Can Zimbabwe`s finance ministry get out of its own way?

Zimbabwe Ministry of Finance Office Complex

For the outside observers, Zimbabwe’s economic environment is getting predictably unpredictable with each passing day. For a country that is seeking to woo, foreign investment, the recent actions by the monetary and fiscal authorities seem like a well-coordinated effort to do the exact opposite. 

With virtually each action, the ministry of finance and the central bank officials increasingly appear to be a motley crew of amateurs experimenting with a loaded gun, leaving  nothing but a trail of destruction in their wake.

The recent embarrassing debacle around the appointment of the controversial William Mutumanje, otherwise known as Acie Lumumba as the ministry of finance’s communications task force chair, and his subsequent sacking, as comical as it is, perhaps shows that Zimbabwe is not yet ready to be taken seriously in the global capital markets. 

At a time when emerging markets themselves are in a state of flux, making it all the more difficult to attract capital, the powers that be locally, are doing a stellar job in ensuring that investment interest is kept at bay. What with, the recent sequence of events clearly showing that the priority, at least for the country’s top officials lies in the settling of personal scores through endless recriminations, at the expense of the economy.

Mthuli Ncube`s appointment as minister of finance was meant to be the master stroke that would reassure the markets – both local and international – that Zimbabwe was firmly set on the path of reform. However, with each misstep, and there are shockingly many, this goodwill is slowly being used up. After using a well-oiled PR machine during the election season, it`s almost as if President Mnangagwa`s administration has stopped trying anymore.

The world over, markets look to both the monetary and fiscal authorities for guidance and signalling. Every little action, even the tiniest whispers by the authorities are scrutinised as markets seek to decipher government policy and take proactive market positions. Institutional credibility of treasury, and more importantly, the individual credibility of treasury`s officials becomes vital. 

Given the recent events at the new government composite office complex, which houses the finance ministry, arguably the most important administrative agency in Zimbabwe, one has to wonder just how much credibility it still has in this respect.

This goes far beyond personalities however, though it seems one individual features prominently in the farrago of missteps and mixed messages from treasury of late. Often it’s not “what” is said or done that has the potential to wreak havoc in the markets, but it is in “how” a policy is communicated. 

The implementation of the controversial two percent intermediated money transfer tax amid accusations of little to no consultation by the finance ministry on the wider implications of the tax is a case in point. After outcries from business and the public, treasury proceeded to issue an amended tax regime with a slew of exemptions to the tax, to its credit.

Minister Mthuli Ncube`s now infamous words at Chatham House earlier this month triggered a wide panic induced buying spree of basic goods and a huge spike in the parallel market rates as the market sought to dump their RTGS and bond note balances, fearing for the worst. “The market has said these currencies (USD and Bond Notes) are not at par.

I don’t want to argue with the market. The bond notes will, at some point, have to be demonetised and I cannot tell you when that will be,” Mthuli Ncube was quoted as saying. Given the events that transpired in the aftermaths of this statement the obvious question that arises, is whether this was the best platform or manner to communicate a message on such a sensitive economic issue.

At 80 Samora Machel Avenue - the RBZ headquarters - the situation is hardly any different. It cannot be business as usual when senior apex bank officials are suspended based on allegations levelled via a home video blather by a hugely controversial figure.  Such developments do little to assuage fears that Zimbabwe has turned the corner and embraced a new reality of consistent policy making and economic stability.

Zimbabwe is in a spot of economic bother. Yet the treasury and central bank juggernaut seems to be not helping the cause as it marches effortlessly on, from one embarrassing scandal to the other. One wonders however when the sloppiness will end, if at all.  Or perhaps, there is a method to all this madness?