Elections: Politics of the economy

IN less than 72 hours, Zimbabwe goes to the polls.

Editor’s Brief

Victoria Ruzvidzo

The much-awaited, or is it the much-feared, August 23 harmonised elections are upon us.

This country religiously holds presidential, parliamentary, senatorial and local authority elections every five years as part of its democratic processes.

This is a constitutional commandment.

While political parties have been busy campaigning, showing off their muscle left, right and centre, the economy has been watching and taking signals.

Indeed, many often think politics and the economy have nothing to do with each other, and yet they have everything to do with each other.

For example, when President Mnangagwa announced the election date, there was chaos on the foreign exchange market, with the local currency losing value at an alarming pace. The Zimdollar depreciated to a historical level of US$1:$6 926 in June 2023 from US$1:$684 at the beginning of the year.

This, described by the authorities as sabotage, resulted in sharp price increases and general instability in the economy.

Intervention by the Government subdued the pressures and strengthened the local currency. Presently, it is trading at an interbank rate of about $4 500  to the United States dollar and a parallel market rate of an average $6 000, down from more than $10 000.

This is a classic example of how politics affects the economy. In this instance, negatively.

Globally, stock markets are affected positively or negatively, by political developments in major economies such as the United States and the United Kingdom. Wall Street and the London Stock Exchange react to political decisions in a pronounced manner.

Closer home, in South Africa, when anything that is politically unsettling occurs, the Johannesburg Stock Exchange limps. However, there can be a positive correlation between the two.

Both feed from each other and live by and with each other.

This is a worldwide phenomenon.

We cannot separate the economy from politics, and vice versa.

There would not be politics without the economy, and vice versa.

It is a chicken and egg situation.

So, political developments determine the economy’s temperature.

It can blow hot or cold, warm or lukewarm depending on what is obtaining on the political front.

So, elections and politics in general determine, to a large extent, movements on the currency, equities and other markets.

Politics determine trade and investment. Confidence, or lack thereof, in a country dictates the level of business activity.

Politics holds sway over the policies that are implemented in all sectors of the economy to give order and direction, hence it impacts significantly on a country’s development discourse.

Elections determine the president and government of tomorrow, hence their development thrust is what the country will be exposed to over the next five years.

Therefore, election periods are ordinarily a time during which many business decisions are put in abeyance as investors, corporate executives, boards and institutions await direction from the elections.

Who will be president after Wednesday? Who will form the next government? Who will be the MPs? And who will run the local authorities? All these issues determine the route the economy and all its facets will take. Will we see a consolidation of current policies or a departure from how things have been done? What will be the make-up of the new Cabinet? Who will be appointed to run the economic ministries?

Do they have the full appreciation of the economic matrices and what needs to be done going forward? Indeed, politics has a large bearing on economic activity.

Many business deals are in the pending tray at this stage, awaiting the all-important signatures to implement them.

Other discussions are almost complete but the nature and complexion of the agreements will be determined by the elections outcome.

In many instances, it is not necessarily a sign of fear or trepidation, but it is the nature of economies globally that something as life-altering as polls will delay future programmes and projects until election results are out.

So, if our stock and money markets have slowed down, and if factories are not making as much noise as a few months ago, it is because they await guidance from the elections.

However, some of the foresighted local firms and institutions are hardly perturbed by the upcoming elections.

They know Zimbabwe is their home and they need to develop it.

They have projects in motion and cannot waste a minute.

They have confidence that after the elections, markets for their products and services will still exist. They know that the huge orders on their books will still need to be fulfilled.

Instead, as we speak, some local firms are injecting funds into their businesses because there is a tomorrow.

Indeed, it is still politics determining their decisions.

The economy is expected to grow by at least 5,3 percent this year — buoyed by huge growth in sectors such as agriculture, mining and tourism, as well as the huge infrastructure developments that we have seen in the last five years.

We commend Zimbabweans for maintaining a generally peaceful pre-election environment and pray that election day and the period thereafter will remain peaceful.

It is through peace that we foster development. It is through peace that we will achieve Vision 2030.

Indeed, an upper middle-income economy is possible with peace as the main ingredient.

Peace allows the formulation and application of sound policies.

There sure is life beyond the elections.

Zimbabwe’s economy has been on a growth trajectory over the last few years and looks set to achieving most of its targets under the National Development Strategy 1, which ends in 2025.

It has already met or exceeded some of these targets, including an US$8,2 billion agriculture sector achieved two years ago.

The US$12 billion mining economy is now within reach while other sectors are striving to outcompete each other in bringing results home well ahead of schedule.

This is highly commendable.

No wonder our economy is the fastest growing in the region.

We  need to keep the momentum. The Promised Land is now in sight.

In God I Trust!