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. 