February 14, 2009.

AFTER ALL HAS BEEN SAID AND DONE

It is justified to proclaim that "every cloud has a silver lining" to describe recent political developments in Zimbabwe. Once a prosperous nation in Africa, the southern African country has been brutally mismanaged by Robert Mugabe. Morgan Tsvangirai has been sworn in as Prime Minister. Few give the deal much hope, yet it must be given the opportunity to succeed. Doing nothing would have left Tsvangirai and the Movement for Democratic Change with nothing - no leverage to succeed. While the West may be justified in its distrust of this deal, it is one that Tsvangirai has chosen - and the only option for now.

The MDC decision to endorse the SADC brokered power-sharing agreement represents a decisive shift on its part from the flamboyant idealism that exuded from its launch in 1999 to a much more down-to-earth practical approach. Many political observers believe that the MDC received a raw deal from ZANU (PF) and the SADC. The MDC appears to have opted to go down the path of realism and pragmatism in its ongoing quest for democratic change in Zimbabwe. It is clear that the MDC has now accepted the fact that while it was formed to promote multi-party democracy in the Zimbabwean political landscape, the harsh reality is that this has to be seen in the broader context of an on-going democratic process instead of a tail-ended battle for change.

But after all has been said and done, the big question that remains to be answered is whether or not the decision by the MDC to join up with ZANU (PF) was strategically wise or not. As they say, the jury is still out on whether a unity government between President Robert Mugabe and Prime Minister Morgan Tsavangirai will be able to live up to the expectations of Zimbabweans. As they say in Shona, "Tichaona kunowira tsvimbo nedohwe/Sizabona okuzawela induku loxakuxaku!" (literal translation - We will wait and see where the stick and snot apple will fall.) In other words, only time will tell!

Zimbabwe's crumbled economy will continue to inflict suffering upon the people of the southern African country unless stringent monetary reforms are instituted to reverse the effect of years of profligate central bank money-printing. The people of Zimbabwe have reached the end of their tether and cannot hang on any longer.

In the most recently contested elections, the people decided they had had enough, but Mugabe and his allies would not let the verdict stand. While Tsvangirai won most votes in the presidential election on March 29, 2008, the state-appointed electoral commission said he did not secure the 51% needed for victory. The Zimbabwe Electoral Commission turned the opposition's evident victory into results that supposedly warranted a run-off. In the parliamentary election, the mainstream MDC acquired 100 seats against ZANU (PF)'s 99 with the breakaway MDC capturing 10 seats.

The MDC took over the administration of all urban councils in the country in the local government election. Since 60% of the population lives in the urban areas, this means that the majority of the people now live under an MDC controlled administration. The MDC also controls a significant number of the Rural District Councils.

There are theories suggesting that the presidential figures were manipulated after the Zimbabwe Electoral Commission took five weeks to release the results. During that period, there were concerted efforts to recount the ballots in many consistencies. Then after having failed to declare Mugabe the winner, they let loose the police and military on the opposition, abducting, imprisoning and clobbering them in preparation for a run-off.

Although the conditions for joining the Government of National Unity (GNU) were not met, the mainstream MDC had no option but to use the pact and the chance presented to it by the SADC and the African Union to reoccupy the democratic space that ZANU (PF) tried to wrestle during the run-off on June 27, 2008. The MDC leadership must have realised that the same SADC leadership have influence on decisions in the African Union. Thus, there was no room for an appeal process other than through the SADC-created Joint Monitoring and Implementation Committee (JOMIC). Opting out of the GNU would have resulted in the total isolation of the party by the SADC which remains a key to the resolution of the country's crisis.

This new MDC position is best pronounced in the following extract from the statement read out by its President Tsvangirai at the press conference in Harare on January 30: "Let us make no mistake, by joining an inclusive government, we are not saying that this is a solution to the Zimbabwe crisis, instead our participation signifies that we have chosen to continue the struggle for a democratic Zimbabwe in a new arena. This agreement is a significant milestone on our journey to democracy but it does not signify that we have arrived at our destination - we are committed to establishing a democratic Zimbabwe regardless of how long that struggle takes us."

It is logical to conclude that the MDC National Council's decision was motivated by the practical expediency of wanting to minimise the economic and humanitarian disaster, which was impacting on the very constituency that forms the Movement for Democratic Change's base. The country is in the middle of an economic and humanitarian crisis marked by acute shortages of food and basic commodities, amid a cholera epidemic that has killed more than 3,513 people and more than 73,000 people have been infected since the outbreak in August 2008, according to the World Health Organisation (WHO) on February 11.

This is the worst death toll in Africa from an outbreak of the normally preventable disease in 15 years - compounding the southern African country's humanitarian crisis. Many of the victims were and are unable to get treatment either because there are no drugs in state hospitals or because there were no nurses and doctors. This situation has arisen as a result of Mugabe's failed policies and abuse of national resources and humanitarian aid from organisations such as the Global Fund. Allegations were made that government officials embezzled US$7.3 million donated by the Global Fund to buy anti-retroviral (ARV) drugs for people living with HIV in Zimbabwe.

The critical lack of clean water, medical supplies, medical staff and even food has made fighting the disease almost impossible. And with aid groups such as the Red Cross warning that their efforts will have to cease soon due to lack of funding, the crisis is set to worsen before the new Prime Minister's actions can make a positive impact.

Zimbabwe's health and education systems have collapsed under an economic crisis that has left 95% out of employment in the once prosperous country. More than half of Zimbabwe's 12 million inhabitants are surviving on food aid and the population is also struggling with the world's highest inflation rate of over 10 billion percent according to independent analysts. The figure of 231 million percent was officially provided in July 2008.

This hyperinflation is because ZANU (PF) and its anointed cronies destroyed the country through institutionalised greed oiled by the pursuit of individual wealth and gross exploitation of the workers the party purports to represent in its "socialist" programmes. What Zimbabwe has experienced is the passing of so-called economic empowerment bills that prioritise dishing out shares to ZANU (PF) cronies. By legislating bad laws, the ZANU (PF) government was committing economic sanctions upon itself. The Indigenisation and Empowerment Bill, for example, sabotages any efforts to attract foreign investment.

In the past two years, Zimbabwe has endured the longest and most severe period of hyperinflation of any country since 1920. Hyperinflation makes the numbers meaningless. It has caused consumer prices to rise at more than 50% a month. For ordinary people and businesses, life becomes a nightmare.

International experience shows that inflation can be brought down, provided there is a strong and credible government, correct policies, an independent central bank and foreign aid. For now, businesses operating in Zimbabwe have had to hone their survival tactics and continue dealing with a dysfunctional government and civil service as the Zimbabwean currency is now worthless. Most people and organisations already avoid using the worthless local currency whenever possible. Much of the economy operates informally, through barter or other means.

In early February, the government announced plans to "dollarise" the economy. This amounts to the official demise of the Zimbabwe currency, and represents another milestone in the collapse of the formal economy. The fact that fuel coupons are seen as a stronger currency than the official Zimdollar bears testimony to a nation in agony. The "dolarisation" scheme proposed has been tried before by other countries that have suffered hyperinflation. But it always fails to fix the underlying problems and can, at best, buy some time for an unpopular and failing government.

The Government of National Unity can only succeed with active support from foreign donors and powerbrokers from the international community. It is hoped that with the MDC's presence in the highest levels of government, donors and banks and financial institutions like the IMF and the World Bank will start letting money flow to Zimbabwe.

The international community expressed cautious optimism about the prospects of a unity government but said it will only lift sanctions against the ruling elite and the companies that support them if the new administration demonstrates genuine power-sharing. The State Department said the US will send new development aid and lift sanctions when Robert Mugabe demonstrates there is "true power-sharing" with the opposition Movement for Democratic Change.

"The success or failure of such a government will depend on credible and inclusive power sharing by Robert Mugabe and his ZANU (PF) party," the department said in a statement from Washington on February 3. "We urge the SADC to fulfil its obligation to guarantee that Mr. Mugabe proceeds on a new path toward reconciliation and genuine partnership with the MDC."

And on February 11, acting state department spokesman Robert Wood said, "We need to see evidence of good governance and particularly real, true power sharing on the part of Robert Mugabe before we are going to make any kind of commitment." Wood went on to say the US is reserving judgment on the new government and "will not consider providing additional development assistance or even easing sanctions until we see effective governance in the country".

Earlier, British Foreign Secretary David Miliband, had said much the same, saying the new government would be judged on its actions which would determine whether Britain provided development support in addition to its present humanitarian support. The UK government would continue to give such support but would not lift sanctions on Mugabe and his henchmen until it was convinced they were committed to power-sharing and democratic change.

Ivan Lewis, Britain's parliamentary under-secretary of state for international development said the performance of the southern African country's new unity government needed to be appraised against set targets before it can access international assistance to rebuild its shattered economy or before sanctions against Robert Mugabe and his inner circle can be lifted.

The benchmarks include "the immediate release of political prisoners; an end to political violence and intimidation; the repeal of repressive legislation; crucially, the appointment of a credible financial team and the production of a credible economic plan; and a clear road map to the national elections, with guarantees that they will be conducted freely and fairly, in full view of the international community," Ivan Lewis said.

Canada's foreign minister, Lawrence Cannon, said the formation of an inclusive government could raise hope for change and give an opportunity to deal with the humanitarian crisis. He said: "At the heart of this crisis lies an acute failure of governance and leadership. Reports that an inclusive government will be formed in Harare may provide some hope to Zimbabweans that there is an opportunity for change. However, pronouncements and plans will remain empty unless they are matched by real political will and policy changes.

"Canada has been unequivocal in calling for improvements in freedom, democracy, human rights and the rule of law in Zimbabwe. We will continue to assess further developments in this light."

The EU welcomed the decision by the two MDC formations and ZANU (PF) to constitute a new government. "I welcome the agreement reached by the Zimbabwean parties, in particular to establish the government of national unity," EU Foreign Policy Chief, Javier Solana, said in a statement. "The government of national unity will be judged by its actions," he added.

Solana said only in the context of an equitable political solution would the plight of the Zimbabwean people be alleviated.

That the West puts "the immediate release of political prisoners" as a priority benchmark is immediately put into focus with the arrest of Roy Bennett, the commercial farmer chosen by the mainstream MDC to be Deputy Minister for Agriculture. This came on February 13, the day ministers in the power-sharing arrangement were to be sworn in. Analysts say this an attempt by hardliners within ZANU (PF) to torpedo the deal.

One other reason for the West's scepticism is the abuse of aid and other investment resources by the ZANU (PF) government. As millions of Zimbabweans fight a daily battle against hunger, it has emerged that critically needed aid from South Africa is being misused to benefit Robert Mugabe's ZANU (PF) cronies, and millions of rands of aid have gone to waste.

The package, which reportedly started being distributed before Christmas last year despite the lack of a unity government in Zimbabwe, has since been mysteriously transformed into a Southern African Development Community package under the foundation of the Zimbabwe Development Assistance Framework. The framework, which is not yet fully operational, was established to channel agricultural inputs to Zimbabwean farmers, but its impartiality is now being questioned as its distributors are reportedly comprised of ZANU (PF) aligned organisations. A senior civil servant working in the state run support network for farmers, Agritex, was reported to have confirmed that South African aid was often only available to ZANU (PF) supporters in parts of the country.

It would appear that despite the unity deal, SADC food aid is still dependent on ZANU (PF) loyalty which has more weight than the threat of hunger and starvation.

Mugabe's chaotic land reform programme is blamed for plunging Zimbabwe into food shortages after Harare failed to support black villagers resettled on former white farms with inputs to maintain production. Tsvangirai has called for an audit to establish who owns which land in Zimbabwe before an orderly land reform programme can be implemented but Mugabe has in the past accused the MDC leader of wishing to return land to former white owners.

Critics say Mugabe's cronies  - and not ordinary peasants - benefited the most from farm seizures with some of them ending up with as many as six farms each against the government's stated one-man-one-farm policy. Poor performance in the mainstay agricultural sector has had far reaching consequences as hundreds of thousands of workers have lost jobs while the manufacturing sector, starved of inputs from the sector, is operating below 20% of capacity.

Zimbabwe's domestic debt stood at Z$56.9 sextillion (Z$56.9 trillion after 12 zeros were knocked off on February 2) at December 31, a significant rise from Z$390.5 million on August 15, 2008. The country's external debt stock stood at US$4.69 billion during the same period, about two and half times the size of the 2009 National Budget presented on January 29. Reserve Bank governor, Gideon Gono said, "Of the country's total external debt 95.3% is owed by government and parastatals while 4.7% is owed by the private sector."

Gideon Gono said the surge in domestic debt position largely reflects the increasing cost of financing government expenditure, not matched by the corresponding increase in revenue inflows. The resultant funding gap was financed by recourse to the domestic financial market.

The Reserve Bank's advances to the government have over the past five years accounted for about 80% of total debt. Economic analysts say this is evidence that the government is broke and has no other source of revenue than the domestic market. The mismatch between fiscal revenues and expenditures also opened a significant funding gap resulting in the government utilising the overdraft window at the central bank, whilst at the same time borrowing from the domestic market.

As the country's debt continues to increase, money supply growth continues on an upward trend, in part as a reflection of the prevailing macroeconomic imbalances under which the government sector has largely relied on domestic bank finance. Gono said, "Broad money supply (M3) growth increased sharply from 81,143.1% in January last year to 658 billion percent in December last year."

The growth was largely underpinned by money creation related to speculative activities on the parallel foreign exchange and the Zimbabwe Stock Exchange. There are also the regime's excesses that have led to unbudgeted spending through quasi-fiscal activities that have seen the RBZ pump millions of dollars for political patronage.

The government has also been forced to rely on domestic borrowings because its tax revenue base has dwindled because of company closures which have led to retrenchments. This means that in real terms, the government is collecting less revenue through corporate and income tax.

Only once government spending is controlled, can the new government work with local banks to reduce interest rates which are inhibiting new investment. Zimbabwe's sky-high interest rates prohibit the private sector from expanding and frighten off much new investment.

Other measures that are necessary to term the hyperinflation Zimbabwe is experiencing include: the curtailing of the high budget deficit; curtailing the institutional ability to use the central bank to print money to fund the large deficit that causes prices to spiral to ever-higher levels; creation of an autonomous central bank; resuscitating of government tax revenue that has collapsed because of the contracting economic activity.

The replacement of Gideon Gono from his post as head of the central bank is going to be a litmus test. As the man who has bankrolled the Mugabe regime and has turned the institution into a piggy bank for the party elite, Gono is one of the main figures blamed for the hyperinflation that has rendered Zimbabwe's currency worthless. Zimbabwe needs a massive injection of foreign aid. But few, if any, countries will be willing to commit funds without a clear change of guard at the Reserve Bank of Zimbabwe.

None of these measures are easy, as reducing the deficit in a situation where tax revenue has collapsed means slashing government spending at a time of very high unemployment and collapsed delivery of social services. First and foremost, there must be political consensus among the parties in the Government of National Unity on slashing the deficit as well as ending the central bank's ability to fund future deficits.

Poor governance, shortages of capital, corruption, loss of skills and crumbling infrastructure have taken a terrible toll on the economy in the past nine years. Analysts estimate GDP has contracted by more than 40% since 2001. Key foreign currency earners - agriculture, mining and tourism - are operating well below capacity.

Joining the unity government, however painful, gives the opposition party a chance to carry out its politico-economic programmes in peace. The party already has RESTART (Reconstruction, Stabilisation, Recovery and Transformation) waiting in the wings. The future of Zimbabwe lies not in generous aid but normalisation of the economy, resuscitating agriculture, education, health, and more importantly, taming corruption. History and present international crises must counsel the MDC that the world is far less concerned about Zimbabwe as it is now burdened with its own global economic challenges.

A government of national unity is one sign that Zimbabwe has begun the process towards a democratic order that ensures that the country is no longer under the exclusive control of Robert Mugabe and his corrupt coterie. The new government is neither an MDC nor ZANU (PF) government, but a transitional one mandated to resolve the current crisis, embark on institutional reforms and draft a people-driven democratic constitution. The immediate target must therefore be Article 6 of the GPA, which refers to constitutional reform processes and is essentially about the political parties seeking to manage, as far as is possible, how they eventually get fresh elections.

The South African President Motlanthe who is also the current chairman of the regional SADC that facilitated Zimbabwe's power-sharing deal said, "Essentially the inclusive government is a transitional authority. The main tasks were really to stabilise the political situation and embark on economic recovery for the country. Depending on how it goes, and whether by agreement this inclusive government decides to call early elections..... that's a matter that they would be able to resolve as Zimbabweans." Kgalema Motlanthe was addressing journalists on the sidelines of the African Union summit in the Ethiopian capital on February 4.

Despite the economic collapse, Zimbabwe still has a good level of infrastructural development and human capital coupled with the diversification of many sectors of the economy. In his inauguration speech, the new Prime Mister of Zimbabwe said, "The professionals in our civil service are the backbone of our government......"

Prime Minister Morgan Tsvangirai went on to say, "People of Zimbabwe, we face many challenges but we are brave and resourceful. By uniting as a nation and a people we can succeed."

While a few within and outside the MDC remain sceptical over the future of the GNU, others have been reassured by the intervention of South Africa's caretaker President, Kgalema Motlanthe. "The chances have been increased by a more proactive South Africa. Without Motlanthe we wouldn't be at this point," said an MDC source.

The country has great potential and a political resolution where there is an equitable sharing of power may lead to economic recovery. Should a serious macroeconomic programme be implemented following the swearing in of the Government of National Unity, this should pave the way for a rebound in the medium-term.