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2016, What a Year: Bond Notes, Missing $15 bln and So on

Man holds up defaced Robert Mugabe street sign during one of the many protests to engulf Harare in 2016 - Photo Credit: Reuters

2016, was always going to be a tough year. The seeds had been sown years prior, with the economy manifestly displaying signs of distress. Inflationary data was negative coming off 2015, and tightening lending by banks all but pointed to a severely weakening liquidity situation that had largely remained restricted to business circles, and big-shot private investors. As the year wore on however, this crisis eventually blew-up and started affecting the individual Zimbabwean at a very micro level, where it hurts the most.

Civil Service Bonuses

With some commendable level of foresight, finance minister Patrick Chinamasa had announced early in 2015 that it was government`s considered view that bonus payments for civil servants was a luxury it could no longer sustain, and hence bonuses were to be scrapped. However, at an Independence Day speech just a few weeks later, President Mugabe disowned Chinamasa`s pronouncements and took a populist stance, promising that government would continue to pay bonuses despite revenue collections clearly showing that government had no capacity to fund bonuses. This was to be the ghost that would haunt government even in 2016, as it was forced to stagger civil service salaries for the better part of 2016. This unpopular move eventually culminated in the successful mass stay-away in July which coincided with the now infamous #ShutdownZimbabwe led by Pastor Evan Mawarire`s #ThisFlag movement. Pastor Mawarire would prove to be a major thorn in government`s skin even as he was miles away after having fled the country. As 2016, draws to an end, government still has not paid this year`s bonuses, having barely managed to pay salaries on time for the month of December. Unfortunately, this is a theme that will very much be recurrent in 2017.

Missing $15 billion

Zimbabweans would receive a huge awakening when the President announced in an interview to mark his 92nd birthday that $15 billion in diamond revenues was missing from the economy and that treasury had only received $2 billion since 2008. As is always the case, the culprits are known, but no action was taken, as the government has consistently displayed its unwillingness to tackle corruption, unless it furthers someone`s political interests. The Reserve Bank of Zimbabwe governor later came in to try and water this down by claiming that the $15 billion the president had referred to was merely an “economic loss,” and not actual monetary value. Be that as it may, this would just go to set the tone for how government handles issues of graft, what with admissions by Professor Jonathan Moyo that he had ‘misappropriated’ Zimdef funds as he painted himself as some sort of Robin Hood, yet today, he is still walking a free man.

Indigenisation

Indigenization minister Patrick Zhuwawo finished the latter part of the year largely obscure, and unnoticeable, but this wasn`t the case when the year begun,  The firebrand minister made a lot of noise hammering foreign companies on the need to comply with the Indigenization Act`s requirements of ceding 51% of their ownership to local Zimbabweans. Most observers agreed that he lacked tact in his general approach to the issue. Earlier, he had demanded that foreign owned companies give 10% of their annual earnings to the Empowerment Levy, but businesses had ignored this call. In response he gave foreign companies up to the 31st of March 2016 to comply with the Indigenization law or else he would shut them down. This gave credence to the notion that government was not that serious in wanting to attract foreign investment given how it was scaring the little foreign capital already in the country. To begin with the policy of contributing to the levy was flawed in that effectively it was asking companies to pay the 10% out of their revenues, not profits. Zhuwao`s brash mannered approach would eventually see him bump heads with finance minister Patrick Chinamasa, something that would again show that government had no real political will to attract foreign investment. How would an investor possibly invest money in a country where two cabinet ministers have a divergent view of such a critical policy, and openly attack each other? President Mugabe had to eventually move in to break the impasse between his cabinet ministers over the issue, by issuing a public statement that the indigenization law was “sector-specific” and had to be implemented differently without a “one-size-fits-all” approach. However noble this intervention might seem, there still exists no official law to back the President`s statement, hence it was a non-event and investor concerns over the Indigenization law still exist.

Bond Notes
Perhaps, the mother of all earthquakes to shake the economy in 2016 was the announcement in April by the RBZ governor that government intended to introduce Bond Notes. What would follow thereafter was pure unadulterated madness economy-wide.  This pronouncement served to only catalyze the worsening of an already dire liquidity crisis as panic withdrawals beset banks, mopping out the little currency that was circulating in the formal economy. It did not help matters, that the whole deal was shrouded in secrecy from the beginning as the central bank was mum on detail. Again, given the general distrust of the public against local monetary authorities, the fact that the proposed release date of the notes kept being postponed also didn`t help matters and the uncertainty created fueled speculative tendencies in the economy. The announcement of bond note introduction had several implications on the economy. Chief among them, was that it created some sort of “electronic inflation” whereby due to the scarcity of physical cash, many transactions had to be done electronically through transfers. The few people with access to cash began adding a 10-15% premium to access hard foreign currency, as they capitalize on the need to remit payments outside the country which now needs cash.  This in some way is a reverse déjà vu moment of the electronic inflation of 2008, which brought about the “burning money” phenomenon. Bond notes appear to be holding their value against the greenback for now, but the key question is for how much longer? 2017 will surely be interesting in this regard.

War Vets Communique

The political landscape has been rapidly becoming predictable. To the wry observer it has been very clear that the politics of Zimbabwe in 2016 would be dominated by the internal party struggles of Zanu PF. The whole country was at the party`s mercies this year, as for all intents and purposes, Zimbabwe does not have an effective opposition party with the structures, acumen and vision to match that of Zanu PF. (This is a rather controversial assertion, however, it is one I fully stand behind.) A group of anonymous war veterans released a highly combustible communique which read in part, “…The ZANU (PF) Party Leadership has dismally failed to use the resounding mandate given to it in the 2013 general election, to address the economic problems that have beset our great nation since independence from British rule. We note, with concern, shock and dismay, the systematic entrenchment of dictatorial tendencies, personified by the President and his cohorts, which have slowly devoured the values of the liberation struggle in utter disregard of the Constitution…” Although this statement was roundly disowned by the vast majority of the war vets, the powers that be in the ruling party appeared rattled and hastily arranged a War Vets Indaba where the President met war vet delegates who aired their grievances. This would just pass to be a talk-shop as no real tangible thing emanated from this meeting; suffice to say the war vets had been placated momentarily after gaining an audience with the head of state. But again, the key question is for how long?

Brexit and Beyond

Further across our shores, the world was rattled too, first with the largely unexpected vote by Britons to exit the European Union, what has now become known as (Brexit). This would also see David Cameron quit as British Prime Minister. Further across the Atlantic, Americans went on to defy logic and reason, by choosing Donald J Trump to be the 45th President of the United States of America, and successor to Barack Obama. These two seminal events would mark the beginning of populist tectonic shifts in the Western world as evidenced by events in Italy, Poland and Austria later on in the year. Fidel Castro, once the longest reigning President eventually answered death`s knock, and the nonagenarian died at a time when frosty relations between Cuba and the USA were beginning to thaw.

In Africa, Angolan President Eduardo Dos Santos who has ruled the oil-rich country for nearly 40 years pulled a shocker by announcing that he would step down in 2018. In Ghana, elections were held peacefully, and a peaceful handover of power between John Dramani Mahama and Nana Akuffo Ado is on course, as the country further establishes itself as one of the most stable democracies on the continent. In The Gambia, what promised to be a peaceful transition was brought to a grinding halt as incumbent Yahyah Jammeh who had initially conceded defeat went back on his word and vowed to remain in power despite losing the election. This would serve to be a stark reminder that despite the occasional mirage of progress; Africa will always be Africa after all. One can only guess how 2017 will play out



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