Mnangagwa carries Zim's hopes to revive failed economy

Pressure is on Zimbabwe’s new leader to fulfil his pledges to be tough on corruption and to act fast to turn the country’s fiscal woes around.

Zimbabweans are hoping for better economic prospects under newly installed President Emmerson Mnangagwa. He has promised to take a different approach from that of his predecessor in running the struggling state, with economists saying the new leader needs to take advantage of the current momentum to change the country for the better.

Zimbabwe’s interim finance minister, Patrick Chinamasa, was restored to his former post this week by Mnangagwa – after he had been moved to head up the newly created ministry of cyber security by former president Robert Mugabe, as part of his last Cabinet reshuffle.

Chinamasa will outline Zimbabwe’s budget for 2018 on December 7. He is expected to trim government expenditure and tighten the country’s fiscal deficit, which is estimated to top $1.2 billion (R16.5 billion) this year, according to Treasury officials.

Mugabe reversed Chinamasa’s policies to curb government expenditure after he turned down a decision by Treasury to cut civil servants’ bonuses last year.

Experts say Mugabe’s populist policies ruined his country’s economy and warn that Zimbabweans will have to brace themselves for salary cuts and a reduction in the number of civil service workers under Mnangagwa.

Mnangagwa has pledged to work harder to hasten the turnaround of Zimbabwe’s ailing economy. But he has to act.

He has also pledged to be tough on corruption, going after looted assets and funds, and has called on government officials to serve the people.

This is in stark contrast to Mugabe, who tolerated casual work ethics by government officials, analysts said.

“With more than 90% of the workforce unemployed, public infrastructure in disarray and with frequent shortages of cash, food and fuel, the new leader of Zimbabwe will inherit an economy in the doldrums,” said Coface, a credit insurance firm.

Zimbabwe’s economy is expected to grow by about 3% this year, propelled by agriculture, mining and telecommunications.

Mnangagwa is said to prefer a soft approach to business policies in a bid to attract investments, compared with Mugabe’s militant and arbitrary economic policies such as indigenisation and price controls.

It is against this backdrop that experts believe that Mnangagwa must act swiftly.

Businesses have responded well to the change in leadership. The financial sector is showing signs of stability after banks started to disburse cash to depositors, and mobile money platforms such as EcoCash started offering cash-out services.

South Africa’s Impala Platinum and Sibanye-Stillwater, both of which have operations in Zimbabwe, said they would maintain their investments in the country.

Mining executives in Zimbabwe told City Press this week that they expected Mnangagwa’s new administration to defer a tax on unbeneficiated platinum and to “sort” the mining fiscal regime, which is considered to be high.

Old Mutual, Econet Wireless and Innscor have also shown positive trade trends on the Zimbabwe Stock Exchange as confidence returns.

Market traders said “demand in the heavyweights” was strong this past week following the exit of Mugabe, although the market had fallen in the two days after Zimbabwe’s army assumed power.

“Mnangagwa has to hit the ground running and to go beyond speaking,” said economist Johannes Kwangwari.

“So far, he has shown good intentions. His call for people to return looted funds and assets should be followed up by the end of February, and robust action should be taken to recover the money because he has to be different in his approach if he is to be taken seriously.”

Bitcoin, which has become a safe haven asset in Zimbabwe, has continued to surge, with the cryptocurrency’s price in the country surpassing $17 400 this week against global averages of about $10 000, according to golix.com, Zimbabwe’s only Bitcoin trading exchange.

Economists say the surge in the price of Bitcoin still reflects scepticism over other assets in Zimbabwe, as well as the inability to send money outside the country through formal channels.

Bloomberg reported this week that, given the lack of confidence in Zimbabwe’s financial system, the cryptocurrency has traded at a persistent premium of more than $10 000.

The Confederation of Zimbabwe Industries, which represents large manufacturers in Zimbabwe, said there was growing confidence in the new dispensation. Its founder and president, Denford Mutashu, said retailers expected easier transactions in stores as parallel market rates in Zimbabwe started to decline.

Francis Chinjekure, a quantitative research analyst at the Real Estate Institute of Zimbabwe, said the country needed to act fast to “take advantage of the positive wind blowing”.

He expects investment in the property sector to pick up quickly. “The property sector suffered in the current currency set-up, especially after the introduction of bond notes. Investors are watching and it won’t be long before they start moving to take positions.”