But there is little fresh thinking in new industry policy plans — a decision to “pick winners” in particular harks back to protectionism, while the medium-term development plan repeats some of the World Bank’s structural adjustment mantra of 20 years ago.
The coalition government launched two short-term emergency recovery programmes (Sterp 1 and 2) in 2009, and then followed them up with an industrial strategy early this year, and a medium-term development plan last week.
Hardly surprising therefore that at the public launch of the 5-year medium-term plan (MTP) last week, Prime Minister Morgan Tsvangirai, President Robert Mugabe’s junior coalition partner, asked “Why should we be inspired by this MTP? We have had so many plans,” adding that over the last six months his coalition has been “dysfunctional”.
The plan itself justifies his doubts.
It is non-committal on key issues. It does not say how the government will tackle a foreign debt of over 100% of GDP, most of it arrears. It glosses over the conflict between its target of US$9,2 billion of investment over the five-year (2011-2015) period to be achieved by a “comprehensive investment drive” and the government’s “indigenisation” programme requiring foreign firms to dispose of 51% of their shares in local businesses, something which will hit the mining sector quite hard.
Mining is forecast to drive growth of 7,1% annually with diamond output surging from 8 million carats this year to 21,5 million by 2015 while production of gold, nickel and coal will all double. The investment necessary for this, estimated by the mining industry itself at over US$6 billion, is not going to happen if Indigenisation minister Saviour Kasukuwere from Mugabe’s Zanu-PF wing of the coalition pushes through his plans to achieve majority local ownership of the industry by the end of this year.
Consistency is not the MTP’s strong suit. It is unclear how mining output can double while electricity capacity increases only 50%. Zimbabwe today generates less electricity than it did at Independence 31 years ago.
It is the same with rail transport, also crucial to mining development. Capacity is 18 million tonnes but less than 3 million tonnes were moved last year because only one third of the locomotive fleet is functional. Moreover, the total investment budget is US$9,2 billion, while mining and public sectors need US$10 billion between them, leaving nothing for the rest of the economy.
With both private sector capital spending and public sector investment falling short of target, the 7,1% growth rate target looks decidedly flaky. Perhaps the most glaring weakness is the assumption that an economy that devotes 92% of national income to consumption can grow at over 7% a year.
Given all this, Zimbabwe’s hope that American-style consumption will drive growth looks misplaced. What the country needs is a debt agreement with its creditors and the dilution, if not the outright rejection, of its “indigenisation” programme.
Without these two economic fundamentals in place, as well as free elections leading to the replacement of the deeply-divided coalition by a majority administration, the MTP is more aspirational than achievable.
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