Zimbabwe’s Budgetary Priorities Part 4

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Note that the main cuts are in Education, Security, Governance and Commissions, whereas other areas have been increased.  Divided by specialist areas, 25% is spent on Economic Growth; 40% is spent on Social Welfare; 20% is spent 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 position 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 first 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.

  1. 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 including farms and factories.  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. Larger investment can speed up economic progress if effectively used.  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.  As Government remains the leader of the whole economy, the Private Sector will be heavily influenced by how much the Government allocates to Economic Growth, and how this will be spent.  The  Government Budget will stimulate a similar rise in domestic investment into the Economy.  A rise to US$2 billion in domestic savings could also stimulate an increase of a similar amount in donor funds and FDI, as domestic savings is so critical.

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.[1]  According to this estimate, agricultural production could quadruple if effective policies and support systems were created and implemented.    If he is correct, it would mean that the 12.2%  that Agriculture contributed to the GDP in 2016[2]  has an almost immediate capacity to increase the GDP substantially.  The quadrupling of agricultural  productivity alone could increase the GDP by 14% from US$14 600 million in 2016[3] 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 such as Command Agriculture; supporting the establishment and strengthening of  industries which provide and develop tractors and equipment for agriculture;  Research and Development;  further in-service 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.

  1. 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.  Surveys of industry satisfaction about the suitability  and standard of tertiary education and training to industrial needs show that there is a poor match.[4]

  • 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.

  1. 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 subsidized, but should be affordable except for Under-Fives and Pregnant Women who should be given free treatment.

  1. 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 Total Budget would bring the allocation to US$452 million.

  1. 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 would be 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.

  • 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 if it is done judiciously by spending on programmes rather than on additional bureaucracy.


 

  • 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%.

  1. 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 proposed re-organization provides a vision of how Government expenditure can be skewed towards greater productivity, whilst at the same time protecting basic services.

[1]                            Eddie Cross,“Agriculture Key to Zimbabwe Economy”,  The Independent, 27 May 2016.

[2]                            Source: http://www.cia.gov.library/publications/the-world-factbook/geos/zi.html

[3]                            Figure from IMF.

[4]                            See  Confederation of Zimbabwe  Industries, 2015 CZI Manufacturing Sector Survey Report.

 

 

 

Zimbabwe Budgetary Priorities Part 3

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 size of the bureaucracy. This is an excellent strategy as it does not involve dismissing any office holders. However there is 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 time 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 upmarket shopping malls and high density suburbs. This was a small positive effect of bond notes.
Given that Government will have severe 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 from 2014 – 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’s development is a dangerous gamble.
Of course Budgets are decided not only through technical considerations 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.
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 Ministry Votes have been organized under nine headings in order of prioritization. The following is the list of nine priorities, beginning with Economic Growth.

I. 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.

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

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

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

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

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

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

VIII. 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.

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

Zimbabwe Budgetary Priorities Part 2

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 was supported by politicians and Government, but little information reached ordinary people. 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 the most serious opposition party to date, 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 were retained.
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 90% 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 teacher left. The quality of education deteriorated sharply. Employment was given to political supporters of ZANU PF rather than for 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 levels of management. The diaspora is estimated to comprise between 30 – 46% of the working age population

Zimbabwe’s Budgetary Priorities part 1

Need for a Practicable Blue PrintNeed for a Practicable Blue PrintThere is a new demand for an Economic Blueprint  following  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.  Most important of all, Government, the Private Sector, and indeed the whole population, should know about and agree to the priorities.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.    See Vusamuzi Sibanda and Ranganai Makirota, Zimbabwe’s Post Independence Policies:

Alleviating Poverty

We are on the brink of ground breaking elections.  The media is full of the elections. Everyone is excited.  In particular individuals are fighting for positions and for power.  The biting poverty has hit everyone.  And  the experience of the past twenty years has made Zimbabweans believe that only politics, and in particular political patronage, can help them out of poverty. Government statistics tell us 70% of the population are suffering from dire poverty.  We also know that less than 1 million out of more than 6.5 million adults are employed in the Formal Economy:  these are the minority who enjoy a reasonable salary of over $76 a month, the average wage of a farm worker.Is it possible that the imminent elections can make a dent on poverty?  Are any of the 128 political parties targeting Poverty Alleviation as one overall important aim?  The two largest parties have published their Manifestoes, which are magnificent, but are they likely to suffer the same fate as the manifestoes of past, all magnificent and exciting, but none of which have been fulfilled. Zimbabweans have become beggars waiting for manna from their politiciansI would like to suggest four possible achievements which will definitely make a dent on poverty.  These are: Free Primary Education will be a major achievement, allowing the 1.3 million out of school primary age children today to attend school.  This can already be catered for in the existing Budget.  This will probably affect all families suffering from poverty. Provide $20 a month Pension to over-65s.  According to the 2012 Census there are about 536 000 Zimbabweans over the age of 65 (Census 2012, pp. 17 – 18).  If each of these were given $20 a month, or $240 a year, it would only amount to $128.64 million, a mere 2.57% of the Government Budget of about $5 billion.  This would be very easy to administer, based on the ID, and carried out at the POSB.  It does not need an extra bureaucracy, and since the aged are also affected by poverty, and in fact most have been left with the responsibility for their grandchildren, this will have a major impact on alleviating poverty.  This programme has already been successfully implemented in selected poverty stricken districts, and could easily be expanded.  Nearly every family will benefit from such a subsidy. Free or highly subsidized medical fees for pregnant women and children under five will certainly have  an enormous impact on the poor, and will lower child and maternal mortality.  A $1-5 fee for consultation and  medication would be affordable to the poor, and this will be very helpful if accompanied with nutrition, pregnancy, and child care education and training as in the past. Support for Non Formal Economy Industries.  Only about 1 out of 6.5 million Zimbabwean adults are employed in the Formal Economy, earning a minimum of $76 a month or $912 a year, equivalent to the Per Capita GDP.  However, another 5.7 million are employed in the Non Formal Economic Sector (Figures from Finmark Trust, Finscope MSME Survey in Zimbabwe 2012, p. 19).  Obviously it will take 2 – 3 decades to grow the Zimbabwean Economy so as to ensure everyone who wants to work to find decent well paid work.  Brilliant  promises about economic growth have been made by the two largest political parties, and we are all hopeful that the Economy  will  actually surpass what has happened in the last twenty years.  Nevertheless it is always possible to start in realistic ways today, and by “today” I mean immediately after the Elections!  What is predictable is what Government’s total Budget will be:  it has been between $4 – 5 billion a year for many years.  Using a percentage on economic development and work creation will certainly be important, and we can only hope that all political parties are seriously thinking about how they can bring about economic development and work creation with the Government Budget as the foundation, and FDI as additional to our own investment.Government is interested in taxing the Non Formal Economy, but so far has failed to find ways of doing this.  However the Non Formal Economy contributes $7.4 billion to the whole Economy, more or less half the GDP.  Yet Government has done little to assist it to improve and grow since Independence.  Instead its main emphasis has been on the Formal Economy. (In the 2018 Budget, Vocational and Technical Training for youths is provided with $11.957 million out of  a total of $39.769 million for Women and Youth Affairs, Estimates of Expenditure  2018, p.249.   This is less than 0.24% of the total Budget).  Providing incentives to the Non Formal sector can help to improve the quality of products and develop its export potential.  This would entail serious technological and quality inputs through training, equipment, infrastructure,  low cost loans and supervision.  Devoting at least 10% of the Budget (about $400 – 500 million a year) to the Non Formal Economy would bring huge economic dividends.One simple approach is to develop, in collaboration with Non Formal partners, Labour regulations for the sector which presently doesn’t have any such regulations.   Only 22% of these workers (about 638 000) are in full time paid employment (FinScope, 2012, p. 23).  Focus on industrial work will benefit industrialization.  It is also practical and “do-able”.  A simple example is to place the minimum wage for the Non Formal Economy on figures which have been developed by Government, and which are close to the Per Capita GDP.  If this small percentage of the Non Formal Sector is improved, it can make Zimbabwe’s industries more exportable than at present, as its exports are much more expensive whilst of lower quality than those of its competitors.
Conclusion

 

Government can play a seminal way in developing the economy.  It has failed to carry out this essential and important role in the last two decades.  Continuation of this bad example will be tragic for Zimbabwe and Zimbabweans.

Poverty Alleviation

Zimbabwe Tomorrow

Fay Chung is a Zimbabwean of Chinese extraction. Her main professional interests are in education and economics. She has degrees in Literature (London and Leeds), Education (London and UZ) and Economics (London SOAS). Her D. Phil is on the quality of primary education in Zimbabwe (UZ). Her experience includes teaching in the townships; teaching and research at university level; running the teacher training, planning and research work during the 1970s Liberation Struggle under ZANU and ZANLA; as the first head of Educational Planning Department in Zimbabwe after Independence she helped expand educational opportunities to the majority of Zimbabweans; she then worked as head of Curriculum Development which developed the textbooks for Grade 1 to “O” Levels; she was promoted to Deputy Secretary for School Administration before becoming Minister of Education in 1988. She left Government in 1993, and worked as Chief of Education Cluster in UNICEF New York (1994 – 1998) and as Director of the UNESCO Institute for Capacity Building In Africa (Addis Ababa 1998 – 2003).
She has researched areas related to politics and economy. She believes that although excellent research has been done in many economic areas, this work has not been utilized by decision makers and leaders. Moreover ordinary people are not aware of this excellent work, and instead are subjected to propaganda by the major political parties. The propaganda has been based on populist wishes, but cannot be practically implemented or fulfilled. As an educator and researcher she wants to reach all Zimbabweans who are interested in a dialogue on the Zimbabwe of tomorrow. The last four decades of Zimbabwe’s history have shown how we are trapped in and repeating the diverse histories and frameworks of the past. Her hope is that in the next few decades we can escape from the thought prisons of the past and move into new forms of democratic leadership and development.