Reforms aimed at turning Zimbabwe into Africa’s first ‘newly industrialised country’ have missed their mark, argues economist Richard Saunders
IN the latest round of adjustment-related shocks in Zimbabwe, government health facilities have been brought to the brink of collapse iby funding cuts which have seen Harare hospitals asking patients’ families to supply relatives with food. Government schools have been hit by worsening shortages of equipment, food for boarders and even the most basic of all stock items — toilet paper.
Even the dead have not been spared. Last week a local magazine reported that economic reforms have forced many ordinary Zimbabweans to avoid funeral insurance schemes, in favour of “pauper burials”.
This is clearly not the vision former finance minister Bernard Chidzero had in mind in the early 1990s, when he announced a package of reforms which would reshape Zimbabwe as Africa’s first “newly industrialised country”.
Esap, as the adjustment programme is known in Zimbabwe, was launched in 1990 and contained typical World Bank-inspired reforms: trade and currency deregulation, large devaluations of the local currency, a movement towards high real-interest rates, the lifting of price controls, chopping of “social spending” and removal of consumer subsidies.
As elsewhere, a key element of the package was an emphasis on the reduction of the public sector — not only in its regulation of markets, but also in its delivery of services and its leading role in the development of national social infrastructure. Talk of “privatisation”, “commercialisation” and “cost-recovery” featured heavily, and was cheered on by the Zimbabwean private sector, where initial enthusiasm for Esap was born out of a mix of navety, myth-making about the recent past and the allure of price decontrols and rising margins.
The campaign to implement “market liberalisation” tended from the start to rely more on conviction and ideology than demonstrated fact.
While it is true that much of the economy at the end of the 1980s was typified by production bottlenecks, effective monopolies in protected domestic markets, and cumbersome regulations governing foreign exchange and imports, the accepted orthodoxy of the 1990s — that the pre-Esap economy was stagnating, if not collapsing — was far from evident. In fact, despite its problems, in the first decade of independence Zimbabwe’s economy grew at an annual average of 4,2% — and 5% in years without drought.
For the government, however, the key point was that this moderate growth was unable to attract substantial new investment into the economy, or absorb increasing numbers of unemployed.
And so an uneasy and unlikely alliance was formed, bringing together the government, the white-dominated private sector and international lending institutions led by the Bank and IMF, with the aim of reshaping an industrial economy that until then was one of the strongest in Africa.
The new credo had a familiar ring. Protected markets bred inefficiency and limited growth; free markets fostered competition and expansion. It seemed to matter less that the country’s own 25-years experience of UDI (unilateral declaration of independence) sanctions and market regulation showed that a different route to national development was possible, that market competition was not always commensurate with job and wealth creation, or that neighbouring economies might be less willing to lift protectionist regulations in response.
Esap planners claimed to take such considerations into account by endorsing the phased reduction of protectionism alongside large modernising investment in the productive infrastructure.
Better still, the programme would be self- sustaining. The huge loans (at least $3,5- billion from the World Bank alone) used to fund industrial renovation, and to support trade and currency liberalisation, would be paid back with the help of steadily growing export earnings.
Five years on, Zimbabwe’s swollen national debt and deteriorating economic and social indicators testify to a different, if more familiar, outcome of adjustment in practice.
While government borrowing has doubled the national debt in five years, and boosted the foreign debt-service ration from 16% to 22%, it has done little to expand productive capacity, export market share or local employment. Suddenly, the government appears to be stuck in a deep and spiralling groove of deficit and debt.
On the other hand, manufacturing shows worrying signs of decline. Many local producers, besieged even in home markets by a wide range of competitive imports, have been rendered punch-drunk. Denied local protection as well as export incentives, key manufacturing industries, and notably clothing and textiles (whose output contracted by an astonishing 63% last year), have been pushed to the brink of collapse.
The state’s own employees have come under attack too. At least
22 000 public-service jobs have been eliminated through retrenchment and attrition, at a pace which had even the World Bank calling for the government to slow down the swinging of the axe. In the face of higher workloads, declining real wages and tighter budgets, many of the best in the civil service have left for the private sector, or for other countries.
The anticipated growth in skilled industrial employment has been answered in practice by a mounting unemployment crisis. Tens of thousands have been retrenched, and many more have seen their jobs, pay, benefits and employment security downgraded. The real incomes of those remaining in the formal sector have tumbled to a 25-year low. More than 1,5-million now depend for survival on the marginal subsistence of the informal sector.
The question now, as Zimbabweans await the unveiling of the second five-year phase of Esap, is whether the government will be able to stay its punishing course.
Though the World Bank rates Esap a moderate success, and is making new efforts to convince non-governmental organisations and other critics that what is needed is “better communication” and more involvement of all national interest groups in the programme’s implementation, a range of business and social organisations beg to differ.
The private sector, once an ardent supporter of liberalisation, is now openly questioning the logic of an unprotected domestic market and demanding an end to the government’s regime of punishing real-interest rates, which has suffocated private investment. An important indigenous business lobby has emerged to demand “re-regulation” of the economy in the interests of Zimbabwe’s growing black business community, whose highly geared enterprises are especially exposed to continued high rates of interest.
Meanwhile, the ruling party’s traditional constituency base of popular groups in civil society is fragmenting under the weight of austerity social reforms, and reconsolidating to challenge the new elitist politics of adjustment. Human rights activists regularly attack the undemocratic rescinding of rights to education, health and economic well-being; trade union leaders demand the renegotiation of Esap by all social interests.
Everyone except the government, it seems, has a sense of where to head next.
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