Intro Zim Economic Freedom Audit 2024

 Zimbabwe is rich and it’s story must be that of plenty. However, the country has experienced significant economic challenges over the past two decades, characterized by hyperinflation, currency instability, and a decline in foreign investment. Against this backdrop, the primary objective of this audit is to evaluate the current state of economic freedom in Zimbabwe and its impact on the economy allowing this report to assess Zimbabwe’s progress towards achieving the National Development Strategy (NDS)1 and Vision 2030. This report therefore would be a good policy paper for the private sector, the government, industry, inform investment policy, academia as well as the public.  In preparing the report, the study employed a mixed methodology approach. Approximately 80% of the analysis was derived from desktop research, utilizing secondary economic freedom data that is freely accessible from the Economic Freedom of the World database. The remaining 20% of the analysis was informed by qualitative data collected through focus group discussions with key informants. In the report, the analysis was conducted by examining Zimbabwe alongside its four neighboring countries: South Africa, Zambia, Botswana, and Mozambique. This approach, which considers countries that share a common history, similar climatic conditions, and significant trade relations with Zimbabwe, provides a broader context for understanding the economic conditions within Zimbabwe itself. Furthermore, this comparative analysis facilitates an examination of the various economic policies implemented by neighboring countries. It also allows for an assessment of how well Zimbabwe is integrating into regional markets and economies.

The economic freedom audit report is based on five key economic freedom indicators: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulation. The findings indicate that Zimbabwe has low and deteriorating economic freedom performance, ranking the lowest across all indicators when compared to its neighbors. This highlights the significant challenges facing Zimbabwe in terms of economic freedom. The report proposes the following policy recommendations: strengthen property rights by establishing clear legal frameworks for property ownership that promote confidence among stakeholders; enhance government integrity by adopting anti-corruption measures, including transparent procurement processes, whistleblower protections, and independent oversight bodies to improve accountability within government institutions; reform bureaucratic procedures by simplifying regulations that govern business operations; promote market openness by reducing import tariffs and eliminating non-tariff barriers to encourage competition and attract foreign direct investment (FDI); and ensure monetary stability by implementing sound monetary policies aimed at controlling inflation through fiscal discipline, strengthening the independence of the central bank, and encouraging the use of a stable currency while gradually phasing out multi-currency systems.

 

2:         Introduction

This audit finds out why Zimbabwe, a resource-rich country, has a contemporary history of economic challenges. Zimbabwe has experienced significant economic challenges over the past two decades, characterized by hyperinflation, currency instability, and a decline in foreign investment. Amidst these challenges, the concept of economic freedom has emerged as a crucial framework for understanding and addressing the underlying issues in the Zimbabwean economy. In Zimbabwe’s context, enhancing economic freedom is seen as a pathway to revitalizing the economy, fostering entrepreneurship, and improving living standards.

When comparing Zimbabwe's level of economic freedom to its Southern African neighbors, the disparities become apparent. Countries such as Botswana and South Africa have implemented policies that promote higher levels of economic freedom, resulting in more robust economic performance and stability. In contrast, Zimbabwe's restrictive economic policies and regulatory frameworks have hindered its growth potential.

Economic freedom is a fundamental principle that resonates deeply with Zimbabwe's constitutional framework and national development agendas. Chapter 4 of the Zimbabwean Constitution outlines fundamental human rights and freedoms, particularly in Section 13 (National Objectives) emphasizes that every citizen has the right to participate in economic activities and Section 14 (Right to Property) ensures that individuals have a right to own property, which is crucial for business operations. Thus, the Constitution of Zimbabwe enshrines the rights to personal liberty, property, and entrepreneurship, establishing a legal foundation that supports individual economic agency. As Zimbabwe strives to rebuild its economy, the alignment of economic freedom with constitutional values becomes increasingly vital in fostering an environment conducive to growth and stability.

The National Development Strategy 1 (NDS1) emphasizes the importance of creating a vibrant economy through strategic interventions aimed at enhancing economic freedom. This initiative seeks to transform Zimbabwe into a middle-income economy by 2030, promoting investments, innovation, and sustainable development. By prioritizing economic freedom, NDS1 aims to empower citizens and businesses, encouraging local and foreign investments essential for economic recovery. The mantra "Zimbabwe is Open for Business" further underscores the government's commitment to fostering an open and competitive economic environment. This slogan highlights the need for deregulation, improved infrastructure, and a more favorable business climate. By embracing economic freedom, Zimbabwe can attract investment, stimulate job creation, and enhance overall economic resilience.

In addition to NDS1, various policy frameworks, such as the Zimbabwe Investment Policy and the Industrialization Policy, emphasize the critical role of economic freedom in achieving sustainable development. These frameworks advocate for reducing bureaucratic red tape, enhancing property rights, and creating a transparent regulatory environment. By aligning these policies with the principles of economic freedom, Zimbabwe can position itself as an attractive destination for both domestic and international investors.

Finally, for Zimbabwe, embracing economic freedom can facilitate greater participation in this expanded marketplace offered by the African Continental Free Trade (AfCTA). By reducing trade barriers, enhancing regulatory frameworks, and fostering a competitive business environment, Zimbabwe can position itself to take full advantage of the AfCFTA. This strategic alignment not only promises to boost exports but also encourages foreign direct investment, which is crucial for revitalizing the economy.

In conclusion, economic freedom for Zimbabwe is not only aligned with the country's Constitution but also resonates with its developmental agenda and trade and investment policies. By embracing the principles of economic freedom, Zimbabwe positions itself to unlock considerable benefits that can address a myriad of economic challenges. This alignment promises to foster an environment conducive to growth, innovation, and resilience, ultimately paving the way for sustainable development and improved living standards for all Zimbabweans. As the nation seeks to revitalize its economy, the pursuit of economic freedom stands as a critical strategy to navigate the complexities of both domestic and regional economic landscapes

Objectives of the Audit

The primary objective of this audit is to evaluate the current state of economic freedom in Zimbabwe and its impact on the economy. Specifically, the audit aims to:

§  Assess the existing policies and regulations impacting economic freedom in Zimbabwe.

§  Identify barriers to economic freedom and opportunities for reform.

§  Benchmark Zimbabwe's economic freedom against regional peers to highlight areas for improvement.

§  Recommend actionable strategies to enhance economic freedom, promote sustainable growth, and improve the overall economic landscape.

Through this comprehensive analysis, the consultancy aims to provide a roadmap for policymakers and stakeholders in Zimbabwe to foster an environment conducive to economic prosperity and stability.

by Dr E, Mavodyo, L. Kanyonganise, I. Zimunya, N.Musikambesa, P.Mutize et al 2024

Summer is here- beware of malaria!

Now that summer is here, one of sub-Saharan Africa’s biggest health challenge also looms, Malaria.

Whilst malaria is worrying across all demographic segments, it is during pregnancy that it is of a greater concern.

 This article seeks to inform women, especially those pregnant and those hoping to be pregnant to be on the lookout for this life threatening disease.

Being pregnant is a delicate phase which requires maximum care both for the mother and baby.   Prevention and detection of threatening conditions which may affect mother and baby often include early bookings, routine antenatal investigations and continued education on pregnancy care.

Even though there are other worrying conditions to look out for when pregnant, here is why Malaria is of greater concern.

1] During pregnancy the immunity of the mother is naturally low so the mother has minimal resistance to diseases.

2] The symptoms of malaria more or less tally with common minor disorders of pregnancy like vomiting, body weakness headache etc. So disease progression may go unnoticed.

3] Malaria crosses the placenta and consequently affects fetal growth.

4] Malaria consumes and survives on glucose which is much needed by the mother and growing fetus.

5] Some drugs of choice are contraindicated in pregnancy depending on the trimester thereby limiting the choice of treatment.

Malaria is a non-communicable disease transmitted via the bites of an infected anopheles mosquito and is most prominent in the low veld, hot and humid areas of Zimbabwe.

With climate change, the precedence of malaria is increasing even on the higher veld of Zimbabwe.

It is very important for pregnant women to be protected from malaria during pregnancy. Untreated malaria often has negative effects on mother and baby. When malaria enters the body of a pregnant woman enters the bloodstream and consequently affects red blood cells which are responsible for the transport of oxygen to the whole body.

Malaria crosses the placenta and starts destroying red blood cells in the fetus.  The growing baby relies on the oxygen from the mother but the destruction of red blood cells distorts the gaseous exchange process.

The usual symptoms of malaria are body aches, diarrhea, a cold stage characterised by shivering, a hot stage characterised by headaches, vomiting and sweating. Effects on pregnancy include intrauterine growth retardation, miscarriages, premature delivery, low birth weight baby, neonatal jaundice –due to the destruction of red blood cells and neonatal respiratory distress syndrome since destruction of red blood cells in utero impairs the transport of oxygen in the baby’s body.

Complicated malaria often has symptoms of coca cola coloured urine, fever and in some cases confusion.

Prevention of malaria includes sleeping in insecticide treated mosquito nets, avoid travelling to malaria endemic zones during pregnancy and taking malarial prophylactic medication.

The secondary prevention includes early treatment at a health facility as soon as symptoms are noted.  So malaria prevention in pregnancy is a vital step in ensuring a healthy and safe pregnancy and a healthy mother.

The responsibility is for everyone- women, men and the community. A healthy summer to you all!

By Patience Hombarume Zimunya. She is a nurse midwife and writes in her own capacity.  Contact: petiehombas@yahoo.com

“Bhora musango” and the crisis of administration in Zimbabwe

That Zimbabwe, the whole of it suffers from a crisis of administration is no longer a contested issue. Many people read, see and emphasise the symptoms of a collapsed political and economic administration, which include corruption and a super-informal economy.

This article seeks to present the idea of “bhora musango” and its implications to politics and business in Zimbabwe. The chief argument is that the endemic and almost “normal” bhora musango may in fact generate a bigger challenge to national reconstruction as people prefer often lazy and quick-money making methods over systematic value based and often tiresome productive systems.

It is important to firstly define and describe this notion of “bhora musango”. Literally, it means kicking the ball off field. In a team of sport, the one who plays “bhora musango” is the one who passes the ball to the opponents or out of the field just to scuttle the team’s winning effort for that person’s private profit.  

This paper argues that whilst “self-interest” has been part of public and political administration in Zimbabwe, it has now permeated the Zimbabwean society and now forms part of the national mode, both in politics and business, big and small.

The splits and challenges within Zanu PF, notably after the Tsholotsho declaration to the current vanquishing of former Vice President Joyce Mujuru and her team are largely not results of ideological differences, but just “bhora musango”.

On the other hand, the splits within the opposition movement are rarely defined on ideology or group plan, but self-seeking “bhora musango”.

In economics, this idea of “Bhora musango” is often referred to as speculative economics.

Economists define speculative economics as that which “is often short term, takes large risks, especially with respect to trying to predict the future; gambling, in the hopes of making quick, large gains”.

Tim Bollerslev, an economic modeller argues that in speculative economies, “rates of return tend to be high in the short term, uncorrelated over time but characterized by volatile and tranquil periods.”

It is important to state that in fact speculative economics is not necessarily bad, but becomes toxic if employed alone or if it displaces productive economics.

Productive economics, in simpler terms, emphasises the use of capital, land and ideas to produce/innovate goods and services to satisfy human needs.

It is therefore my argument that millions of informal traders now fill up the streets of Zimbabwe’s cities, not necessarily because they cannot produce, but the lure of quick but often elusive gain is irresistible.

Many false “middle class” people have ex-Japan cars, farms and small businesses which they use as symbols of status. Much of it is dead, zero-producing capital.  

Such characters cover their lack of economic depth by parading labels of clothes and hence derive status and “deals” by the shoe and dress labels they wear, and not by what their ideas are worth. They make money on the basis of who they know or the political party they conveniently purport to support.

In politics, speculators are agile and unpredictable. They make the most noise especially attacking others of a different opinion in public but dine and wine with the so-called enemies at night.

Insider trading which is going on unchecked within government, where departmental buyers have become departmental suppliers is blatant corruption, but all in the stampede of this “get rich quickly” manifesto.

The recent public policy debate on whether police officers have the constitutional mandate to charge and collect “road offense fees” comes to mind. It is unconstitutional but the supporters of that process argue that “it is easier to administer road fines by police collecting it there and then than for offenders to pay at police stations or through some safe system”

Read simply, they argue that the constitution and the administration it creates are inconvenient. The constitution is now a victim of “bhora musango” as well.

Common sense means it would be very convenient for the state if offenders pay and get their funds into the cycle of public administration. But under “Bhora musango” the private interests of the “administrator” are superior, and then the state/public/povo suffer the cost of missed development.  

From a political perspective, the various short-term, egoistic political decisions and processes we witness in Zimbabwe make it difficult to read the future. Because it remains volatile and uncorrelated, I argue that Grace,  S.K Moyo, Mnangagwa, Tsvangirai or any of the front runners to state presidency are not guaranteed to take over from Cde.R.G Mugabe. Far from it!

With “bhora musango”, political succession in Zimbabwe has ceased to be mainly determined by social bases, but largely a sub-function of speculative politics. This means, among all leading contenders for state presidency, no one is purely MDC or Zanu PF, but like shifting sands, eats within all camps to maintain their short-term speculative edge.

From an economic perspective, it’s better for people to broaden their portfolios and do at least 75% production and less speculative economics in Zimbabwe.

The main actors of economic “bhora musango” may soon lose as the new post Mugabe administration, whether Zanu PF or not, would want to stabilise the country and make themselves legitimate by emphasising merit and institutions.

As a point of conclusion, as policy debates continue on the kind of Zimbabwe the future deserves, politicians must never again sink a whole country by substituting production with speculation.

Speculation must not also be killed totally as no country or administration functions purely on production alone. Both production and speculative economics and politics are necessary, but the average balance must always lie on production.

The prospect of a merit and production based Zimbabwean economy is possible but remote unless if the political leadership boldly brings order within the state. President Mugabe can no longer reform the state as he is, sadly, now held hostage by “bhora musango”. 

Whoever takes over after Mugabe may not survive two terms in power due to this “bhora musango” politics. The touchstone is to restore institutions; merit and teamwork (cross party and cross faction) to both survive and re-build production as an economic base.

Time will tell!

Itai Zimunya.... writes in his personal capacity and participates in the Institute for New Economic Thought. 

Zimbabwe’s economy: any hope for 2015?

As the year 2014 comes to the end, Zimbabweans continue to ponder on what year 2015 promises on the economic front. Part of that debate focuses on 2015’s $4.1bn national budget which was presented by Finance Minister Patrick Chinamasa in November. It seems two schools of thought are competing on reading 2015. Firstly, the government or the “new government” with new policy makers seem to promise a robust implementation of Zimasset and hence better economic fortunes for Zimbabwe in 2015 going forward. On the other hand, ordinary citizens who were largely cash strapped in 2014 and smarting from the introduction of “valueless” bond coins and a non-delivered public service bonus are already bracing for a worse 2015.

As things stand, it appears the external factor of weather seems to be bringing smiles to the faces of ordinary Zimbabweans as the xmas and new year week seems to be wet, hence good for both crops and livestock; themself significant factors of household food security and food sovereignty.

This article seeks to contribute to the debate on Zimbabwe’s economic fortunes. In particular, it shall focus on the 2015 budget and compare it with those of other countries in the region, and assess whether Zimbabwe is making progress or regressing. Whilst we have the latitude to use many economic indicators, a relative analysis of Zimbabwe and her neighbours’ gross budgets will be sufficient in assessing where Zimbabwe will likely lie in 2015.

In 2014, Angola, Mozambique and Namibia did far better than Zimbabwe both in real and nominal terms of economic development. Their projected budgets for 2015 are much higher than that of Zimbabwe. Their economies are also growing at faster rates than that of Zimbabwe.

The notes below display these economic figures and rough development trends for these countries.

Zimbabwe’s 2015 national budget remains largely pegged at $4bn, with a growing budget deficit meaning Zimbabwe may fail to pay her bonuses again in 2015.

Angola, with 27 years of regression during its civil war has a projected 2015 national budget of $70bn which will be 17 times bigger than that of Zimbabwe.

Mozambique, also with a sad history of a post independent civil war has a growing budget of $8.9bn, double that of Zimbabwe in 2015. Using the gross investment flows into the region, Mozambique tops with more than $2bn of investments in 2013/2014. Zimbabwe had less than $400million real new productive investments in 2014.

Zambia, Zimbabwe’s Siamese twin has out leaped her southern sister. Zambia’s budget for 2015 is pegged at $11.8bn, which is two times bigger than that of Zimbabwe. Zambia like Zimbabwe is largely a mining economy even though it is diversifying its economy.

To really display what is happening to Zimbabwe, it is important to state that Zimbabwe had a higher budget in US dollar terms in 1980. Its economy was more diversified and its growth rate was far much higher than most of these countries in this cluster.

This story of Zimbabwe’s demise is not new. The key policy questions are-perhaps; why and is there light at the end of the tunnel?

The reasons for Zimbabwe’s economic collapse are many and have historically invited serious debate and disagreements. These factors jointly contributed (or still contribute) at different times and in different degrees to Zimbabwe’s sorry state.

The ruling party and its scholars argue that the reasons for Zimbabwe’s collapse are largely due to neo-colonial forces, with Western international institutions responsible through both covert and overt means to destabilise Zimbabwe.  

Others cite leadership failure at the national policy level as Zimbabwe’s challenge. This is what many political scientists discuss as the failure of the post-colonial state in Africa, Zimbabwe included.

From an economic perspective, every fair economist concurs with those that argue that leadership failure is the significant factor in Zimbabwe’s fall. Leadership failure including lack of viable alternatives is the biggest challenge confronting Zimbabweans in 2015 and the medium term.

It is important to qualify the phrase leadership failure as it is loaded and may mean different things to different people. The leadership discussed herein refers to leadership of the state. The state has a primary duty to promote growth and stability of business and the economy. The Zimbabwean state, rather, focuses on “deception and operations” thereby making investors and ordinary citizens largely uncertain thereby taking a normal “wait and see” stance which further leads to zero or negative response to the numerous and incoherent but often false incentives/declarations.

The current rejection of bond coins and mass-withdrawal of money from banks is a good example.

The Zimbabwean economy in fact shrunk in 2014, and yet the government “declares” a 3% growth rate. A government that pumps 80% of its revenue to salaries and allocates 12% of its budget to defence in times of relative peace reaps what it sows- hunger and recession!

At the risk of sounding pessimistic and losing hope on the future, perhaps, the fitting question would be: is there any hope on Zimbabwe?

 From an economic perspective, yes, there is lots of hope on Zimbabwe. Zimbabwe is fairly endowed with economic resources ranging from natural resources to brain power. Investors from Zimbabwe and abroad have enough information on economic opportunities that Zimbabwe presents. That piece of information is golden and other things being equal, Zimbabwe can easily turn-around within a year of sound, coherent and business friendly policy regime.

Assuming everything constant, if Zimbabwe were to fully explore only one mineral -platinum and purify it in Zimbabwe and sell it as a finished product, her economy can easily hit the $20billion mark per year.

The leadership that Zimbabwe needs is to change from politics of isolation into that of engagement. Hospitality must be seen not as a limited function of tourism only, but international relations.

The noise, both ideological and political that Zimbabwe makes is an antithesis to her economic development endeavours.

The risks of remaining behind the region in terms of development are too many, including, at some stage becoming the regions dumping ground. Unbridled corruption and politicisation of business that the leadership along Samora Machel Avenue promotes and protects choke entrepreneurship.  

Business leadership is not directly co-related to being a Zanu PF party member and of a particular faction in fact. Promotion and protection of business has to be non-partisan and in the national interest.

The very basic values of care, respect, tolerance, honesty, fairness are the very same magnets of investment that the political leadership in Harare knows but practices not.

Growth and happiness is possible Zimbabwe- if and only if Zimbabwe drifts from its narrow and person/party centred leadership schemes of Mnangagwa /Mujuru or Zanu PF/MDC onto national development plans which promote growth and development of the country irrespective of race, politics, ethnicity and gender.

Party politics and personalities must be junior to the country’s development plan.

Sadly for Zimbabwe, the state was captured. This state capture in Zimbabwe is defined along party politics, tribe, gender and race. The more associated one is to those in power the better. The stampede by people of the Midlands province to swear allegiance to the new Vice President Mnangagwa at his celebration party was shocking but revealing how and why things (don’t) work in Zimbabwe.

Zimbabwe has no serious economic development plans like Angola or Mozambique. Zimasset is not an economic development plan (EDP), but a stepping stone towards an EDP.

Now that Zimbabwe has a new cabinet, does that mean change for the better or more of the same in terms of economic development?

The hope is that things change for the better as the social cost of regression will be terrible especially to vulnerable populations.

Conversely, this continued economic collapse may, soon, bring demise to the current political edifice. The economy and its mismanagement are bigger threats to Mugabe and his succession politics than Mujuru and her team.  

The choice is the leaderships to make- propaganda or delivery.

Welcome 2015!

Itai Zimunya is a socio-economic analyst based in Mutare and participates in the Institute for new economic thought. 

Zimbabwe’s economy: any hope for 2015?

Zimbabweans continue to debate the 2015 $4.1bn national budget which was presented by Finance Minister Patrick Chinamasa last month. Some say it is shallow, some say he did his best and some did not even follow it beyond just knowing some budget was passed last month. 

This article seeks to contribute to that discussion, especially taking the whole budget and economy and compare it with those of other countries in the region, and assess whether Zimbabwe is making progress or regressing. Whilst economic indicators are many, a relative analysis of Zimbabwe and her neighbours and how they manage their economies frames the scope of this paper.

Angola, Mozambique and Namibia are all doing far better than Zimbabwe both in real and nominal terms of economic development. Their projected budgets for 2015 are much higher than that of Zimbabwe. Their economies are also growing at faster rate than that of Zimbabwe.

The notes below display these figures and rough trends.

Angola, with 27 years of regression during its civil war has a projected 2015 national budget of $70bn, 17 times bigger than that of Zimbabwe.

Mozambique, also with a sad history of a post independent civil war has a growing budget of $8.9bn, double that of Zimbabwe in 2015. Using the gross investment flows into the region, Mozambique tops with more than $2bn of investments in 2013/2014. Zimbabwe had less than $400million real new productive investments in 2014.

Zambia, Zimbabwe’s Siamese twin has out leaped her southern sister. Zambia’s budget for 2015 is pegged at $29.8bn, which is seven times bigger than that of Zimbabwe. Zambia like Zimbabwe is largely a mining economy even though it is diversifying its economy.

To really display what is happening to Zimbabwe, it is important to state that Zimbabwe had a higher budget in US dollar terms in 1980. Its economy was more diversified and its growth rate was far much higher than most of these countries in this cluster.

This story of Zimbabwe’s demise is not new. The key policy questions are-perhaps; why and is there light at the end of the tunnel?

The reasons for Zimbabwe’s economic collapse are many and invite serious debate as well. These factors jointly contributed (or still contribute) at different times and in different degrees.

The ruling party and its scholars argue that the reasons for Zimbabwe’s collapse are neo-colonial, with Western international institutions responsible through covert and overt regimes of restrictions/sanctions.

Others cite leadership failure at the national policy level as Zimbabwe’s poison. This is what many political scientists discuss as the failure of the post-colonial state to move beyond the struggle to development.

From an economic perspective, and being a researcher on Zimbabwe, I concur with those that argue that leadership failure is the significant factor in Zimbabwe’s fall.

Perhaps, the fitting next question is: is there any hope on Zimbabwe?

This question solicits different answers depending on who is responding. From an economic perspective, yes, there is lots of hope on Zimbabwe. Zimbabwe is fairly endowed with economic resources ranging from natural resources to brain power. Investors from Zimbabwe and abroad have enough information on economic opportunities that Zimbabwe present.

Zimbabwe shares its geological endowments with its neighbours like Coal with Botswana and Mozambique, Platinum with South Africa, Diamonds and Gold among many other mineral endowments.

Assuming everything constant, if Zimbabwe fully explores only one mineral -platinum and purifies it in Zimbabwe and sell finished products, her economy can easily hit the $1 trillion mark. Yes, $1trillion US dollars!

The leadership that Zimbabwe needs is to change from politics of isolation into that of engagement. Hospitality is not a limited function of tourism only, but international relations.

The noise, both ideological and political that Zimbabwe makes is an antithesis of its economic development endeavours.

The risks of remaining behind the region in terms of development are too many, including, at some stage becoming the regions mafia-market. The corruption and politicisation of business that the leadership along Samora Machel Avenue in Harare tolerates is Zimbabwe’s enemy number one.

The very basic values of care, respect, tolerance, honesty, fairness are the very same magnets of investment.

Growth and happiness is possible- if and only if Zimbabwe drifts from its narrow and person/party centred leadership schemes of Mnangagwa /Mujuru or Zanu PF/MDC onto national development plans which promote growth and development of the country. 

Party politics and personalities must be junior to the country’s development plan.

Sadly for Zimbabwe, the state was captured. This state capture in Zimbabwe is defined along party politics, tribe, gender and race. The more associated one is to those in power the better.

That country has no serious economic development plan like Angola or Mozambique have.

Like Zambia, the people- as workers, investors and consumers have to have free space to participate in the economy.

Now that Zimbabwe has a new cabinet, does that mean change for the better or more of the same in terms of economic development?

The hope is that things change for the better as the social cost of regression is sorry especially to vulnerable populations. Continued economic collapse may, soon, bring demise to the current political edifice. 

Time will tell! 

Stop the IMF in Zimbabwe!

The International Monetary Fund (IMF) has visited Zimbabwe several times in 2013 and 2014, advising government on how to manoeuvre out of its current economic mess. That institution must be saluted for that gesture, for many institutions would stand and watch when such a self-injuring government as Zimbabwe’s continues with its errors, deliberate or otherwise.

Unfortunately, the IMF-Zimbabwe Government alliance has been far from public scrutiny, leading to possible laxity. This paper unscrambles the IMF’s Staff Monitored Program (SMP) and presents a report on what that prescription is likely to cause to Zimbabwe- the economy and the people.

The argument is that the IMF’s policy agenda and methodology are both misplaced as they prime debt repayment to please the insatiable appetites’ of western capital at the expense of anguish and pain on ordinary Zimbabwean citizens. 

It further questions why the IMF is giving different pills to Zimbabwe compared with what it gave to Greece and USA during their economic crisis periods? One of the recommendations this paper advances is based on Hernando de Soto Polar’s idea of converting dead capital into productive capital, and grow the economy.

To make this discussion easy, it is best to start by painting the state of the Zimbabwean economy using a story. It is like a person suffering from many ailments at once, malaria, hunger, sore-eyes and a cough. The universal and clinically recommended way to manage this multiple set of ailments perhaps is to arrange the conditions by their nature of threat to life, and start with the life threatening ones. The other conditions would be stabilised and attended to once the patient moves from the critical care unit to a general ward.

 In the case above, feeding the person and giving them anti-malaria medication would most likely save their soul, and focusing on the cough would be tantamount to condemning that person to death.

That is the footprint of the IMF in Zimbabwe.

The IMF African Department Director, Antoinette Monsio Sayeh visited Zimbabwe from October 21-24 and met several people and institutions. After her mission, she issued a statement thus:

" .... I highlighted four issues that are key to helping fast-track the country’s policy reform agenda and to gathering support toward a strategy for clearing the outstanding arrears: balancing the primary fiscal budget; restoring confidence and stability in Zimbabwe’s financial sector; addressing the country’s debt challenge; and enhancing the business environment with a view to attracting investments.....”

Put simply, the main agenda is to “help” Zimbabwe clear its outstanding arrears using a methodology of structural adjustment, technically called primary fiscal budget management or just cutting government expenditure and collecting more revenue.

Both the IMF targets and methodology are largely heartless and misplaced as they treat the people of Zimbabwe as nerveless and or useless iron objects.

Here are the two main reasons the IMF's model is wrong.

a)      The recommendation to balance the primary fiscal budget by mainly cutting the government’s wage bill in order to stabilise and grow the economy will most likely yield the opposite, further sink the economy.

Economists at the IMF and within government would be so careless to miss this basic economic theory behind our reasoning. It is called the paradox of thrift. It states that the prescription of “saving to grow” works for individuals and not whole economies.

In Zimbabwe’s case, if the government cuts its wage bill by retrenching some workforce; that would have a likely effect of reducing the aggregate income whose knock-on effect is reduced aggregate demand.

When aggregate demand falls in an economy, other things being equal, that economy shrinks further. The spiral continues until it reaches the trough or lowest point at which that economy can’t sink any further.

Retrenchments will likely result in more social support pressure as the retrenched families join the social welfare list needing government help like the Basic Education Assistance Module (BEAM) among other social welfare interventions.  Ordinary citizens and the already fragile industry will struggle to pay rents, interests and buy basic commodities/inputs. This is the big risk of the IMF's prescription of balancing the primary fiscal budget.

The evidence of our analysis is there for all.

The move by government to generate more revenue through increased toll-fees, hiked duties and taxation as well as the introduction of pre-paid water meters received and continues to receive public outcry and litigation. That reaction ought to have informed the IMF of the unholiness of its template.

As a public relations stunt, the Government constantly sings the tune, “Zimbabweans are resilient” and the IMF swallows that line. 

We challenge both the policy actors in government and the IMF on this. Which one of you can last a month on $400?

This is the psychological trap that the Zimbabwean government uses to freeze and trick the IMF. 

Those people you see in Zimbabwe are as human as other beings in Greece, the USA or Nigeria. They deserve peace, love and happiness and not the patronising label of “resilience and peace” in hunger.

b)      The payment of arrears to international financiers is a good proposal assuming that fiscal space exists. However, the IMF very much knows that, in the short run, the government of Zimbabwe cannot pay for various reasons main of which is the government’s own record of pillaging. The auditor general’s subsequent audit reports reveal how this government constantly abuses its resources without concern.

So why should ordinary citizens re-pay, and keep on paying what the government keeps on abusing? It’s absurd! This scenario reveals four fools, and not in any order:  the citizens, the government, the private sector and the IMF.

By placing arrears payment ahead of growth, would it be remote that their unstated aim is to retrench government workers, save some money and use that money to pay the international financiers so that they sink Zimbabwe into bigger debt?

This displays the IMF’s duality and unfairness from a global perspective. The pills they are giving Zimbabwe are different to what they gave the US and or Greece when these countries had their credit bubbles in 2010.

This is why the IMF must be stopped!

The Zimbabwean economy is so informalised to an extent that its degree of favourable response to such policy prescriptions is very low. Less than 20% of its able workforce is employed in the formal sector, and does it make any economic sense to further contract that sector without further hurting the very tax base that is contributing to the much needed revenue?

Why are both the government and the IMF ignoring Zimbabwe’s 80% workforce in the informal sector? Zimbabwe has massive dead capital in the informal sector and in the Diaspora. That is Zimbabwe’s touchstone!

The second reason why the IMF needs to be stopped is its heartless proposal to remove bread from the mouths of hungry Zimbabwean children to bring extra red-wine to the noses of financiers in London and New York.

It is prudent at this point to acknowledge that indeed Zimbabwe owes lots of money, and the gist of this discussion in not to promote national decadence, but to challenge the IMF  to consider the ordinary people, and not punish them for the errors, deliberate or not, of the leadership in Zimbabwe.

Zimbabwean citizens and private sector institutions need tax relief and fresh capital.

If the IMF fails to come to the side of ordinary citizens in its economic modelling, then it has to know that both the IMF and the government of Zimbabwe will be complicit in blood sucking vulnerable citizens, and further compounding Zimbabwe to a short-medium term future of pain and sorrow.

The morality and legitimacy of the IMF in Zimbabwe is under constant threat.

In conclusion, it is important to repeat that the IMF and other international interventions are needed in Zimbabwe. The Zimbabwean economy is very vulnerable, its bureaucrat’s clueless and ordinary citizens almost reaching a breaking point. The best intervention for the IMF and the Ministry of Finance is to offer four complementary remedies, a) tax relief to households, b) targeted support and formalisation of the Diaspora and the small to medium sector, c) support substantial public works like railway, road and housing construction to anchor the SME growth, and d) deploy the African Development Bank as a fiscal agent to strictly stabilise Zimbabwe’s return to credit.

It is possible!

Itai Zimunya – works with the Open Society Initiative for Southern Africa and participates in the Institute for New Economic Thinking. 

Consequences of Zimbabwe’s narrow economic modelling

The dominant and most common thesis on the Zimbabwean economy is that it has crumbled as signified by a formal unemployment rate of over 80% and a biting liquidity crunch. In the same extreme, there is a statistic that the average beef consumption per capita is 4kgs per year. On the other hand, the continued life as usual situation in Zimbabwe suggests either the presence of other survival means (kiya-kiya) or a rare miracle where 80% of that country’s employable population survive, like birds, by the mercies of God.

This paper argues that debate on Zimbabwe’s economy is narrow and unreliable as it is based on one pillar of the whole economy. The description and definition of this economy is the point of departure.

Orthodox economic thought, on which Zimbabwe’s current fiscal and monetary policy is based gives over-emphasis on the formal economy.

Historically, the Zimbabwean economy has always been a dual one, with a strong and robust formal sector and an equally resilient informal but largely ignored informal economy. Before independence, the formal economy was an enclave of the upper class, whilst the informal sector was the unbanked and yet productive and mainly subsistence sector that supported the rural and ghetto sides of Zimbabwe.

The decade between 1998 and 2007 saw a huge exodus of Zimbabweans into the Diaspora including but not limited to South Africa, the United Kingdom, the USA, Australia and New Zealand. Unconfirmed estimates put this figure at 3million people, and that cannot be ignored.

Whilst indeed the formal economy is ailing and de-industrializing, the economic policy challenge for Zimbabwe is her inability to read the whole game. The monetary and fiscal policy statements of 2014 and the recent past seem to be focused solely on crying the beloved formal economy. And the question is this fixation on the formal economy? Is the formal economy holy?

The economic crisis in Zimbabwe is not mainly due to a collapsing formal sector, but the state’s inability to read the bigger picture and emerging trends. The consequences of that narrow view of the economy then become Zimbabwe’s own bottleneck, and not sanctions or any such foreign attack as politically repeated.

It is important to attempt to understand the reasons for the states obsession with the formal economy.

Firstly, it has to do with a post-colonial disease of viewing independence as “our time to eat”. It’s a narrow political-economic manifesto that supposes that leaders, especially those that participated or experienced the liberation war have the bigger rights to benefit from the proverbial milk and honey of any state. 

The sad trend across Africa was transfer legally or violently of the formal economic base from the former white class to the new black elite.

The rest is history.

The late Father Zimbabwe Joshua Nkomo better articulated the political economy of growth, that the role of the state was to bring-up the blackman without taking down the whiteman so that the entire nation grows.

The disease of enclavity discussed here was dominated by displacement or substitution from land to capital. The new political class minimised independence to a “time to eat” and not grow, hence, partly, the collapse of the formal sector.

This “time to eat” disease is more catastrophic to Africa than Boko-Haram and Ebola combined. Members of Parliament and government officials always reward themself with expensive cars, huge mansions, many wives, expensive jewellery and whisky at the expense of public jobs, education and health among other goods and services. They want to be addressed as “Chef” failure of which punishment comes.

This disease has to be expunged from the psych of an African bureaucrat, and instead grow competent officers who serve the people.

The second reason for the over emphasis of the formal economy is the traditional disdain of the informal economy by the global economic think-tanks, especially the Washington cousins, the World Bank, the International Monetary Fund and the International Finance Corporation.

The dominant and often wrong economic prescriptions from these institutions, especially on Africa are disastrous in that they fail to understand the African state and the role of the informal economy therein.

The failure by economists to highlight the role of the other economic bases is the antithesis of various national visions, which include economic growth and re-distribution/equity.  

The orthodox and dominant economic thought, for example, in the case of Zimbabwe that because 74% of government revenue is spent on salaries, the cure is to fire more government workers to rein in non-growth expenditure is, in fact, most likely to generate the opposite of its intension.

Firing people is not a growth strategy as it in fact shrinks aggregate demand which in turns suffocates aggregate income and puts more pressure on social welfare as, other things being equal, many children- especially girls will fall out of school.

Fiscal and monetary authorities in Zimbabwe urgently need to broaden their economic scope to include the Diaspora and the informal sector. These are so big and influential that leaving them in the periphery is a huge economic and political opportunity cost.

It is important to emphasise that this policy expansion is not a substitutive one which replaces the formal sector, though ailing, but a summation of the economy’s parts whose outcome is bigger than its parts. The development of linkages in the economy will likely breed more multiplier effects given the hunger for growth across these three bases.

The Diaspora includes Zimbabwe’s finest brains and craftspeople. It is remitting an estimated $2billion per year, both through formal and informal channels. This is part of Zimbabwe’s net employment. In this globalized day and age, employment must be factored as such irrespective of where it takes place. That is why Chinese firms bring their labour to work on their African projects. The trick is basically to beat unemployment in China.

The irony displayed by Zimbabwe’s political leadership across parties and factions is that, even those who cry the collapsing formal sector medicate, clothe, feed, educate and holiday abroad.

Economists estimate that the informal economy employs more than 2.5million people in Zimbabwe, floating on a $7billion base largely circulating out of the banking system. No right thinking economist ignores $7bn.

This paper argues that whilst the informal sector and the Diaspora bring their own challenges in terms of computing their worth and taxation, that cannot be sufficient to ignore them. The balance of economic forces has changed and the ability of both government and traditional industrialists to appreciate and ride on this will add momentum on growth. On the same note, it is important to highlight that the formal sector is not pure either. It has its fare-share of ills which this paper cannot adequately explore at the moment.

Developing economic thought using indicators like formal employment rate, Gross Domestic Product (GDP) and the stock exchange is good but not adequate for any developing, let alone a post independent African economy.

Taking beef eaten per capita/year in Zimbabwe as an example. The economic calculation basket of beef per capita in Zimbabwe only looks at cattle officially slaughtered at registered abattoirs in Zimbabwe. It lowly places the average beef eaten by a Zimbabwean per year as 4kgs. And yet it is common knowledge that in the village, growth points and even in some urban areas, lots of small scale butcheries slaughter cattle for sale out of the formal market.

Many families in the village rely on rock-chicken for their protein, Mopani worms and fish all which do not form part of the national product statistic. Self- produced food must, ordinarily be factored as part of Gross National Product (GNP).

Nigeria and India, big economies now teach us several lessons.

Like Zimbabwe, India and Nigeria are post- colonial states too. Their local produce from the informal sector forms part of their GDP calculations. Though problematic, that inclusion helps bring a more objective and representative indication of the size and state of the economy.

Secondly, Bangladesh rakes in billions of dollars from its exported labour. Zimbabwe trained people who are producing in other jurisdictions, and sustaining local demand of goods and services through remittances.

In terms of value in 2013, top recipients of remittance funds were India ($71bn), China ($60bn), the Philippines ($26bn), Mexico ($22bn), Nigeria ($21bn) and Egypt ($20bn).

The Government needs to facilitate the growth of the Diaspora. It is a growing global industry, and Zimbabwe is ready to benefit owing to its celebrated education system.

The diaspora needs quid-pro-quo tax breaks, discounts and special offers that depend on their level of remittance. Like Bangladesh and Nigeria, Zimbabwean embassies must track, engage, promote and protect its people across the world. Both demand and supply side interventions are necessary.

Zimbabwe has miles to run, especially regarding the “new passport” test. The passport office is counterproductive as it seems easier for a Carmel to pass through the needles eye than for a Zimbabwean to renew or get a new passport.  It is hell.

How then does the government expect fresh funds flow from the Diaspora when that sector is not respected and supported?

The fourth point is that the current estimate of a GDP of $17billion is unrepresentative and unreliable on the basis of the elimination of the two bases discussed above. Zimbabwe’s GDP  is easily above $20bn.

The catch is not in just celebrating the $20bn mark, but, like Nigeria and India , factor the robust informal sector which is real.

These countries have moved beyond the enclave, and sadly, Zimbabwe is still trapped in the old mode.

In a five star Nigerian hotel, one would have a choice of western or African cuisine. Yes, fresh water snails, egusi, pounded yam and dried-meat. It is big business and not “food for the poor”. 

The psyche along Samora Machel Avenue in Harare is that dried bean leaves (mfushwa wenyemba), black-jack (tsine) and millet (mhunga/inyauti) are old-fashioned and only eaten by sick and or poor people. 

The reverse is that it is this traditional or so-called poor-people’s menu that constitutes the frequent dishes of the elite on medication or diet.

The example above clearly displays that this economic discussion is much broader than economic theory, but brings in culture and politics as part of a set of thought leadership that needs to be renewed.

Fifthly, there is no motivation for any right thinking person to bank their money given the history of sequestration by the central bank. Even the political and business elite in Zimbabwe bank, clothe, medicate and holiday abroad.

 If the economy is to jump-start, as it surely needs to, then the “Buy Zimbabwe Campaign” needs a cultural push from the political elite.  They have to start eating, clothing, medicating and shopping in Zimbabwe.

The seemingly remote idea of a $100bn economy is achievable, assuming responsible leadership.

In conclusion, government’s primary policy priority must be to register and facilitate these three sectors without favouring or excluding the formal sector.The world has changed and continues to change. Zimbabwe needs the competence to manage change amid global economic change. Unemployment in Zimbabwe is far below 80% and Zimbabwe’s GDP is way beyond $11billion. Yes, the general environment for doing business in Zimbabwe is harsh. But that harshness is in fact the reason government needs to reframe its economic structure beyond the enclave, and grow that economy.

It is possible!

Itai Zimunya- a political-economist based in Zimbabwe. He writes in his personal capacity.