When Finance Minister Professor Mthuli Ncube presents the 2023 national budget tomorrow, three things will be uppermost on his mind: maintaining current investor confidence, ensuring stable exchange rates and keeping a tight lid on inflation.
At a glance, this is a big ask in an election season when, traditionally, politically-motivated largesse often comes into play.
After suffering the sharpest foreign investor drought, probably in history outside a war zone, the Second Republic has painstakingly worked hard to win back the confidence of both external and domestic capital,since coming to power in 2017.
Billions of US dollars, primarily from foreign investors, have since flowed into the country to finance big ticket investments in mining, power generation and an assortment of infrastructure projects.
Notable, among these, is the greenfield US$1 billion Chinese-led steel venture in Mvuma, the US$1.3 billion thermal power project in Hwange, and huge road and airport re-development programmes around the country.
A huge oil and gas project is also in the early stages of development in the north of the country, underlining the growing investor confidence in the government in particular, and Zimbabwe, in general.
Yet only a short four years ago, it was unthinkable that foreign investors would give even a glance at Zimbabwe, let alone park billions in the country.
The investments have primed the country for strong, sustained economic turn-around and growth in the short to medium term, and Prof Ncube will be mindful in his budget not to sow doubt again in investors’ minds about Government commitment not only to the security of their capital, but its growth and success in Zimbabwe.
He will, therefore, likely throw in sweeteners like tax relief in the budget for business, especially those investing in greenfield projects with long gestation periods, to nurture and underpin investor love and confidence.
Of equal concern for Prof Ncube will be maintaining stable exchange rates to anchor government’s short term economic stabilisation, to lay a strong foundation for medium to long-term growth.
Over decades, unstable exchange rates fuelled inflation, which in turn severely impacted business confidence, and investor interest, across the board.
“This (unstable exchange rates) is a killer for business. Business cannot operate in an environment where it cannot make long range plans because of exchange rate volatility,” a business leader noted.
Through a combination of monetary and policy instruments, Prof Ncube managed to douse an inflation hurricane that had swirled in the country earlier this year, and is likely to double down on this in tomorrow’s budget.
Part of the measures included easing on the official exchange rate brake paddle, which brought this in tandem, or close to, the black market rates.
The parity of the exchange rates has killed off speculative pricing in the economy, and arrested inflation.
The other measure, still being rolled out, is the introduction of gold coins.
These have sucked out billions of dollars from the market which could have otherwise ended up on the black currency market, thereby driving up inflation.
Before these and other measures were put in place earlier in the year, inflation had threatened to journey back to hyper levels of years gone by, which could have rendered all painstaking economic revival efforts of the Second Republic, above all winning foreign investor confidence, worthless.
For Prof Ncube, luckily, the political landscape is not troubling enough, notwithstanding the upcoming elections, not to double down on these and other economic stabilisation and recovery efforts, while avoiding the largesse often associated with electoral contests.
The opposition, in spite of grandstanding public postures of electoral confidence, is in reality in sixes and sevens, hobbled by growing loss of interest in their cause by their Western founders and backers.
The West is in deep crisis, geopolitically and economically, over its short-sighted tussle with Russia over Ukraine, and is barely keeping its head above water to be able to keep minding peripheral interests like regime change in Zimbabwe via the opposition.
Inflation, joblessness, approaching winter cold and food shortages,among other economic and social ills, are ravaging the West after it dis-entangled from decade old trade links and part with Russia, its main commodity supplier, over the Ukraine war.
The result is the West’s withdrawal of sponsorship of peripheral goals like regime change in Zimbabwe and elsewhere, via funded opposition.
Here, this is clearly illustrated by the absence last week of the usual
Western sponsored staged-managed opposition tricks of abductions and disruptions of rallies when a Commonwealth team was in town to assess Zimbabwe’s suitability for re-admission.
In gone by years, rallies could have been held ahead of the team’s visit in which police could have been goaded to clamp down on these, or supposed ‘ruling party’ members mobilised to scuttle the gatherings.
No more, a telling sign of growing Western dis-interest in local opposition politics.
Only this week, the European Union advanced US$50 million to the country, through government, and not United Nations or international humanitarian agency structures as was always the case, in another sign of the changing times and fortunes for the opposition.
As a result, the waning potency of the opposition, which sitting governments often try to blunt by spending large during elections, should free Prof Ncube to aggressively fight off any potential source of danger to the economy, and offer more sweeteners to business in the upcoming budget. — New Ziana.