Freedom through Violence?

        by Fay Chung

The long struggle for freedom, for more than a century, politicised as well as polarized society.  In order to belong one had to adopt the ethos and values of the rulers.  Those who wanted to be part of colonial society, adopted the values of the settlers and colonialists, whilst those who opposed settlers and colonialists looked to the values of the past, the values of Nehanda and Kaguvi, who were killed by the white rulers because of their opposition to the take over of their country.  This polarization has lasted right up till today.

In Zimbabwe, having different views from others can lead not only to exclusion but can place you in dire straits.  Those who hold different views are often called “traitors” or “sell outs” by many of those who fought in the Liberation Struggle.   There are reports of  incidents of political critics of ZANU PF being ostracized, damned as traitors, or even killed.  Violence and bloodshed followed Morgan Tsvangirai’s  narrow victory in 2008.  Some former Liberation fighters see MDC followers as equivalent to the “sell outs” and “traitors” they had fought against in the 1960s and 1970s.

Yet when the  MDC was formed in 1999 it soon took over many of the values and attitudes of  ZANU PF followers.  In the recent Elections in July 2018 we witnessed Thokozani Khupe, a prominent MDC leader, being attacked  by MDC youths, known as the Vanguard, for challenging Nelson Chamisa.   They were apparently ready to burn her alive in a grass hut.   

We have witnessed the two leading political parties in Zimbabwe not only ready to attack each other, but also ready to use  violence to silence those within their own parties.  

This history of violence inherited from the colonial past continues to haunt Zimbabwe.  For Zimbabwe to move forward there is urgent need to address these forms of political analysis and political activity.  It is not good enough to say “Since Smith did it so can we”.  Repetition of the past is not a solution for the future.  Yet it seems that politicians, activists and youths believe violence is an integral part of elections, when they are free to express their frustrations and undertake activities which would be regarded as criminal at other times.

Can Violence Solve the Challenges?

The Lancaster House Agreement brought about political power to Nationalists, but ensured that the economy, the civil service, the armed forces and the judicial service remained as they were before Independence.    This was the peace and stability that every body yearned for.    The  tragedy of Gukurahundi (1983 – 1987) demonstrated that political party rivalry, as well as tribal loyalties, could so easily scar the face of the nation.  The peace which was brokered in 1987 was a top-down peace where the top leaders agreed to cooperate, but it did not filter down to the grassroots who had suffered the destruction.

Most important of all the 1987 Unity Agreement did not entail a systemic change, and as a result the majority of Africans remain as paupers.  Today more than 70% of Zimbabwe’s population live in poverty.  And  only 816 000 people are employed in  the Formal or modern economy, 12.5% of the working population.  In contrast 5.7 million people are employed in the Informal economy.  What changes are needed to address these fundamental problems?

In some ways the answers are simple and straight forward.  These simple and straight forward answers include:

Devolution  and large scale decentralization.  Zimbabwe inherited a highly centralized system of government, suitable when targeted at providing good governance to 250 000 white people, but this system is highly unsuitable for a large population of over 15 million.  The inherited system gave massive powers to central government and cabinet, which controlled almost the whole of State decision making and Budget.  The inherited bureaucracy has ballooned to 550 000, eight to nine times what it was at Independence.  Increasing the size has not improved their efficiency and effectiveness as there are insufficient funds for training, administration and supervision.  Re-training and re-deployment of the existing bureaucracy to serve at provincial and district levels would be a first step.  Decisions regarding local issues should be decided at local levels, not at central government level. It would require the larger part of the Budget to be decentralized.  Central government would then be left with the critically important roles of  coordinating policies and supervising implementation.  It would unite the nation rather than try to do all things themselves.

An important area of devolution and decentralization is the control of foreign exchange.  We inherited this centralized system where the Reserve Bank could control all of it, and we have continued to enjoy such centralization.  Whilst it is important for the State to retain some control of its foreign reserves, the huge wastage of this scarce resource has had frightening  consequences for the country.  We now have millions of cars, but little investment into our industries. It has also seen the refusal of the diaspora and of foreign investors to bring in its money:  they know that they will lose control of it to an over-heavy and inefficient bureaucracy which is slow and favours the politically powerful.  We have been told by the Ministry of Finance that an additional US$2 billion of forex is available to the country, yet we can’t enjoy this because of distrust of the authorities.  The State’s role in the utilization of its forex should not only be transparent, but should be open to discussion and debate.  It is clear that forex should be utilized for economic expansion rather than for luxury items.

Agriculture and the rural areas remain the foundation of the economy.  68% of the population still live in rural areas and earn their living through the land.  Yet they are not able to access technical and professional training, supervision, modest loans or mechanization.  For some of them even their land tenure is not guaranteed or stable.  The price of fertilizer and seeds has become unaffordable.  The government policy of free gifts of fertilizer and seeds provides the minimum for survival, but not sufficient for them to make a profit or to improve their standard of living.  In fact they must remain  subsistence farmers.  Their average maize output is 0.8 tonnes per hectare compared to an average 2.5 tonnes per hectare for better resourced farmers.  Policies and action required include the subsidization of domestic producers of seeds and fertilizer so that it becomes affordable to this hard working population.  If they were able to treble their output, it would mean an enormous growth of the GDP.  It would also mean that these farmers can produce a surplus for export.  Marketing has been a problem.  The weaknesses of the Grain Marketing Board (GMB)  have to be addressed so that Board and staffing are based on technical and professional criteria rather than by politicizing appointments at every level.  The decentralization and partial privatization of this key marketing system would be essential.  Once Communal and other small scale farmers begin to make a profit they will be able to invest in increasing their own productivity both in farming and in local industrialization.  

Zimbabwe needs to develop new industrialization models.  At present Zimbabwe’s manufacturing sector cannot compete with either South Africa which provides most of the middle class foods or China which produces engineering and electrical goods and even clothing.  Zimbabwe’s manufacturing industries are still rooted in the technologies and management systems of the 1950s and 1960s.  They cannot serve either the enormous home market or the rich neighbouring  markets.  A good example is that Zimbabwe has two million farmers, and yet Zimbabwe does not manufacture any tractors, not even those with motor cycle type engines or indeed tractors of any size or specialization.  Neighbouring countries such as Zambia, Mozambique, the DRC, Angola also have millions of small scale farmers who would welcome mechanization, but cannot afford  the expensive imported models.

The very large Informal economy urgently needs to be recognized as one of the major engines of industrial and therefore economic growth in Zimbabwe.  By analyzing this large sector of 5.7 million owners and workers, it is possible to formalize a number of sections, such as the successful steel and other  manufacturing  industries.  As the informal economy at present has no labour laws and regulations, it provides ample opportunities to innovate.  The big trap would be to replicate the present  laws and regulations of the Formal economy into the informal economy.  The present formal labour regulations, made during past regimes to solve problems which no longer exist, would make it impossible for the Informal economy to progress.  The Finance Ministry’s Zimbabwe Interim Poverty Reduction Strategy Paper (I-PRSP) 2016 – 2018 provides a lot of information such as the Food Poverty Line of US$32.70 per person per month and the present per capita GDP  of US$1064 per annum, or US$88.67 per month.  Thus the present  trade union demands require salaries to be about nine or ten times the per capita GDP, an impossible feat for any government at any time.  Upgrading  Informal industries could provide a bonanza in job creation as well as to export earnings.

Conclusion

Zimbabwe can well resolve its own problems, but it has yet to do so after four decades. The continued practice of political violence cannot solve these problems.  It only prolongs the agony and tragedy of poverty. The new dispensation has a wonderful opportunity to open a new trajectory for Zimbabwe.  This new trajectory is to ensure economic growth and work creation.  The aim should be to provide everyone with the basic right to work so that everyone can earn a useful and rewarding livelihood.  We are yet to see if the New Dispensation  will succeed in undertaking these straight forward and simple challenges.

Freedom through Violence?   10 Dec 2018

Advertisements

Money Madness Hits Zimbabwe!

 

Money Madness hit Zimbabwe last week.  Food prices suddenly went up exponentially.  Panic ensued, with supermarkets filling up with crowds attempting to buy enough food for their families for weeks to come.  Shops were so packed that it was difficult to walk about freely.  The shops had to put in controls, such as limiting how many items people could buy.  Shelves were rapidly becoming empty.

Prices rose two, three, four, five, six times.  Only a couple of  large supermarkets retained their old prices.  Some shops just closed, unable to cope with the crowds.  Street money changers were having a whale of a time, able to change US$s for bond notes at four, five or six times the rates of the day before.  Cash in both US$s and Bond was abundantly in display in the shops.

The Money Madness died down after two days, after a statement by Finance Minister Mtuli Ncube to the effect that those with RTGS accounts would still get US$1 for 1 Bond Note.   It is essential to interrogate this Money Madness.  Why and how did the whole country panic at the same moment?  Did Government make a mistake in introducing the 2 cents per dollar tax through banks and telephone companies?  Should we return to the system established by the Mugabe Government which introduced Bond money in 2016, two years ago?  What was right and wrong about the Mugabe system?  

What is clear is that all Zimbabweans, whether rich or poor, love the US$.  Since the introduction of 1:1 convertibility of the US$ to the Bond $, everyone went to town hoarding the US$ under their mattresses, and fueling a vibrant street money market.  The original idea that the equivalent of US$200 million would be made available through the Reserve Banks of Zimbabwe (RBZ)  turned out to be seriously problematic, as the demand for Bond $s far outstripped the supply.  This led to the much hated bank queues.  Since everyone sort of believed that they would get a US$ for a Bond$, also known as RTGS, both Government and banks increased the RTGS total to over Bond$9.billion.  This amount is not fully backed by US$s on a 1:1 basis.

Government has also increased its budget through the use of Treasury Bonds (TBS).  TBS are funds Government borrows from the RBZ which in turn borrows it from both foreign and domestic private enterprise.  Apparently Government borrowed US1.37 billion through TBS in the first six months of 2018.   This was a prelude to the Elections, and could have included the free fertilizer to farmers, the generous raise for civil servants, and the donation or subsidy of motor cars to key groups.  But according to Parliamentary regulations Government is not allowed to borrow more than 20% of the previous year’s collected revenue This means that Government has broken the regulation, as Government revenue was less than US$4 billion last year.  Total TBS now comes to US$7.6 billion.

What Is To Be Done?

Bond notes, also known as RTGS, served a purpose.  Despite its inherent weaknesses, which include high levels of borrowing and the over use of TBS, it succeeded in stimulating the economy.  According to the World Bank, Zimbabwe’s growth rate was 0.7% in 2016; 3.0% in 2017; 2.4% in 2018; and projected to be 4.2% in 2019.  Thus Zimbabwe was able to achieve a modest economic growth from 2016  – 2018, during the Bond Note/RTGS period,  and is projected to do better in 2019.  

Its fatal weakness was equating the US$ to the Bond/RTGS$.  Economists know that the value of money is linked to real things, like the amount of maize grown, houses built, children educated, sick healed, etc.  When we don’t grow, build, educate and heal enough, our money becomes more worthless.  Money cannot just be invented by the printing press as happened during the Hyper-Inflationary period (2003 – 2009) or by utilizing the banking and electronic systems , which is a similar way of expanding the money supply without necessarily increasing productivity.   We are not as productive as we were in the 1980s and 1990s for example.   The Bond/RTGS cannot be equated to the US$ simply because Zimbabwe’s economy does not produce the same goods, the volume of goods, and the efficiency of production as the US economy.  Equating them was popular, but also dangerous.  Today everyone who holds an RTGS account expects to be able to exchange for US$s on a 1:1 basis.  Now Government’s domestic debt is about US$9 billion:  can Government repay this amount through US$s when it also has a large external debt estimated at US$11.3 billion.

The Government’s recent decision to separate RTGS accounts from US$ accounts is obviously essential.  It will end the madness that has struck Zimbabwe where we have six different exchange rates for the US$, and all decided in the streets by informal money changers.  

The second major decision is the 2 cents tax on every dollar imposed on  money transfers through banks or through mobile exchange.  In principle this is a great  and brilliant idea.  However, great ideas can fail if they are badly implemented, and there are definitely signs that the implementation has not been carefully worked out.  There is need for much more research and consultation between Government, RBZ,  key stakeholders and communities. Present implementation should be seen as still on an experimental basis and capable of being improved.  A fixed period should be provided for dialogue, such as a year at least before more detailed implementation programme can be instituted on a more permanent basis.

A year long discussion of this important economic policy, which will have a huge impact on productivity and on the fiscus, will be a display of democracy.  Democracy has been narrowly defined mainly be external critics, with insufficient inputs by stakeholders and communities within Zimbabwe.  Small groups of important stakeholders such as industrialists and commercial entrepreneurs; trade unions; agricultural, teaching, medical, engineering and other professional associations;  small scale enterprises including Communal and Resettlement farmers; economic and sociological researcher; religious organizations; women’s and youth groups;  etc. can be invited to discuss these critical issues very carefully, and over a fixed period of time.   It is surprising that the ruling party has not discussed these important  issues with its Parliamentary caucus and with its many party members.   It has not been discussed by the Parliamentary Committee on Finance.  I wonder if it has been discussed by the Cabinet Committee on Finance?  Government would then incorporate a few of these suggestions through gazetting more details into this policy.  Detailed adjustments will bring a huge buy in for this policy, as well as ensure efficient implementation.

Unfortunately, the past populist policies of Mugabe, deteriorating rapidly into the buying of voters, meant that little attention was paid to important issues of governance.  For example the Annual Budget is passed by Parliament in a few days, giving little time for a thorough understanding of particular budgetary details.  As a result the US$70 million for the now disputed purchase of planes was actually approved by Parliament in the 2018 Budget passed in 2017.  Another result is the removal of grants to schools for the purchase of textbooks and construction of classrooms – these were removed without a murmur from the parents, teachers and pupils who were deprived of textbooks and new classrooms for a decade.  Those affected by the new tax system must understand it.  How will the money collected be spent?  This should be discussed.  A framework for the division of the tax, for example to develop new industries and new markets would very much be appreciated by both industry and commerce.  Ensuring that Zimbabwean pharmaceutical industry can be supported to produce key drugs within the country would surely please all patients and doctors.  It is essential to develop a clear framework for how the additional money will be utilized.  Of course a substantial amount should be spent on paying our domestic and international debts, but reserving some money for key areas which would help develop the economy as well as cushion the existing poverty of so many Zimbabweans is essential.

Money madness will not end with pronouncements from high places but only through consultations and explanations that will earn the trust of the citizens.

Work and Employment Creation

Zimbabwe inherited two economies at Independence: the Formal Economy developed to serve the needs of the white population; and the Informal Economy which sustained the majority black population. Both economies have survived for the past four decades.
The Formal Economy was strongly supported by State inputs in terms of Planning, Research and Development, technological and managerial inputs, Banking facilities, etc. The result was a sound modern economic model, but intended to support only a small percentage of the population, at its height only 4% of the population. On the other hand, the Informal Economy received little State support both before as well as after Independence. Thus it utilized traditional technologies, with little access to modern agricultural and industrial models and inputs. Despite these handicaps the Informal Economy now includes 5.7 million owners, managers and workers. This is in comparison to the 816 300 employed in the Formal Economy, 550 000 of whom are employed by the State.
The analysis recommends a more active State and National policy to unite these two disparate Economic Sectors by building bridges between the two. By providing incentives for entrepreneurs in the two Economies to work together, Government can enable Informal sector enterprises to improve their management, technologies and product quality. Their Formal partners have had decades of experience in quality control and export, and can share these assets with their new partners. On the other hand, the Informal Economy has not yet developed frameworks for work conditions and pay, so they can pay workers lower than the stipulated wage in the Formal sector. The present per capita GDP is about US$75 a month, a tenth of what is paid in the Formal Economy. The partnership would therefore be beneficial for both partners, for the Formal Sector by lowering pay levels and therefore overall productions costs; for the Informal Sector by increasing productivity, quality and exports. This will gradually close the wage gap. This is a win win situation.
The article is also critical of the utilization of the State Budget, about US$4 – 5 billion annually in recent years, devoted almost entirely on pay for State employees. It recommends utilization of at least half of the State Budget on economic growth and development. Development includes social policies which can provide the minimum of Human Rights, such as the Rights to Education, Health and Clean Water Supply. Agricultural and Manufacturing industries play a key role in economic growth and modernization. Key changes are needed to provide reliable individual and institutional ownership rights to property such as land and housing.

Zimbabwe Budgetary Priorities: continued

Ideological Foundations for Government Policies and Strategies

ZANU PF changed its ideology from so-called “Marxism Leninism” to the Economic Structural Adjustment (ESAP) ideology in 1992. The decision was taken by the ZANU PF Central Committee. It is appropriate to examine why and how this drastic change took place, and whether the full import of this transformation was clearly understood by those who made the decision. Whilst this short think paper is not the appropriate place to dissect the two ideologies, a brief explanation may be appropriate here, with emphasis on the relationships between government and the private sector.
There are two opposing views about how governments should deal with the private sector: one is that promoted by Japan. The Japanese model, latterly followed by China, has now become known as the “Asian” Model. The second one is known as Neo-Liberalism, expressed as Economic Structural Adjustment Programme (ESA or ESAP) in developing countries. ESAP was strongly recommended by both the World Bank and the International Monetary Fund (IMF) in the 1980s and 1990s. Western donor funds and investments were closely linked to adherence to ESAP rules.
It would be erroneous to say one model represents Socialism and the other model represents Capitalism. Japan and the Asian Tigers claim to be capitalist, and China’s post-1978 development into a more market based economy is also seen as more capitalist by most Western analysts. One could instead say that both models are market orientated models, the first one being based on the works of British economist John Maynard Keynes (1883 – 1948), who believed that Government had to play a key role in bringing about new economic development as well in stabilizing the economic and social systems. The second one is based on the works of F. A. Hayek (1899 – 1992), an Austrian British Economist and political theorist. Hayek observed the disastrous impact on Europe before and after the 2nd World War (1939 – 1945), dominated by Nazism in Germany and Stalinism in the Soviet Union. He saw these two regimes as totalitarian. As a result he became very suspicious of any form of collectivism which he believed required a centralized and therefore totalitarian government. Hence he recommended government to be based on minimal control, but should instead depend on the shared Rule of Law which everyone followed.
The original Japanese model promotes close collaboration between Government and the Private Sector. The key characteristics of the Japanese model are:

Dependence on internal funding, in particular on agricultural surplus and domestic savings. This meant that in the early stages of the modernization of its economy it was almost totally reliant on domestic financing. There was no dependence on FDI for almost a century.

Emphasis on strengthening the military and industrialization. This focus began in 1868 with the beginning of the Meiji Government. The reasons for this dual emphasis was that Japan was suddenly threatened with colonization by various mainly Western countries, and found itself unable to resist with its wooden boats and traditional swords. A very strong modern military was required to defend it from colonization. Industrialization was equally essential, as the Meiji intellectuals believed that without Western science, technology and industrialization, Japan would soon be subjugated. Despite its powerful traditional philosophy and religion, Japan welcomed Western ideas on mechanization and manufacturing.

Education was seen as a key institution, with universal primary education introduced in 1868, and compulsory middle school education (between 9 and 10 years of schooling) introduced by the 1950s. Elite high quality university education was introduced, and gradually spread to all prefectures.

Japan enjoyed a strong coherent domestic labour market, which enabled it to develop its own conditions of work and payment. Greater wage differentiation only began to affect Japan in the 1970s when it had already successfully developed export markets for its manufactured goods. Those working on the export market could be paid more than those working for the domestic market.

Japan emphasized the unit cost of its products, so ensuring that prices were competitive in the international market.

The Ministry of International Trade and Industry (MITI) played a critical role coordinating industrialization and ensuring quality control. MITI offered grants and loans to private companies which had provided substantive examples of what they had already manufactured. Such companies grew to become the giants of the global economy.

Neo-Liberals believe the main role of Government is not to interfere with private companies, the opposite of the Japanese model which forms a partnership between the Government and the private sector. Instead Neo-Liberals believe that the Government should establish suitable macro-economic frameworks which favour the rich, based on the theory that the rich would invest in the economy and so enable it to expand. The “trickle- down theory” was based on the belief that everyone would benefit if the rich benefited. ESAP, an interpretation of Neo-Liberalism, enabled a wealthy group of Zimbabweans to emerge, but did not bring about the expected economic development for the whole country.
Zimbabwe’s domestic industries such as Agriculture and Manufacturing, have been more or less stagnant since the mid-1990s. Mining has had a healthier growth, although at a time when mineral prices were low. Zimbabwe has been heavily dependent on Foreign Direct Investment, but this amounted to US$319 in 2016, a third of Government’s aim to attract about US$1 billion. Most of the FDI was into Mining. Zimbabwe’s own priorities have yet to be clearly identified and articulated. The proposed Economic Blueprint will provide detailed basic statistics as well as domestic investments into specific sectors. The Blueprint will provide notional requisite amounts of domestic investment based on domestic savings by Government, by the private sector and by individuals. Government is necessarily the leader as it has the greatest capability to save. It also has influence on other key institutions, such as Parliament, the Judiciary, the Armed Forces, Education, Health, etc. The Blueprint will require a thorough in-depth analysis of how much can be invested into each sub-sector of the economy, followed by a dialogue between the Government, the Private Sector, the Informal Economic Sector, and the Services. This is roughly covered under Table 3 above. This provides a sound foundation for building a consensus of the whole society on a realistic and practical Way Forward.
Moreover the Informal Economy dominates over the Formal Economy, creating 57% of the GDP. Whilst the Informal Economy keeps developing and expanding, the Formal Economy is moribund. Reasons for this are evident, such as the utilization of inherited technology and management systems from the 1950s and 1960s, the Labour laws which make it virtually impossible to dismiss workers once they have been employed for more than 6 months, protected salary scales which are totally divorced from the real incomes of enterprises and the real Per Capita GDP, etc., etc. Thousands of workers, for example in parastatals like the railways and the national air line, are being paid even though they have not been working for decades. These barriers to progress have not been holistically addressed.
The Informal Sector accounts for about 90% of the employed. Given the huge success of the Informal Economy, which provides a variety of goods for the domestic market, it would be very useful to the Economy as a whole if the Government were to provide them much needed support such as affordable loans; developing labour laws linked to the real Economy so that Informal workers can be protected; providing research, development and training to upgrade the quality of products; providing affordable work shelters which will allow informal industries to move out of the streets; etc.
Government should also build bridges between the Formal and Informal Economies, departing from their history of the Formal Economy representing White interests and markets, as opposed to the Informal Economy representing Black interests and markets. Formal industries can help their counterparts to improve the quality of their products, and assist in jointly developing new export markets.
Government should also build bridges between the Formal and Informal Economies, departing from their history of the Formal Economy representing White interests and markets, as opposed to the Informal Economy representing Black interests and markets. Formal industries can help their counterparts to improve the quality of their products, and assist in jointly developing new export markets.
Agriculture and manufacturing are the keys to economic expansion. Neither can be relegated to either the Government or the Private Sector, exclusive of each other. They are areas which require coordinated and generous mutual contributions in terms of investments, training, quality control, developing export markets, etc. Thus, it is essential to take into account its policies and strategies pragmatically, examining how it would benefit the different sections of the population.

Zimbabwe Budgetary Priorities continued

A key instrument in Government’s hand is the National Budget. This analysis is based on an analysis of Government priorities in 2018 Budget. In order to simplify the analysis the thirty five Votes have been organized under the following headings in order of prioritization:

Economic growth. This includes the Ministries of Industry; Lands and Agriculture; Mines; Environment and Water Development; Transport and Infrastructure; Local Government; Energy and Power; and Tourism.

Education. This includes the Ministries of Primary and Secondary Education; and Higher and Tertiary Education, Science and Technology.

Security. This includes the President’s Office (Special Services or CIO); Defence; Home Affairs; Justice.

Health. This includes the Ministry of Health and Child Care.

Governance. This includes President’s Office (excluding Special Service or CIO); Parliament; Finance and Economic Planning; Auditor General.

Labour. This includes the Ministry of Labour and Social Services.

Public Relations. This includes the Ministries of Foreign Affairs; Information and Media; Information and Communication.

Commissions. Eight Commissions are included: Judicial Service; Public Service; Council of Chiefs; Human Rights; National Peace and Reconciliation; National Prosecuting Authority; Zimbabwe Anti-Corruption; and Zimbabwe Electoral Commission.

Small Ministries. These include the Ministries of Women and Youth Affairs; and Sport, Art and Culture.

Table 1 compares the Prioritised list to the actual 2018 budget allocations.

1

Note that the main cuts are in Education, Security, Governance and Commissions, whereas other areas have been increased. Divided by the specialist areas 25% is spent on Economic Growth; 40% on Social Welfare; 20% is spend on Security; and 16.25% on Governance, Commissions, Public Relations and Small Ministries. The next section provides explanations of how this list of priorities was devised, assuming that the Government will not be in a positions to increase its income in the near future.

Brief Explanations Regarding Proposed Priorities

Widespread discussion will help to arrive at agreed priorities. Different institutions may find it useful to utilize this framework as a basis for discussions. There may be differences in how much emphasis should be placed on each priority, depending on the interests of different groups. However it is important and appropriate that such a national dialogue should take place at every level, rather than that such a large proportion of the National Income such as the Budget is passed by Parliament every year without in-depth analysis of how effectively it is being used.
At present there is a lot of emphasis on attracting Foreign Direct Investment (FDI). FDI is of course important, but it is also crucial to note that both Japan and China began by utilizing domestic savings to promote agriculture and food security. Japan, through close collaboration between Government and the Private Sector, encouraged the growth of agricultural surplus and domestic funding. The first ten years of China’s opening up of its economy after 1978 stressed and improved agricultural development.

Economic Growth

Government and Private Sector share the responsibility for economic growth. When the two don’t work in tandem, it is unlikely that much economic growth will take place. The National Budget comprises about a third of the total GDP, and it can play an important role in spurring the development of economic institutions. Generally a minimum of 20% of the Budget is recommended to stimulate economic growth. However countries like China have devoted more than 30% during their growth period from a developing to a developed economy. It may be difficult to increase immediately from 20.43% of the Budget, so it is recommended that it rise to at least 25% as soon as possible. It is essential that this be increased substantially every year. It would be appropriate to aim at reaching 30% of the Budget being allocated to Economic Growth.
Agriculture has an enormous potential for immediate growth. It could double its contribution to the GDP within a few years. Agriculture must necessarily be the key focus of economic development for many decades to come, especially so for the next five years. Economist Eddie Cross estimates that the output per farmer was about US$4000 a year before 1997, whereas in 2017 it was only US$1030 per farmer. According to this estimate, agricultural production could quadruple if effective policies and support systems were created and implemented. If Eddie Cross is correct, it would mean that the 12.2% that Agriculture contributed to the GDP in 2016 has an almost immediate capacity to increase the GDP substantially. The quadrupling of agricultural productivity could increase the GDP by 14% from US$14 600 million in 2016 to about US$20 000 billion within a few years, no mean achievement in such a short period of time. Yet this is within the realm of practical possibility.
Policies which can contribute to the growth of Agriculture include subsidization and support of important agricultural industries such as fertilizer, seeds and chemicals; supporting the establishment and strengthening of industries which provide tractors and equipment for agriculture; Research, development and training of agricultural extension workers; suitable in-service training for all levels of farmers; provision of suitable transport and funds to enable extension officers to do their jobs; assisting small scale farmers to have some access to mechanization; linking growers to their markets; etc. These policies should be targeted at banks; institutions such as associations of professionals which serve agriculture such as irrigation engineers; farmers’ unions; etc. One of Zimbabwe’s perpetual problems is that we have three years of drought out of every five years. Joint support for irrigation schemes including the State, local government, farmers’ associations and groups of farmers could bring about solutions to this perennial challenge.
The stimulation of industries for tractors and equipment can lead to the development of export markets throughout SADC, as the challenges facing Zimbabwean small scale farmers are also faced by their neighbours.
The manufacturing industry, particularly in terms of agricultural and construction machinery and materials, also offers huge opportunities for both old and new industrialization, and could find new markets in the Region. There is urgent need to re-orient manufacturing to cater for the needs of the majority, who are mainly farmers, and who need to mechanize their industry. The strengthening of engineering companies so that they can provide local production suitable to farmers’ needs is very important.

Education

Education is of critical importance for the mental, emotional and economic development of the nation. UNESCO has recommended that 20% of State Budget should be allocated to Education. Investment was about 23% of total Budget in 1980s, 1990s, 2009 – 2017, but this broke down under Hyper-inflation and Sanctions (2002 – 2009). The breakdown resulted in marked deterioration of education quality as measured by Grade7 and “O” levels exams. However it is necessary to increase the Budget gradually rather than too quickly. It is recommended that investment into Education is reduced to 23% of the Budget, the level of the 1980s and 1990s, modest but adequate.
Amalgamating the two Ministries can bring about greater coordination and efficiency and a saving of an estimated US$50 million which can be spent on improving in-service training, infrastructure and hardware which are poor in both Ministries, mainly because of under-investment in new technologies, in-service training, and hardware.

Security

Investment into Security Services varies globally. Obviously Security is of utmost importance for development. However efficiencies can be made by improving the training of staff, and slimming down the number. Larger numbers do not necessarily increase efficiency, especially if they are under-qualified and under-trained as well as under-paid. More should be spent on hardware and efficient management to enable them to be more effective.

Health

The World Health Organization (WHO) recommends that between 10 – 15% of Budget should be devoted to Health. Zimbabwe invested between 7 – 8% of the Budget on Health in the past, but it is essential to increase it gradually as the Budget is quite inadequate, with little or no medication in clinics and hospitals. Health is heavily dependent on donor inputs which are both unreliable and tilted towards donor preferences. Medicines and treatment should be subsidize, but should be affordable except for Under-Fives and Pregnant Women who should be given free treatment.
Poiu

v. Governance

A slimmed down President’s Office, for example reducing the US$20 million spent on travelling and slimming down the bureaucracy for State Houses could bring a saving of more than US$73 million. A reduction of Governance to 9% of the Budget could bring a saving of more than US$73 million.

vi. Labour

This is very underfunded. It should be increased to 4%. A popular and low cost intervention would be to provide US$20 a month for those over the age of 65. The number of the population over the age of 65 is very small, so the cost is minimal, but would be highly visible and popular. 70% of the population are poor, and targeting this small group would have a large impact on poverty, as these grandparents have been left with onerous child care responsibilities as a result of HIV AIDS deaths and exit of large numbers of parents into diaspora. This has already been successfully implemented in selected districts over the past 10 years.

vii. Public Relations

Creating friendships and trade relations with other countries and improving information, both through traditional and computer media, is important for business. The low investment in this area hampers the growth of tourism for example, compared to rivals which are able to advertise lavishly internationally. Increasing this component may be very advantageous to Zimbabwe is it is done judiciously by spending on programmes rather than on additional bureaucracy.

viii. Commissions

Commissions have been an area of growth. In 2016 there were only 2 Commissions (the Judicial Service Commission and the Public Service Commission). This has now increased to 7. The amount to be allocated to commissions could be decreased to a more modest 3%.

ix. Small Ministries

These small Ministries need to be reorganized so that the bureaucracy is lowered whilst funding of programmes is increased. At present the bureaucracy is large but the achievements are limited.
The propose re-organization provides a vision of how Government expenditure can be skewed towards greater productivity, whilst at the same time protecting basic services.

Zimbabwe’s Budgetary Priorities Part 2

Need for a Practicable Blue Print

There is a new demand for an Economic Blueprint following on the game changing accession to power of the New Dispensation. The mantra of the New Dispensation is “Zimbabwe is open for business”, a signal that the aim is economic growth.
Zimbabwe has had a total of fourteen economic plans since Independence, and except for the first one, Growth with Equity (1981), it can be said that few of the economic goals could be fulfilled. Growth with Equity outlined the objectives of the first decade of Independence, when the main achievements were in the social services, such as Clean Water Supply, Education and Health. These three achievements lasted for twenty years, but became eroded by the Hyper-inflation and Sanctions after 2002/2003. The economic gains during this period were very modest. It is essential that the new Government’s Economic Blueprint should be pragmatic and practicable, hopefully avoiding the problems raised by previous blueprints which were either academic exercises, rhetorical statements, or political manifestoes which could not be implemented. Clear and measurable economic targets should be outlined and followed.
A good Economic Blue Print must ensure that basic necessities such as Food, Education, Health and a Clean Water Supply are available for all. When parts of the population are denied these basic needs and human rights, conflict and demonstrations arise. A successful Blue Print requires the support of the whole population. In order to guarantee that these basic rights are maintained there is need for a sound Blue Print based on strong economic as well as political foundations.
The components of the New Economic Blueprint must include what the Government can do as well as what the Private Sector can do to bring about progress. All institutions, whether governmental, non-governmental, private, religious, social and community should participate. But an Economic Blueprint is fundamentally about the Economy, even though all sectors contribute to the Economy. A Free for All whether by Government, by the Private Sector or by Foreign Investors, leads to Disaster for All.
As Government and the Private Sector are the two most important economic actors, this article will concentrate on these two seminal areas.

Government
It is generally recognized that the Government failed to make significant progress in the economic areas. However the analysis of why and how these failures took place differ substantially. The economic policies in the 1980s attempted to retain the inherited Rhodesian Economy to ensure economic stability, which it succeeded in doing for a decade. Rhodesian institutions such as Commercial Farming and Industry flourished, side by side with the improvement of social welfare institutions. The 1980s now appear as the pinnacle of the success of Independence.
But in the 1990s the Government decided to divorce itself from the Rhodesian economic system, and to replace it with the Economic Structural Adjustment Programme (ESAP). ESAP proved to be a disaster for ZANU PF as well as to the country as a whole: it brought about the end of the One Party State instituted in 1987 through the Unity Agreement between ZANU and ZAPU; and brought about the establishment of a definitive opposition party, the Movement for Democratic Change (MDC) in 1998. It also brought about more corruption amongst the ruling elite, as well as serious unrest from the urban unemployed. These two effects of ESAP have been long lasting. The situation was exacerbated by the population increase, from 7½ million in 1980 to 14 million in 2012.
ESAP was based on the belief that removing customs duties, in effect removing protection for the domestic industries which had made Zimbabwe self-sufficient in basic consumer goods, would automatically bring about economic growth. But economic growth did not take place, whilst 300 factories closed every year. This annual decrease has continued to date. One problem was that the Rhodesian factories were utilizing technologies and machines of the 1950s and 1960s. Moreover utility costs and wages were much higher than in competitor countries. One reason was that the Formal Economy was staffed mainly by Whites before Independence, and they had had a much higher pay scale than Blacks. Although racialism was officially removed, the differential pay scales remained.
Gradually the Rhodesian industries were replaced by imports from South Africa and China whose manufacturing industries were more modern and also cheaper than Zimbabwe’s. ESAP brought about rising imports and destruction of the inherited formal industries. The high level of importation and the demise of farming and industrial production meant that Zimbabwe’s imports averaged about US$3 billion more a year than its exports. This led to the lack of cash liquidity which is generally used for consumption needs.
Under ESAP Government investment began to change radically from the more balanced approach of the 1980s and early part of the 1990s, where investment into social welfare was balanced by investment into the economy. Instead Government decided to double government employment (Civil and Security Services). Employment costs came to about 50% of the Budget in 2017. As employment could not grow under Sanctions, government employment was the only source of employment creation. Although government employment doubled, individual salaries went down, and qualifications and work experience decreased. Many poorly educated staff were employed, mainly in Education, Youth and Security Services. Training was reduced or even removed. For example police recruits only received 6 weeks of training. In the teaching service, unqualified teachers were now employed in many schools, as qualified teachers left. The quality of education deteriorated sharply. Employment was given to political supporters of ZANU PF rather than to technically and professionally qualified and experienced personnel who were in short supply. The huge diaspora of between 2 – 3 million exacerbated the loss of skills and experience, as many highly experienced bureaucrats, teachers, medical and business specialists left the country, mainly to South Africa where they quickly filled the middle level of management. The diaspora is estimated to comprise between 30 – 46% of the working age population.

Fortunately by 2018 Government managed to lower employment cost to 61.2% of the total Budget including both Constitutional and Vote Appropriations. This was a great change from the recent past, when employment costs came to about 90% of the Budget. The main strategy was to limit new appointments, which meant that only between 64 – 70% of positions were filled between 2016 and 2017, a sizeable cut in the bureaucracy. This is an excellent strategy as it does not involve dismissing any office holders. However there is a further need to lower the amount devoted to staff costs to 40 – 50%, and this needs to be done gradually. Various strategies can be utilized to implement this, for example replacing Housing Allowances with mortgages. This links up to Government’s planned construction of housing for civil servants. The best way would, of course, be through an economic expansion, but at the same keeping staff costs stable. But economic expansion takes time.

The increase in RTGS and other forms of mobile payments increased for economic investments such as construction, as business and individuals were nervous about holding bond notes as savings, and instead utilized bond notes to build. A modest and unexpected building boom started in both up .

Given that Government will have severed difficulties in raising more than the present US$5 billion for its expenditure, it is absolutely essential for it to examine how it is spending this scarce resource. The present usage, although slightly better than from2014 – 2017, places severe limitations on economic growth unless and until donors and FDI become available, and Zimbabwe’s history over the past four decades shows that both are likely to fluctuate dangerously. Depending entirely on outsiders to fund Zimbabwe development is a dangerous gamble.

Of course Budgets are decided not only through technical consideration but also through political considerations. Over the past 18 years, since the heavy banking Sanctions were imposed by ZIDERA, political criteria dominated: technical and professional criteria were ignored. This ensured political success, but resulted in serious economic deterioration. These banking Sanctions are still in place.