Political Economy of Zimbabwe

The President Mnangagwa, has announced GOZ new policy to repossess unused land, big farms, multiple owned farms & state land. This land will be redistributed to the youth.

The new policy is Political & NOT economics. See the attached thread.
With a restive, unemployed, unskilled youth, albeit the largest voting block, Zanu PF has decided to placate the youth with Land.

As a political party, this is well within its rights. But this is dangerous for the Economy & will destroy what little activity is in Agriculture
Agriculture in Zim requires security of tenure. It requires title deeds & private property status.

Private property is not necessarily needed for banking finance. But for innovation to take place. Land is just a factor of production no one has the right to dictate its usage
J. Schumpeter made clear innovation is changing the combination of factors of production.

Why should a farmer be stopped from turning their land into a factory? And later on into a motel/hotel? Or subdivide into residential stands? OR to keep it idle & speculate on price?
No one except the market should determine the best use of land. But without title, the ruling party has the greatest say on land. Thus the present tenant who decided to keep land fallow will lose it. This is anti market. It’s the worst message to current farmers.
Secondly the idea of small farms is the anti-thesis of farming. Farming is an economies of scale venture. The bigger the farm the massive reduction in unit cost of machinery & working capital.

Farmers are profit motivated & NOT socialist.
The new policy is meant to attract voters but will destroy agriculture further.

Land must be given title and allow innovation to take place. Current tenants require security of tenure otherwise they will never invest in innovation.

GOZ policy on land is ANTI CAPITAL.

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More from @baba_nyenyedzi

15 Feb

Zimbabwe - Afreximbank loans

On the 12th of Feb 2021, compelled by a court order, the MOF gazetted loans taken by RBZ it guaranteed.

It is very clear why RBZ & GOZ were secretive about these loans to the point of making its apologists deny the very existence of them.
For example, over the last 3yrs it has been pointed out that;

(a) RBZ is involved in quasi fiscal activities
(b) GOZ treasury has no surplus

These two points are linked. RBZ comes directly under the Minister’s armpit. RBZ took over treasury responsibilities & its deficits.
RBZ losses, are directly treasury’s losses & by law must be included in the consolidated revenues & expenditures. This never happened, so the right hand claimed it was clean, when all the time the stolen goods were in the left hand.
Read 21 tweets
6 Feb
Not many countries in the world have a budget surplus. Not even fake surpluses. Well run countries found themselves in manageable deficits - without need to print. Borrowing directly from the market place.

Luxembourg is such an example- in normal years it runs a surplus.
Mthuli made a mistake touting a surplus when it really wasn’t necessary to propagandize. The economy was already in a depression with the 2nd highest inflation in the world. GOZ domestic debt was being inflated away. Offering pensioners 8% interest when inflation was over 500%
Perhaps his colleagues didn’t understand. They were happy to be told GOZ domestic debt was falling fast. Remember this was at a time the official ZWL inflation was banned.

The false euphoria resulted in 2 mistakes;
(I) Pension industry crushed to only $1bn.
Read 6 tweets
4 Feb

I am of the strong view that the private sector should lead the vaccination program.

The insurance & pension industry must lead the private sector initiative. The NGO’s & aid agencies must support the private sector initiative- for free inoculation of the most vulnerable.

Relying on a clueless GOZ will not solve the problem. But will perpetuate the endless lockdowns. Zim is already a laggard in the purchase of a vaccine. Israel made the order in April 2020. As of now, no order has been made by GOZ. Zero proof has been given
Zimbabweans don’t realize how bankrupt the state is. And if the state was honest then the public would have been more sympathetic to Mthuli. Mthuli sees an opportunity to further fund raise. AIDS, rural electrification, Zinara levies go to central treasury & not intended uses
Read 7 tweets
1 Feb
The diamond/water paradox goes as such. Diamonds are of no use to human beings yet valuable because they’re scarce. A carat is 1/5th of a gram & can fetch up to $20k. While water which is life saving, which humans cannot do without is free to $1 per 0.5l. Because it’s not scarce
Therefore value is determined by scarcity. A painting can fetch up to $400m, yet no matter how much a farmer produce can save starving kids, maize will fetch $200 per ha.

This explains why an Actuary is better paid than a Doctor. An entrepreneur better rewarded than a manager.
As an anecdote, Aristotle failed to solve this problem. So many are in good company. Yet Hesiod a contemporary of Homer figured it out by just observing the price of produce during the seasons. He identified the scarcity problem.
Read 6 tweets
20 Jan
Wishing Biden well

Back in 2017, today. People protested against President Trump. It continued throughout the weekend. Their message was simple enough. It even had a hashtag. “He is not my president”.

Suppose others too were to protest today with the same hashtag #HeIsNotMyPresident. How will the media & world react? This is not a call of violence of any kind. But peaceful protest as were witnessed four years ago.
For a president that was predicted to be kicked out of office before his term was done, President Trump did well. More than well infact. History will record his many wins.

Reducing the tax rate from 36% to 21%.USA oil independent. Peace in the Middle East. No new war started
Read 14 tweets
18 Jan
Tourism is a forgotten sector in Zimbabwe. Treated as a step child. Despite its forgotten status it contributed 6% to GDP.

This is the same as Mining, but requires far less capital.

In good years Tourism contributes 10% to GDP. 2% more than agriculture.
Zim tourism is almost exclusively driven by domestic clients & diaspora. Very little is being done to attract international visitors who tend to spend more.

This is a snapshot of room occupancy. The number of rooms has remained stagnant for ten years since 2011. Image
The policy problem in my view is moral hazard. In cabinet & civil service you have full time farmers who go out of their way to direct attention & spending towards Agric. Mining is rot with corruption hence its visibility.

A study funded by USAID identified the policy problem Image
Read 5 tweets

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