Zim needs a domestic resources mobilisation strategy
ZIMBABWE must mobilise domestic resources to clear its external debt and revive the country’s waning economy, a former cabinet minister has said.
The southern African country, which is experiencing its worst economic crisis in a decade and struggling to deal with the deadly coronavirus pandemic, has failed to service a US$12 billion debt owed to multilateral institutions in the last 20 years.
Gorden Moyo, the ex-State Enterprises minister, said there is an urgent need for a domestic revenue mobilisation strategy that can help Zimbabwe deal with perennial fiscal deficits and deepening debt distress among the other economic and social ills.
“It is no secret that Zimbabwe has long been engrossed in the morass of a debilitating debt trap and has been struggling to extricate itself from this trap especially in the last two decades,” he said in a report titled “Domestic resource mobilisation and the quest for sustainable alternative”.
“The current government has no obvious means of affording debt and arrears repayments except borrowing from borrowing, pursuing austerity policy measures, and hoping for re-engagement with the Euro-American creditors, lenders, and donors all of which is yet to yield the desired results.”
Moyo also noted that a decline in foreign direct investment, export receipts and overseas development assistance in the past few years has brought to the fore the need for an alternative model to boost the country’s diseased economy.
“A cursory analysis of the natural capital in Zimbabwe including its mineral resource stocks, wildlife, forestry, fisheries, and arable land among others suggests that the country’s resources are enough to finance its own development if the right mindsets, conditions, institutional, and legal frameworks are put in place,” he said.
The study, which was disseminated on an online platform organised by the Zimbabwe Coalition on Debt and Development, revealed that the country holds 13 million tonnes of gold, 2,8 billion tonnes of platinum and 26 billion tonnes of coal.
In addition, Zimbabwe also boasts of 10 billion tonnes of chrome, 4,5 million tonnes of nickel, 16,5 million carats of diamonds, 30 billion tonnes of iron ore, 5,2 million tonnes of copper and 765 billion cubic metres of coal bed methane.
“Given this magnitude of natural capital, a well repurposed approach to domestic revenue mobilisation could harness all these and many other resources to scale up development finance in Zimbabwe without overly relying on erratic external flows,” read part of the survey.
“In all this, it must be categorically made clear that the policy of enhancing domestic resource mobilisation proposed in this contribution does not embrace the use of natural resources as collateral for accessing international financial markets, making it possible for global capitalists with their extractivists’ tendencies to exploit Zimbabwe’s natural capital without enabling the country to undergo systemic and structural transformation.”
Meanwhile, Moyo said while several African countries such as Angola, Benin, Botswana, Cote d’Ivoire, Ethiopia, Ghana, and Rwanda have embraced domestic resource mobilisation as part of their development trajectories, President Emmerson Mnangagwa’s administration lacks political will to follow suit.
“Government should go beyond the rhetoric of zero tolerance to corruption and adopt drastic measures to curtail illicit financial flows. Every effort must be made to strengthen all institutions that are involved in the management of illicit financial flows including customs, tax departments, Zimbabwe Revenue Authority, Zimbabwe Anti-Corruption Commission, and all the relevant parliamentary portfolio committees. Stemming capital flight and encouraging the repatriation of capital held abroad will have a very significant impact on the level of resources available for productive investment in Zimbabwe thereby directly contributing towards debt sustainability,” he said.
The Public Policy Research Institute of Zimbabwe director also added that the government must revamp and revitalise its public finance management systems and align them with the constitution.
“This should aim at promoting a real culture of transparency in the public sector in order to ensure that the budgetary resources result in economic growth and development,” he said.
In addition, the report urged the government to embrace, customise, and fully implement the principles and values of the African Mining Vision (AMV), such as the maximisation and management of tax revenues in the mining sector.
AMV offers the unique opportunity of increasing the transparency of transactions between companies and government entities, and of the use of revenues by governments.
As a way of improving domestic resource mobilisation, the study recommended the government to capitalise on its membership to the nascent African Continental Free Trade Area to increase its intra-Africa trade.
“Attendant benefits include technology transfer and development of regional value chains in which Zimbabwe businesses can add value as they turn raw materials into finished goods. The net result of this will be greater domestic resource capital for Zimbabwe.”
“Government should urgently adopt innovative financing mechanisms such as public private partnerships, securitisation of diaspora remittances, and sovereign wealth funds, and digitally-enhanced tax administration practices as well as online gaming industries.
The successful implementation of these innovative financing mechanisms would provide strong impetus to efforts geared at accelerating accumulation of capital, productivity, and economic growth in the country thereby contributing towards debt sustainability,” the report added.