A belated welcome to 2017! Some of us were still dreading the obligations of planning for the year ahead and thinking through what needs to be done to turn around the fortunes of our country. However, there is something special about a new year, the rains and green environment- so beautiful-makes you realize that this is a wonderful country after all. But still that is not a sufficient basis for hope there are still many things that are out of sync; the majority are still out of work, poverty and vulnerability remain the common denominator. It just looks like the development project has collapsed. As a country, we have a rich history in coming up with big development ideas but rarely do we interrogate the outcomes. In this series of short essays, we will focus our discussion on prospects for economic recovery and Zimbabwe’s eventual transformation and in the process critique some of the big development ideas.
We have no choice but to do some back-tracking a bit to identify the moment when the wheels literally came off- for we believe that it is through the appropriate learning of our history that we can come up with answers that can move us forward. Concerns for equitable economic growth resonate with the aspirations that were initially expressed during the liberation struggle. They have been at the centre of policymaking since independence. The essays will provide detailed but brief analysis on the initial attempts that were made towards economic growth and how the GoZ literally lost the plot in the second decade of independence and despite halting attempts around redistribution of land the situation remains unfavorable to many.
Some historical context; when we got our independence the nature of the inherited economy was incomparable to any other inherited by a newly independent African country. In the years between 1945-1975 it was one of the fastest growing economies in the world and the result of such sustained growth was an economic structure virtually unique in Africa (Gordon, 1984 & Herbst, 1990). Rhodesia’s economy was characterised by a largely self-sufficient agricultural sector with huge export potential an industrial sector that was producing 25% of Gross National Product (GNP) and producing about over 6000 different commodities for domestic consumption (Gordon, 1984). It was also characterised by high levels of inequality based on racial cleavages. The majority (83 %) of the black population was resident in communal areas and had to contend with declining quality of land, diminishing land sizes, overpopulation and insecure use rights to customary lands. Most those based in the urban areas lived in squalid conditions.
Today we have more companies closing than opening-surely this is abnormal. Furthermore, our public debt stands at US$11.2billion or 79% of GDP, of which US$7.5billion (53% of GDP) is external debt (GoZ, Budget Statement). We are in so much debt that most lenders do not want to lend us anymore. Our budget making cycles do not promise to contribute towards significant economic growth. For instance, in 2016 the government spent 91% (US$2.63billion) of its budget on salaries for civil servants. Suggesting that only 9% of the budget was available to implement the development programmes spelt out in ZimAsset-our current development framework. The ZimAsset plan requires an annual spend of US$5.4billion to turn around the economy but we can only allocate approximately US$400million.
But that was 2016 one may say and we have a budget in 2017. Unfortunately, the actual distribution of resources follows a similar pattern. Out of the US$4.1 billion budget total, employment costs are US$3billion, US$400million has been set aside for current operations and US$180million for debt servicing which leaves US$520 million for capital development projects whilst as already stated the desired levels of annual expenditure on the capital budget supportive of effective implementation of ZimAsset projects is US$5.4billion. So, if we are looking for capital long-term development the budget in its current form has little to offer. To be fair there is a somewhat (even under austere circumstances) a level of serious commitment to the development of agriculture and other productive sectors.
The government through the Ministry of Finance has also made a commitment to undertaking critical reforms that aim at improving efficiencies within ministries and has also correctly identified the need to improve the operating environment. The 2017 budget statement describes two sets of critical reforms that government will undertake. The first set essentially focuses on internal reforms and will entail:
- Containment of expenditure by addressing errant ministries which incur commitments outside the budget and in the process, increase the obligations of government
- Shedding off excess state owned enterprises (important measure but no criteria is set on how these will be identified)
- Improving the performance of state owned enterprises that will remain under government control
- Reducing policy uncertainty
- Fighting corruption
- Enhancing competitiveness
When one looks at the list above you would assume that it was written by an independent analyst but this is in the budget statement! So, we take it government is aware of the source of the problem and their challenge is acting. Many analysts have over the years called on government to reduce policy uncertainty when it comes to ownership of business, especially in the aftermath of the indigenization policy. The amount of investment flows we have lost due to the challenge of policy uncertainty cannot be easily quantifiable but there is a strong basis to argue that this has been the main cause behind attracting the least amounts of foreign investments into the country compared to others in the sub-region. The acknowledgement of corruption as a cancer in our society is also not new-our challenge is that it has become fashionable for every politician from the President and now the Minister to refer to it but the fight against corruption remains inadequate-whilst the country is losing huge sums of money.
In the second set of measures the Minister’s Budget statement focuses on creating an enabling environment for business. The introduction of Statutory Instrument 64 (S.I 64) has apparently helped in improving the capacities of many manufacturing concerns-even the CZI report confirms this. The rationale of S.I 64 makes sense-we need to promote and protect local production-we cannot develop as a country when everything we use is imported. Furthermore, we currently have a Balance of Payments deficit- we spend more on imports (US$5.36billion) than we generate through exports (US$3,365billion). Policy uncertainties have negatively affected possibilities of improving on-farm investments. The Minister in the budget statement acknowledged that farm based production requires long-term investment which also requires security of tenure. The GoZ must acknowledge that they have been responsible for creating these uncertainties and must quickly resolve them.
Today our reality is that of a deflationary economy-simply put-we do not have sufficient demand or command over goods in the economy-hence instead of growth the economy is contracting. If our economy had been growing like the Chinese one, we could have called this period a ‘cooling down’ phase but alas ours has been a continuous process of decline and contraction since 2000. Before you think we are being hyperbolic- the GoZ also acknowledges this situation- ‘the fundamental challenge of the economy has been under-production across all sectors of the economy’. Furthermore, most of our active labour is either unemployed or under-employed. It is sad that Zimbabwe’s projected GDP growth for 2017 is 1.7% compared with an estimated 3% average for Africa. If the rains do not let us down, we are hoping for a bumper crop which may improve prospects for food security and also reduce the fiscal burden of importing maize.
Still the state of affairs is not satisfactory at all. We are at a place where we need new ideas of taking us forward. The existing framework, especially ZimAsset given the limited resources it receives, remains wishful thinking. What then are the essential ingredients for success? We propose the following (but not exhaustive):
- Credible, trusted and accountable leadership
- A coherent and achievable development strategy
- Conclusion of development processes- 13 years on since we embarked on fast track land reform or the land revolution we are still bickering about tenure issues-what kind of revolution takes 13 years- we need to be more decisive and move on.
- Re-engagement with the international community- Zimbabwe is too small to go it alone we need the support of development partners (sad as it may sound)
- Reduction of bureaucratic hurdles for business (see our forthcoming post on this-It’s the Bureaucracy Stupid!)
Let’s be clear we have a national question that remains unaddressed and there is need for urgent action not only on the part of government but all of us. For those who can make noise for government to be more effective and accountable please beat the drums louder this year. For those who can offer policy advice please sharpen your pens, for those who can expose corruption please do it fearlessly with no partisan inclinations-let’s build Zimbabwe. We will continue to write and convene others to dialogue and where possible promote alternative frameworks of development. This is our country-it belongs to all of us and we are all responsible for it.