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Fight over Zimbabwe economic policy favours finance minister
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Fight over Zimbabwe economic policy favours finance minister
ZIMBABWEAN Finance Minister Patrick Chinamasa is gaining the upper hand in a power struggle in the ruling party over his efforts to revive an ailing economy and tap financing from the International Monetary Fund.
In recent weeks, Mr Chinamasa has said the state may compensate white farmers whose land was confiscated and that the southern African nation will pay $1.8 billion of about $10 billion it owes to foreign lenders by June 30.President Robert Mugabe issued a statement on April 12 softening regulations forcing foreign companies to ensure black residents own at least 51% of their businesses.
"What was presented in Mr Mugabe’s statement is actually a policy shift of seismic proportions," said Alex Magaisa, a Zimbabwean constitutional lawyer at the University of Kent in the UK "In many ways the statement represents a significant retreat by the Zimbabwe government on a flagship indigenisation policy."
National Disaster
The changes highlight the government’s drive to resuscitate an economy that’s half the size it was 15 years ago, with about 90% of the population out of formal employment. Mr Mugabe declared a state of national disaster last month due to the worst drought in almost two decades that’s killed cattle, withered crops and left millions of people needing food aid. The government’s also struggling to meet monthly wage bills that consume over 80% of revenue.
Zimbabwe hasn’t been able to access finance to build infrastructure and create jobs since it fell into default to the IMF in 1999. The US and European Union nations imposed sanctions on Mr Mugabe and senior members of the ruling Zimbabwe African National Union-Patriotic Front, citing allegations of human-rights abuses and electoral fraud.
"ZANU-PF’s election campaign slogan three years ago was ‘indigenize, empower, develop, create employment’," Mr Magaisa said. "It has not created employment, there has been no empowerment, there has been no development and now indigenisation has just been abandoned in all but name and slogans."
The economy is in such bad shape it’s forced the government to re-think its management and start re-engaging with international institutions that can help support a recovery, IMF mission chief to the country, Domenico Fanizza, said in an interview on Friday. The government is making some progress in committing to reforms, he said.
"The shift is happening. They realized there was no alternative but radically transforming the economic structure of the country," Mr Fanizza said in Washington. "It’s clear the policies they’ve been following for the past 15 years have come to nothing."
Mr Fanizza said the economy is beset by low demand, lack of liquidity and a shrinking industrial base
.
Policy Resistance
Resistance to the policy shift has centered around a faction in ZANU-PF known as the Generation-40, which has coalesced around Mr Mugabe’s wife Grace as a potential eventual successor to the 92-year-old president.
Criticism of Mr Chinamasa’s policy direction has been led by Indigenization Minister Patrick Zhuwao, who’s Mr Mugabe’s nephew.
When Mr Chinamasa and central bank Governor John Mangudya assured banks that they were exempt from rules requiring all businesses to be at least 51% locally owned, Mr Zhuwao accused them in a statement of disregarding the law and a decision by the cabinet. Mr Chinamasa and Mr Zhuwao declined to comment about any differences within the government or the ruling party.
"My appeal and plea to you is to urgently engage the financial services sector so that all affected institutions make a commitment to developing indigenisation implementation plans and indicate such commitment to comply by the deadline of March 31 2016," Mr Zhuwao said in a statement.
Ownership Rules
About two weeks after the deadline passed, Mr Mugabe issued the statement saying that banks wouldn’t be forced into unwanted partnerships. Standard Bank Group, Barclays and Standard Chartered have units in Zimbabwe.
Mr Mugabe also proposed watering down ownership rules for mining companies that have been in place since 2010. While new miners will have to offer a 51% stake to black Zimbabweans, existing operators will be able to retain ownership if they retain or spend 75% of their earnings within the country including expenditure on tax and wages. Foreign miners such as Zimplats, Anglo American Platinum and Aquarius Platinum met their empowerment obligations as early as 2014.
"It’s a humiliating moment for Mr Zhuwao. The indigenisation minister has now been reduced to the role of coordinator, after adopting a belligerent tone in recent months," Mr Magaisa said. "It’s a victory for Mr Chinamasa in that ugly fight with Mr Zhuwao."
Fight over Zimbabwe economic policy favours finance minister
BY BRIAN LATHAM AND MIKE COHEN, APRIL 16 2016, 14:09
Bloomberg
http://www.bdlive.co.za/africa/africannews/2016/04/16/fight-over-zimbabwe-economic-policy-favours-finance-minister
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Re: Fight over Zimbabwe economic policy favours finance minister
Maybe there is some light at the end of this tunnel. Hopefully it's not a freight train.
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