Saturday, April 20, 2019

Relentless price hikes put Govt in a catch 22 situation

THE recent wave of price hikes leaves government in a catch 22 situation. Their history of populism and new trends set by the new dispensation under President Emmerson Mnangagwa seem to be contradicting each other.
On the one hand, government wants the market to determine trends in the economy, obviously riding on sound policy foundations. However, on the other, restive Zimbabweans — who have endured decades of imposed poverty — desperately want relief, similar to the one they tasted during the short-lived government of national unity (GNU) that lasted between 2008 and 2013.
For most Zimbabweans, it is doable as long as government adopts the right policies that spur not only economic revival but also growth. As things stand, Zimbabwe’s economy — which is agro-based, has been on a free-fall since the turn of the millennium when the clueless Zanu PF administration led by former president Robert Mugabe unleashed war veterans and other Zimbabweans onto white-owned farms under the guise of the land reform programme.
This development left large tracts of fertile farmland derelict. Instead of engaging in farming, the new settlers went on to cannibalise equipment on the farms, destroying the potential the country had in agriculture.
As the madness continues, government — which has already issued threats — may be forced to control prices. Ironically, Mnangagwa has already announced that he prefers a policy of non-interference with business, a policy position most successful world economies pursue. 
This could however, come at a heavy price for Mnangagwa, who needs all the support for the next elections in 2023 given the narrow margin with which he beat opposition leader, the 41-year-old Nelson Chamisa in the July 30, 2018 polls.
Populist policies like price controls could find favour with the masses but their benefits are short-lived as commodities may disappear from the formal market as businesses try to evade government controls. In terms of political expediency, Mnangagwa may reap all the possible gains but such policies are retrogressive as they will further hurt the doddering economy.
Shortages are nothing new for Zimbabweans.
They have walked this road before having traversed the same wilderness during the hyper-inflationary period of 2007-8. Lifetime savings for a significant number of Zimbabweans were wiped away as the economy went haywire.
Balancing people’s expectations on the one hand and economic revival on the other will be crucial for Mnangagwa going forward.