As Zimbabwe’s new president Emmerson Mnangagwa sets the country on what many hope will be a new economic course, he will need to focus on reforming two key sectors, agriculture and mining, if he is to generate the revenues and attract the foreign investment necessary for a sustained recovery.
Mnangagwa’s turn as president comes as the country faces seemingly insurmountable problems, with over 90% of the workforce unemployed, an acute shortage of foreign currency, a fiscal deficit hovering at around 12-15 % of GDP, and debts of about $9 billion. Mnangagwa’s first order of business must be to repair relations with international lenders and restore confidence amongst overseas investors.
A long-time ally of former leader Robert Mugabe, Mnangagwa cannot escape a degree of responsibility for the mismanagement that has devastated what was once one of Africa’s brightest economic prospects. Now, though, Mnangagwa appears ready to make a break with some of the flawed policies of the past.
Yet while recognising the importance of agriculture and mining in turning around the country’s moribund economy, he has given mixed signals over two issues that are widely seen as constraining these principal drivers of growth.
While Mnangagwa is opposed to reversing Mugabe’s ruinous land reform programme in the 2000s – which saw the appropriation of over 4,000 white-owned commercial farms – he has pledged to compensate farmers for the land they lost and seems prepared to allow them to play a significant role in reviving agriculture.
A similar compromise is evident in his stance towards Mugabe’s indigenisation and economic empowerment policy that put a break on international investment, especially in the mining sector that generates half the country’s export earnings. He is planning a partial repeal of the legislation which requires foreign-owned businesses to transfer 51% of their shareholding to Zimbabweans – with some mine operations still subject to its provisions. It will be instructive to see how much opposition there is to any adjustment of this contentious piece of legislation.
Agriculture has experienced a slight recovery of late thanks to a major subsidy programme, but the country continues to suffer from the consequences of land reform, under which confiscated white farms were transferred to black Zimbabweans lacking agricultural expertise and funds. Crop production subsequently collapsed, the country becoming a net importer of maize – one of its main staples – until recently.
Government intervention in mining severely affected the sector. Diamond production fell by more than two thirds last year after it was nationalised, while in the summer platinum and chrome miners were ordered to surrender 80% of their export earnings – up from 50% – to help tackle shortages of foreign currency.
Following the appropriation of their land, many white farmers left for neighbouring countries and beyond, but in recent years some have returned at the invitation of black farm owners to form joint partnerships, serving as managers or consultants on farms they arguably still own. Some are also involved in financing small-scale farmers producing tobacco, which has emerged as a big foreign currency earner.
A Reuters investigative report in September – which drew on interviews with diplomats, local politicians and Zimbabwean intelligence reports – revealed that Mnangagwa, then vice-president, was not only planning to compensate white farmers should he come to power but also reintegrate them, without specifying how this would be done.
Mnangagwa’s apparent willingness to allow white farmers to play a bigger role is an acknowledgment that their commercial and technical acumen could help restore Zimbabwe to its former status as Africa’s breadbasket. Their increased involvement would help buttress Mnangagwa’s own, albeit controversial, efforts to revive production of staples. His so-called Command Agriculture programme contributed in part to record volumes of maize output – 2.2 million tonnes – this year, the highest for two decades.
Under the programme, begun in 2016 and aimed at medium-sized farms, the government provided farmers seed, fertiliser, tractors and fuel to plough and plant an agreed number of hectares, with input costs deducted from the sale price of the crop. But there have been implementation problems, such as delays in the delivery of inputs, and the IMF recently warned that the funding model could deepen the budget deficit. Yet Mnangagwa is determined to persevere with the programme, with plans to expand it to include soya and livestock. Meanwhile, another bid to help farmers by enabling their leases to be used as collateral to borrow from banks has reportedly run into trouble, as some lenders have concerns about the extent to which the leases can stand as security for their loans.
As well as giving more thought to how farmers can better access capital, Mnangagwa will also need to improve agricultural productivity. To this end, a Land Commission, set up last year to improve accountability and transparency in the sector, is to undertake periodic land audits, which will identify idle and under-utilised land.
Mnangagwa’s so far limited agricultural reforms mirror his approach to mining, where he has excluded key sectors from his relaxation of the indigenisation law. It will continue to apply to foreign-owned companies mining diamond and platinum, while the rest of the economy will be free of the protectionist measure.
Zimbabwe’s mineral wealth is potentially huge, but international mining operators need to be incentivised. In recent years, Mugabe’s interventions and allegations of corruption have severely undermined confidence in the sector. Moreover, few Zimbabweans have benefited from revenues generated. In 2011, Bloomberg reported that the then Finance Minister Tendai Biti said as much as $15 billion of revenue had been lost through the looting of diamonds, accusing the ruling Zanu-PF elite of “prospering from the stones”.
When Mugabe nationalised the diamond mines last year, he blamed mining companies for billions of dollars of missing revenue – although just how the funds were lost without the government’s knowledge is hard to explain given that it jointly owned the operators, some commentators point out. Mnangagwa clearly needs to make the industry more transparent and accountable, something opposition parties have long called for.
At his inauguration, Mnangagwa said job creation would be a top priority. Getting agriculture and mining fit for purpose is essential to achieving this goal. It is too early to say whether he has the political will or energy to undertake far-reaching reforms in these sectors. It looks like they will be fairly modest at first, but after being poorly maintained for decades there is now at least hope that the twin engines of the economy may begin to perform at something like their true potential.