The instalment of Jacob Zuma as president of South Africa will not solve Zimbabwe’s domesticproblems, but is likely to be supportive of the country’s peace process over the longer term. AlthoughZuma has so far said little about his future policy towards Zimbabwe, our view is that hewill be supportive of the Movement for Democratic Change (MDC) and will focus more than Mbekion practicalities rather than sentimentalities. Both Zuma and Tsvangirai count on their respectivelabour movements for political support, and share similar personal backgrounds of great achievementwithout the benefit of much formal education. They are also very aware of the realities ofeconomic globalisation and the importance of foreign investment, which will be key to Zimbabwe’slong-term recovery. While Zimbabwe’s growth prospects will remain dim in 2009, real GDP growthis expected to grow by 3.0% in 2010, barring a collapse of the unity government.
The Government of Unity (GNU) is functioning at a sub-optimal level, but there are encouragingsigns that its game could be raised if it were not for the alleged spoiling tactics of ZANU-PF hardliners.For the GNU to work, it needs funds from abroad, but donors are holding back until it performsbetter, which creates a vicious circle that will prove difficult to break. Our view is that the coalitionwill probably survive the short term, but whether it can last the (minimum) 18-24 months needed totake the country to a new election is very much in doubt. With Robert Mugabe and the ZANU-PFunlikely to depart, the real question is how long the MDC is able to withstand the provocations itis faced with.
Finance Minister Tendai Biti intends to bring discipline to budgetary management but faces a numberof hurdles. There is impatience amongst government workers for improved pay, and althoughthe GNU is trying to pay each state employee a monthly hard currency stipend of US$100, it isbattling to afford the cost. In addition, until economic output recovers and collection mechanismsare improved, tax capture will remain inadequate to fund even current expenditure. At the politicallevel, Central Bank Governor Gideon Gono and Biti remain locked in a power struggle over controlof policy, which is jeopardising a holistic approach to economic management. Gono retains thebacking of Mugabe, but donors would strongly prefer a change at the top of the central bank.
In the World Bank’s 2009 Ease of Doing Business rankings Zimbabwe came in at a lowly number158 out of 181 economies assessed. Recently, the IMF opined that the country was still an extremelychallenging place for private enterprise to operate, a view echoed by several multinational corporations,particularly in the mining sector. Nonetheless, there is little doubt that there is considerablepent-up FDI interest in Zimbabwe. According to the GNU, which took office in February 2009, itis realistic to aim to raise gross fixed capital formation to 25% of nominal GDP over the mediumterm, from our current 8.0% estimate.
(0 items)
