Andrew
President Mnangagwa
Impact of Eastern Europe on Global Economy
SOME within our business community have begun showing jitters over the impact of the ongoing Russian Special Operations in Ukraine.
This is to be expected.
Any war, let alone one pitting a superpower against its rival bloc, albeit through a proxy, inevitably generates great perturbations in the global economy.
And in slightly over two weeks of Russian military operation in Ukraine, and sabre rattling by countries comprising NATO, global tremors have been ample and unsettling.
Fossil fuels and gas markets are roiling; the global cereal market is topsy-turvy.
Given the centrality of Russia and Belarus in production of fertilisers, the pressure will not abet.
Across these key commodities of life, prices continue to spike.
Petroleum moguls, largely from the West, are reaping windfalls from disruptions and disturbances their home governments have caused.
Global supply chains, already strained to the limit by the global Covid-19 pandemic, are now close to breaking point.
The global economy is being buffeted by raging headwinds of pandemics, war and rumours of war.
Our Zimbabwean economy which was on path to recovery and growth, cannot avoid these jolts and bumps.
This is a situation we must meet head-on so we cushion our economy.
My piece this week addresses this very subject, hopefully laying a framework for a robust national response.
How Zimbabwe is impacted
Like most small economies, we are exposed.
We meet our fuel needs through imports.
Muzarabani oil explorations are still quite some way off before we begin to be counted as a fossil oil economy.
Until recently, we have been meeting our cereal deficits, principally wheat, through imports from Eastern Europe and Latin America.
Fertilisers, too, have been coming from Eastern Europe.
There are many other imports we get from the same regions, in order to grow our economy.
We are thus in the direct line of shocks.
Above all, Russia is a significant player in our foreign direct investment calculus.
She is active in the mining sector, notably in platinum through Great Dyke Investments, and in diamond sector through Alrosa.
Great Dyke alone needs US$2 billion to take off.
Alrosa has identified several diamond deposits it intends to work on.
Belarus has been supporting our agricultural mechanisation programme, alongside America’s John Deere.
All these developments have been made possible by our far-reaching internal reforms, and by our policy of engagement and re-engagement.
Zimbabwe’s economy is thus fully integrated into world markets, making it markedly susceptible to exogenous shocks, such as this major situation of conflict in Eastern Europe.
Hardened by Sanctions
Yet there is a way Zimbabwe is in a far better position, comparatively speaking.
For more than two decades, we have been in some kind of war we call illegal western economic sanctions.
These sanctions have been wide-ranging, clearly designed to stymie the whole gamut of our economic activity.
Both American ZDERA sanctions, and those by the European Union which are beginning to be eased somewhat, were designed to hurt us, indeed to attack all sinews of our economy.
We have been under siege already, weathering multiple exogenous shocks.
Our agriculture, our mining, our trade relations, our access to global finance, our infrastructures, our health and social services, our national security, and certainly our bilateral, international and multilateral relations — all these have been curtailed by sanctions.
Well before the West’s ouster of Russia from international payment system SWIFT, Zimbabwe was already grappling with international payment challenges because of illegal sanctions.
Powerful economies of the West have been determined to strangulate us.
We have been in a war: at war for more than two decades without a truce, without a ceasefire.
Two decades of a war without humanitarian corridors.
A total war where a whole people are a legitimate target. This unreported war has levied billions on us, stymied our growth and limited our prospects.
In 2000, when this aggression started, we were just two decades from a brutal Liberation Struggle which claimed more than 70 000 of our people, and which set us back several decades by way of postponed development.
Yet we still stand.
The situation of turbulence is thus not new to us.
Zimbabwe’s Resilience
Every cloud has a silver lining.
There is a positive side to this unjust war against us.
Aggression has imparted resilience in us and on our nation.
We have had to survive amidst hostilities, indeed to grow our economy in an environment of myriad exogenous shocks.
Such an hostile environment triggers creativity and inventiveness, engenders and stirs self-reliance in us and our nation.
Indeed, NYIKA INOVAKWA NEVENE VAYO!
Escaping debt trap
Unlike many post-independence countries on our continent, Zimbabwe has not been favoured by donors.
Even ZIMCORD (Zimbabwe Conference on Reconstruction and Development) we had in early 1980s saw fabulous pledges which were never made good by donor countries.
Because of this negative donor attitude, Zimbabwe has escaped the insoluble debt-trap which constrain many economies of Sub-Saharan Africa.
Not that we do not have foreign debt.
We have it, in part inherited from the Ian Smith regime, and in part incurred under the First Republic for decade-long post-war reconstruction and rehabilitation.
But when benchmarked against other African economies, our debt is relatively small, and has diligently been kept within manageable levels.
In fact, what has been growing are interests and default charges, with the principal remaining largely unchanged.
Lately, we have begun servicing that debt, the hostile global circumstances created by the West notwithstanding.
Gradually, our debt burden will ease, in the process raising our creditworthiness in the eyes of the world.
Like the proverbial lion, we have learnt to eat what we catch.
This is one side to our story of resilience.
Self-financing model
The other side emerges from sheer necessity, itself the mother of invention.
Circumstances of Western economic strangulation forced on us novel models of development financing. With no credit lines coming our way, and given the risk profile which sanctions created for us, we have learnt to survive and run on a cash economy.
In simple terms, we cannot borrow, or buy on credit.
Rather, we self-finance; we buy only those things we have saved for and can afford.
Our large infrastructural projects currently underway are largely self-financed.
We are financing the rehabilitation of our road network.
We are financing our dam construction.
Other projects are being undertaken largely through grants from friendly countries like China. Or through soft, concessionary loans we can absorb.
While this model has been painful and slow, it has taught us hard lessons in good husbandry, lessons in efficient stewardship of scarce national resources.
Limited resources restrain our unlimited needs, forcing us to drop wants for genuine, pressing needs.
Over the years, we have acquired and internalised self-discipline and frugality in management of our affairs.
And as they say, spend not, want not.
This is a key attribute which places us in very good stead, amidst the current, ensuing turbulence in world affairs.
Relying on our own natural resources
With not many friends with deep pockets to spoil us, we have had to look inward for answers to challenges of our growth and development.
I have already said we did not, could not borrow or access credit lines as is normal with other economies.
All International Financial Institutions — IFIs — including those to which we are a fully paid-up member, and thus with full rights and entitlements, have slammed their doors on us.
ZDERA enjoins American officials to oppose any requests for credit lines to IFIs by Zimbabwe.
The perennially renewed American Presidential Executive Orders have ensured this hostile stance by American officials sitting on IFIs is ruthlessly enforced.
Looking inward has meant asking ourselves what we have as God-given endowments, and how to maximise on them.
Under the Second Republic, our endowments are our bootstraps, by which we raise ourselves.
In this season of pandemics, global conflict and all-round disruptions, mining has become our foremost bootstrap.
Thankfully, we are a highly mineralised country, favoured with majority of precious minerals and metals which are in great demand worldwide.
Mining, our foremost strategic response
As I write, prices of key minerals which Zimbabwe has and offers to the world, are firming up on the world market.
Gold is creeping towards US$2 000 an ounce; palladium, which is part of our PGMs, is well above US$3 000; the price of platinum is firming daily, pointing to bright prospects.
Lithium, already enjoying a pride of place because of the seismic shift to green economies, can only bring rich rewards to our economy.
Investments in chrome, tin and iron are on the upward. Diamonds are holding their own, in fact rising.
My recent meeting with representatives of World Diamond Council in Brussels showed a great appetite for our parcel.
Soon our Zimbabwe Consolidated Diamond Company will be in the market with several parcels.
All these good auguries in the mining sector make our US$12 billion target realistic and achievable by 2023, if not much earlier.
Well before the present conflict in Eastern Europe, we began reforming our mining sector, and all institutions which serve it.
It was a stroke of foresight, and one which is serving us quite well in these turbulent times.
The US$12 billion mining economy has thus become much more than an internal goal; it now is our veritable formulae for stabilising our economy against exogenous shocks which the unforeseen conflict in Eastern Europe has wrought upon us and upon the world.
What we lose on the swings of galloping fuel and cereal prices, we should be able gain on the roundabouts of windfalls from the mining sector.
It is important that our unsettled and panicky business leaders look at matters from that positive angle.
I am happy that our platinum sector has raised production, and is expanding investments. So, too, is our gold sector which continues to benefit from reforms we instituted.
A lithium policy is being worked on, with actors already recording progress on the ground.
The mining sector has a lot to do to cushion our economy against the ensuing turbulence.
Limiting Fuel Shocks
We are looking at the whole duty framework to cushion our economy from shocks and pressures from galloping fuel prices.
There is no need for panic.
I have already directed the Ministry of Energy and Energy Development to review and reduce duty and surcharges on fuel, so the pump prices of petrol and diesel remain manageable.
We need stability in the fuel market so we minimise imported inflation for price stability in the economy.
Cabinet will be seized with this issue in days and weeks ahead.
Our Agricultural Response
In these dire and turbulent times of global conflict, our strategy of accelerating national self-sufficiency in cereals must be supported by all, Government and private sector alike.
We must discount food imports from our national food security calculus.
Conflict in Eastern Europe has made traditional surplus units in the global cereal markets uncertain, unlikely even.
Both Russia and Ukraine have played that role, which is no longer possible or likely in present circumstances of conflict.
Last year’s national maize and wheat output clearly showed self-sufficiency in both is within our grasp.
What remains is to create conditions where these output levels are consistent and predictable, whatever vagaries the weather or situations of global conflict might visit us.
As we prepare for this year’s wheat programme, we must aim for national self-sufficiency. We came very close to it last year; we must achieve it this time around.
Patient Capital for
Agricultural Financing
Reforms in the institutional arrangements on agricultural financing must continue to be reviewed so farmers are better served.
We must now fund agriculture with patient capital. Short-term commercial loans are not the way.
Worldwide, including in the West, agriculture is financed through affordable money.
European agricultural subsidies under Common Agricultural Policy, CAP, are instructive.
In the current budget, Government set aside US$120 million towards revamping and expanding our irrigation capacity.
Dam construction must continue across provinces.
As we move forward, dam construction should be done by national companies.
The private sector should gear itself for this new shift which we have already seen at work in our road construction.
We must rely on local resources and expertise.
Building domestic value chains
The global supply chain disruptions because of both Covid-19 and the current conflict in Eastern Europe underscore the need to domesticate value chains.
In Government, led by the Ministry of Industry and Commerce, we weekly look at, and interrogate the list of finished goods which our economy continues to import.
We have taken a deliberate decision to progressively reduce this list of imported finished goods by up-scaling local production, and by starting new value chains for import substitution.
I direct responsible Ministries, namely Industry and Commerce and Finance and Economic Development to intensify interaction with the manufacturing sector so this goal of domesticating value chains for greater import substitution is expedited.
More than a strategy for cushioning ourselves against exogenous shocks, it is also a strategy of enhanced employment creation through value addition and beneficiation of our primary resources.
Above all, it is a strategy for ensuring we manufacture to export under the African Continental Free Trade Area (AfCTA).
The Covid-19 global pandemic revealed our unlimited capacity for inventiveness.
As I write, a number of products related to our health delivery system are being produced locally.
Nothing illustrates this better than the remarkable progress we have made in manufacturing medical oxygen here at home.
We now enjoy a surplus which we will soon export to other countries.
Because there was a pressing need, we gathered the Will and developed a Way.
Our Higher and Tertiary Education Ministry continues to show the way through innovation hubs whose impact must begin to find expression in our industry and commerce.
New World Order, New Mindset
Dear reader, the world is being remade under our very eyes. Without doubt a new world order is emerging. New rules are being written; new balance of forces is evident.
The key issue is locating ourselves within this whirlpool of major changes and shifts in world affairs so we are not on the receiving end. Change, change, forever change; we dare not resist change, for only change is permanent. In closing, I put the following questions on the table. How must Zimbabwe engage and re-engage amidst this emerging new world order?
What national mindset is required for the new world order?
What is our best foot forward amidst these fraught, seismic global shifts?
Whatever answers we may have to these questions I pose, it is clear tomorrow is another global country.
It requires new approaches, new citizens.
We must self-reinvent.
Online Reporter