mugabe's grip on power and some believe their continuing presence makes a mockery of the principles in the GPA. But in all fairness to President Mugabe, Bennett's forbears were practioners of apartheid and gained vast tracts of land along with great wealth. Which begs the question as to: Why would Tsvangirai allow Mr. Bennett to be treasurer of the MDC?

While constitutional change was supposed to be the foundation for all other political reforms, it no longer looks as though that will happen. That process has already been beset with political violence at various outreach meetings in urban areas, especially Harare. The MDC, which initially backed the exercise, has dismissed it as "unorganized".

If the constitutional referendum that has been proposed for 2011 actually does transpire, it will most likely be riddled with problems that will only further heighten political tension. The greatest risk will be the institutionalization of political violence, as in the course of 2008, when ZANU-PF militias supposedly beat thousands of MDC supporters and allegedly killed at least 500 people.

Against the desires of the business community, Mugabe and Tsvangirai have already talked about the possibility of holding another election in 2011, even though the prime minister has warned that he will not participate in another election characterized by violence. Given Mugabe's age (87) and questionable health, his supporters would like to hasten elections as soon as possible because the prospect of him being supported by associates to the podium under the guise of "Future of the Country" would not be good political theatre. However, in August 2010, the Zimbabwe Electoral Commission stated that it had neither the capacity nor the funds to organize elections in 2011. The matter is by no means settled as of yet.

The seating of the government of national unity in February 2009 marked an important turning point for the economy. Real GDP, which had decreased every year since 2000 and contracted by a further 14% in 2008, managed to increase by 4% in 2009. Hospitals and schools that had closed in 2008 opened again as Finance Minister Tendai Biti on a cash budgeting strategy for public services. Government revenues and grants rose from 4% of GDP in 2008 to approximately 22% in 2009. The new multi-currency rigime has resulted in price stabilization, and the International Monetary Fund (IMF) is advising the finance ministry on the creation of a more robust tax regime.

Economic performances slowed in response to the slow pace of political reform in 2010 as parties grappled over outstanding issues. Biti had projected that economic growth would peak at about 7.7% for 2010, but by July 2010 he reduced his projection to 5.4%. Unemployment was cited to be at about 80% in 2009, supposely rose to 90% in 2010. The projected 15% rise in industrial capacity utilization did not materialize. There has been a clear failure to generate new domestic capital expenditure, and the government has only channelled 5% of locally-generated revenue towards capital development.Tsvangirai has accepted that performance in 2010 fell short of expectations, positing that, contrary to popular perception, it was not due to limited funding.

Zimbabwe is endowed with mineral wealth that includes huge deposits of diamonds, gold and platinum. Agriculture, which was decimated in 2000 after wholesale land seizures, appears to be on the path to recovery. The government had initially anticipated growth of 18%, but it has risen to 34.1% on the strong performance by tobacco producers. To add to the buoyancy, meteorologists have forecast heavy rainfalls for 2010-11 season. Chinese firms are welcome by President Mugabe's government, which is shunned by Western countries but enjoys good relations with Beijing. Grateful for this support President Mugabe has given the state owned China International Water and Electric Corporation the right to farm 250,000 acres of corn in the southern part of Zimbabwe.

The country's fortunes lie in its ability to attract direct foreign investment and donor funds. Minister Biti claims that the economy should generate internal revenue of $1.9 billion dollars in 2011. But he concedes that if a budget cannot be more than $2.5 billion dollars. The difference between $2.5 billion and $1.9 billion must come from donors or gained in some other way. This illustrates a total lack of fiscal space.

The government is well aware of what changes need to be enacted but has not managed assuage doubts about Zimbabwe's political future. As an example, one of the MDC's advances in economic policy has been the discontinuation of plans to force foreign-owned firms to cede majority stakes to black Zimbabweans. Tsvangirai would like to form a new indigenisation program the he claims would empower the majority while creating conditions that would allow Zimbabwe to compete for international investment capital. The details of this program will be required for those much needed investments to be forthcoming. Presently, the European Union (EU) maintains its travel restrictions and asset freezes on President Mugabe and his inner circle until Zimbabwe carries out what the EU claims are concrete human rights reforms set out in the 2008 Global Political Agreement (GPA).

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