Zim falls back into economic coma

A year after President Robert Mugabe beat Morgan Tsvangirai in disputed general elections Zimbabweans have become a disgruntled lot, with the economy once again in decline.

After the July 31 elections the Zanu-PF government vowed to put the spark back into the economy.

But today Zimbabwe is being forced to sell bills and bonds to pay a ballooning wage bill as the growth outlook dims and deflation takes hold.

The recovery from a decade-long recession is wavering as factories shut and households come under pressure because of delayed salary payments by the government and job cuts by private companies.

Growth, which averaged 10% between 2009 and 2012 - during the power-sharing government of Zanu-PF and the opposition Movement for Democratic Change - is forecast at 3.1% this year, according to the International Monetary Fund.

The IMF projects Zimbabwe will pay $2.22-billion (about R23.64-billion) for wages and salaries this year, out of total expenditure and net lending of $4.3-billion. Spending on salaries is forecast to increase each year until at least 2019.

Increasingly, government workers have to make do with uncertainty about their pay dates. Simple Mpofu, a teacher, already knows he will have to survive Christmas without his salary.

"Our pay slips no longer indicate the date on which one must be paid. The government just pays without making a commitment. But one sad reality is we were told that our December salaries would be paid after Christmas."

Mpofu said because parents do not receive their wages on time, some pupils are dropping out of school.

''I have observed a sharp increase in school dropouts. Those that stay in the country resort to illegal mining and others just go to South Africa. It's going back to what was happening about eight years ago," he added.

To stay afloat, Mugabe's government has employed a raft of measures, such as increasing road-tolling fees, stringent tax regulations in mining, sending the armed forces on compulsory leave and taxing street vendors, among others. Still, the measures fall short.

Massive job cuts have become common in major cities as local and foreign-owned firms fold.

This trend has extended to government-owned companies, the Minister of Finance, Patrick Chinamasa, said.

''We have started tackling problems at state enterprises and parastatals, which used to contribute 40% [to the fiscus] but now are milking the economy as they are not contributing anything," Chinamasa told a recent Institute of Chartered Accountants of Zimbabwe conference in Harare.

The Zanu-PF-led government adopted an economic revival programme called Zimbabwe Agenda for Sustainable Socio-Economic Transformation. But the programme is failing to attract foreign direct investment to stimulate economic growth.

"Though Zanu-PF stole the election, it cannot steal the economy," embattled MDC leader Tsvangirai said recently.

Eddie Cross from the MDC research department argues that Zimbabwe has reached economic paralysis.

''Hundreds of firms have taken the easy way out and gone into liquidation and many others are simply not paying their creditors or staff. Nearly all state enterprises are technically insolvent, including the Reserve Bank," he said.

But Mugabe remains steadfast. "Let me assure our people that the country's economy is on a recovery path," he said last month. - Additional reporting by Bloomberg