Zimbabwe settlement – a cause for celebration?

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By Roelof Horne

Is the Zimbabwe settlement a cause for celebration? The answer is “yes”. But unfortunately, the yes is a whisper, not a roar. The people of Zimbabwe needed peace, and a power-sharing government should ensure that. For that, we celebrate with all Zimbabweans.

But the Zimbabwean economy needs more than peace. It needs generosity from outside and austerity from within. In a power-sharing government the architects of the economic implosion are still partly in the driving seat, and therefore neither generosity nor austerity will be delivered as enthusiastically as they might have in the case of a fresh start.

Stopping hyperinflation and rebuilding GDP needs a halt to deficit funding by the printing press, and a speedy and complete reversal of economically inhibiting and distorting laws and regulations. There are some tough decisions to be made and implemented. If they are not, no-one should hope for a magical reversal of the economic tragedy that is Zimbabwe.

Even in the best of circumstances, the road to recovery would have been a bumpy one. Much of the fabric of what once made Zimbabwe an exemplary country has been seriously eroded over the last ten years. Economic capital, infrastructure, banking capital, human capital and the institutional framework are all in need of recovery and repair.

I have not seen the details of the political settlement. I am glad one has been reached. But for the moment, unless my expectations are exceeded, I am afraid the economic road will be a muddlethrough and not a victory march.

Source: Roelof Horne, Investec Asset Management, September 12, 2008.


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