Mugabe’s history of economic populism
Robert Mugabe resigned as Zimbabwe’s President on Tuesday, leaving behind a floundering economy, thanks to years of economic populism to retain power.
Throughout his tenure, populism became Mugabe’s hallmark as a power retention mechanism.
When marauding veterans of the liberation struggle pushed for a share of the cake, Mugabe buckled under pressure, Mugabe gave each of the 50 000 veterans a once-off gratuity of Z$50 000 and a monthly pension of Z$2 000 from January 1998.
The money had not been budgeted for.
Such unbudgeted for expenditure saw foreign investors losing confidence in the currency, which resulted in the local unit losing 71,5% of its value against the greenback on November 14 1997, commonly referred to as Black Friday.
A year later, Mugabe sent soldiers to the Democratic Republic of Congo (DRC) to prop up Laurent Kabila, who was under threat from rebels backed by Rwanda and Uganda.
It is estimated that Zimbabwe was spending at least $1 million a day to prop the Kabila government.
The DRC excursion did not bring any benefits to the economy amid revelations government officials and military elites were the beneficiary of various deals.
The fast-track land reform exercise in 2000 decimated agriculture and it has taken Zimbabwe 17 years to be grain sufficient, via the expensive command agriculture programme.
Mugabe’s reign will be remembered for his denunciation of anything that had fingerprints of reforms.
In 2002, then Finance minister Simba Makoni was hounded out for calling for the devaluation of the Zimbabwean dollar.
Makoni was labelled a saboteur and with that tag, opened floodgates of attack on the minister.
Businessman Phillip Chiyangwa said at the time that Makoni’s actions were a departure from the promises Zanu PF made during the campaign and this is why he received a vote of no-confidence from the party.
“Immediately after the elections, the man went for devaluation of our currency and from then onwards, it became a priority for him, yet it was not on the Zanu PF agenda. The new thinking in Zanu PF cannot allow for someone who is so detached from the people,” Chiyangwa told our sister paper, The Standard back then.
Makoni was jobless some months later.
In 2006, then Finance minister Herbert Murerwa was rapped for his bookish economics, after he had called for an end to the quasi fiscal activities that were blamed for accelerating hyperinflation.
“We are under sanctions and there is no room for the type of bookish economics we have at the Ministry of Finance,” Mugabe said then.
Last year, Mugabe overturned a plan by Treasury to cut salaries and waive bonuses due to limited fiscal space.
In his mid-term fiscal policy review, then Finance minister Patrick Chinamasa had proposed a raft of reforms that included cutting 25 000 government jobs, slashing salaries for senior civil servants and suspending bonuses for at least two years.
The proposals were thrown out by Cabinet.
After the land reform exercise, Mugabe decided to expand that programme to the economy through the Indigenisation and Economic Empowerment Act.
He found a useful enforcer in Saviour Kasukuwere who was the new sheriff in town.
When former central bank governor Gideon Gono proposed the Supply and Distribution Based Indigenisation and Empowerment model in 2011, it found no takers.
It was Gono and then Finance minister Tendai Biti who fought tenaciously to ward off Kasukuwere’s threats of indigenising the banking sector.
Ministers would fight in later years over the policy, with Mugabe clarifying the legislation, but without ensuring that such clarifications were incorporated in the law.
It was one toxic piece of legislation which chased away potential investors.
Under Mugabe’s watch, an expansionary fiscal policy was the order of the day, with the bulk of the revenue going towards what Biti called trinkets of patronage like cars for ministers and foreign junkets.
Whereas the inclusive government ran a balanced budget, spending has been multiplying after 2013, with Treasury expecting a budget deficit of $1,8 billion this year.
Government has been financing the deficit through borrowing from the domestic market by issuing out Treasury Bills.
Biti said Mugabe knew nothing about the economy since independence.
“From 1980, he failed to implement a robust fiscal policy. He invested his interests in power retention, he worshipped power,” he said.
The former Treasury boss said Mugabe would be remembered for introducing controls — price controls, import controls and foreign currency controls.
In his state of the economy address last month, Biti said Zimbabwe has now sunk to a fragile state which is unable to deliver basic services to its people, faces massive poverty, dislocation and disequilibrium, thanks to years of self-induced policy distortions, economic nihilism and a politico-centric mindset.
It was under Mugabe’s watch that the economy experienced two sides of inflation — hyperinflation and deflation.
In 2008, Zimbabwe inflation reached Weimar Republic proportions rising to over 500 billion percent.
Hyperinflation was tamed by the use of the multi-currency regime in 2009.
The economy slipped into deflation in February 2014 when annual inflation went below 0%.
It slipped out of deflation in August the same year before annual inflation went below 0% in November 2014.
Annual inflation was in positive territory in February this year and has quickened reaching 2,24% in October.
Over a dozen economic blueprints were introduced but the devil was in implementation.–newsday
