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Saturday, 28 May 2011 20:54

Zimbabwe: Government Dreams BRICS

By Munyaradzi Mugowo

HARARE, Zimbabwe, May 28, 2011 (Financial Gazatte) - Zimbabwe believes its four-year Medium-Term Plan (MTP) approved by Cabinet on Tuesday can be a dream ticket to the BRICS, a club of the world's leading and fastest emerging markets comprising Brazil, Russia, India, China and South Africa.

 

Just two years into stabilisation and after a record economic crisis that lasted a decade, the country believes it will maintain typical emerging market macro-economic indicators over the next four years - an average growth rate of about 7,1 percent, a single-digit annual inflation and double digit savings and investment ratios of about 20 percent of gross domestic product (GDP).

 

Predicated on the BRICS' "development state model", the MTP presumes investment-led growth underpinned by greater State control and involvement, as opposed to the neo-liberal non-interventionism model propounded by the more industrialised countries of the West.

 

"The MTP has to be underpinned by a development model - the development state model. It borrows heavily from the BRICS in terms of its participatory nature," Economic Planning and Investment Promotion Mini-ster, Tapiwa Mashakada, said on Tuesday as he broke news of the Cabinet approval.

 

"Instead of rolling back the State, the State becomes an actor. In the Chinese model, the state becomes an actor through partnerships."

 

Non-interventionism thinking informed past failed economic and social blueprints such as the Economic Structural Adjustment Prog-ramme and its successor, the Zimbabwe Programme for Economic and Social Transf-ormation, often blamed for causing social distress.

 

The MTP seeks to parrot the Chinese economic miracle based on the development state model that the world's second largest economy adopted from Japan in the 1970s, allowing for intensive regulation, state-business relationships and control of foreign investment.

 

Zimbabwe has emerged from a decade-long crisis with a strong disposition for State-led macro-economic planning, extensive regulation and greater State involvement through partnerships provided for in its indigenisation and economic empowerment legislation and public-private partnership framework.

 

The MTP has designated indigenisation and economic empowerment as one of the country's 11 national priorities, which establishes a framework for State-business relationships characteristic of a development state.

 

Other priorities include infrastructure development, employment creation, entrepreneurship development, macro-economic stability, investment regulation, co-ordination and promotion, resource utilisation and poverty reduction, good governance, human-centred development, science and technology development and economic mainstreaming of gender.

 

The Minimum Requirem-ents for Indigenisation gazetted for the mining sector on March 25 as a supplement to general regulations passed in January last year, have assigned franchised monopoly to State-owned entities such as the Zimbabwe Mining Development Corporation (ZMDC) in the indigenisation transactions.

 

The regulations direct non-indigenous miners to sell their shares or interests only to "designated entities" in six months in the event that their compliance plans are deemed irregular, a strategy that may have been developed to put the resources sector under State control.

 

ZMDC has officially adopted smart partnerships as an operational model in its alluvial diamonds ventures in Chiadzwa, Marange, in the eastern part of the country, where it is exploiting the gems through two joint ventures with foreign investors.

 

Mashakada said the MTP, which lays out the vision, objectives and targets, national priorities and priority programmes and projects as well as funding and implementation mechanisms over the period 2011 to 2015, would also pave way for co-operating partners to ring-fence and fund development projects in the country.

 

"Development agencies such as the United Nations De-velopment Prog-ramme were saying you can't run an economy based on a budget," Mashak-ada said. "They can now fund the plan. The Chinese are also looking at which programmes and projects they can fund. We had discussed elements of our plan with them before."

 

Since it formed an inclusive government two years ago, the country has sweated in vain to raise $8-10 billion required to repair the economy damaged by 10 years of political feuding and cumulative economic contraction.

 

Government has put the MTP funding bill at about $9 billion.

 

The economic and social development blueprint presumes funding from new domestic equity investments by mutual funds and other investors, public-private partnerships, privatisations and a sovereign fund that government plans to establish this year.

 

Zimbabwe is barred from receiving multilateral financial support as a result of a statutory embargo imposed by some Western countries as well as an accumulation of arrears with key multilateral lenders such as the World Bank, the International Monetary Fund and the African Development Bank (AfDB).

 

A report produced by the AfDB in February this year on the state of Zimbabwe's infrastructure, empirically demonstrated the gravity of the country's infrastructure crisis and identified it as the largest drag to recovery.

 

The report estimates that the country must mobilise at least $14,2 billion to rehabilitate and upgrade its infrastructure, ring-fencing energy, transport and water as key priorities, all of which have been appendixed to the MTP as priority projects for the period.

 

Over the four-year period, economic planners predict an average current account deficit of not more than five percent of GDP and an average employment creation rate of six percent per annum, a budget deficit of no more than five percent of GDP set by the Southern African Development Community.

 

They also target sustained poverty reduction consistent with the UN Millennium Development Goals and an interest rate regime that encourages savings and investments.

The MTP also sets ambitious targets of foreign exchange reserves of at least three months import cover and retiring the country's delinquent foreign debt to at least 60 percent of GDP by 2015.

 

The stock of Zimbabwe's external debt is currently estimated at nearly $7 billion against a nominal GDP projection of just $6 billion for the year, from $5,5 billion percent last year.

 

Mashakada said the MTP should transcend governments, from the current inclusive arrangement to the next administration, as it is a government programme, different from a political party manifesto. (END)

 

 

 

 
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