See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/314154884
Zimbabwe Post Independence Economic Policies: A Critical Review
Book · February 2017
CITATIONS
READS
2
75,287
2 authors:
Vusumuzi Sibanda
Ranganayi Makwata
National University of Science and Technology, Bulawayo
National University of Science and Technology, Bulawayo
9 PUBLICATIONS 5 CITATIONS
1 PUBLICATION 2 CITATIONS
SEE PROFILE
SEE PROFILE
Some of the authors of this publication are also working on these related projects:
The Impact of Multi-Currency System on the Viability of the Zimbabwean Hospitality System View project
Customer Relationship Management as a Customer Retention Tool View project
All content following this page was uploaded by Vusumuzi Sibanda on 22 December 2017.
The user has requested enhancement of the downloaded file.
! ! ! " ! # # " " $ % $& '()*+& , -. ()
/0 1 &) 2 - & 3 ) /4
!
!
!
""# $
% ! " # $ !% ! & $ ' ' ($ ' # % % ) % * %
' $ ' + " % & ' !# $,
( $ - . ! "- ( % . % % % % $ $ $ - - - -
// $$$ 0 1"1"#23." 4& )*5/ +)
678%99:::& %
2 ; ) -
* &
/- <0 & %3 -# $ /- <7=:>4& )*5/ +)
"3 " & 7=:>
Zimbabwe Post Independence Economic Policies: A Critical Review.
1. Vusumuzi Sibanda – Lecturer Graduate School of Business: NUST, Zimbabwe.
2. Ranganayi Makwata – Financial Analyst with Zfn Capital, Zimbabwe.
Abstract
In its 36 years of existence as an independent state since 1980, Zimbabwe has come up with
several economic blueprints aimed at promoting sustainable economic growth and poverty
alleviation. Early years of independence were marked by policies aimed at redressing
colonial era imbalances by assimilating previously marginalized people into the mainstream
economy. These people did not have the means and capacity to participate in the economic
programmes and government had to assist them through providing free education and health,
job creation and land resettlement. Later on the thrust was to wean off the citizens from too
much dependence on government for survival with the economy moving from being tightly
controlled to liberalisation. This conceptual paper seeks to evaluate the country’s post
independence economic policies and the impacts thereof. It will take note of success stories
from the different economic policies but will argue that in general they have not been very
successful because of poor implementation and excessive political expediency by national
leaders. Current economic problems cannot be solved by more blueprints but require policy
makers to change their paradigms towards prudent economic management and eradicate
social ills such as corruption while reengaging the world as opposed to narrowly focusing on
one side under the Look East Policy.
Key words: post independence, economic policies, economic liberalisation
Contents
1.0
Introduction and Background ..................................................................................................... 2
2.0
Economic Policies Since Independence ...................................................................................... 3
3.0
Review of economic policies ....................................................................................................... 4
3.1 Growth with Equity (GWE) 1981 ................................................................................................... 4
3.1.1 Growth with Equity Success Stories ....................................................................................... 5
3.1.2 Problems with Growth with Equity ........................................................................................ 6
3.2
Transitional National Development Plan (TNDP) (1982-90) ................................................... 7
3.3
The First Five Year National Development Plan (FFYNDP) 1986-1990.................................. 8
3.4
The Economic Structural Adjustment Programme (ESAP) (1991-1995) ............................... 11
3.4.1
3.5
Outcomes of ESAP ......................................................................................................... 12
Zimbabwe Programme for Economic and Social Transformation (ZIMPREST)..................... 14
3.5.1 ZIMPREST Outcomes ............................................................................................................ 17
3.6
Vision 2020 and Long Term Development Strategies ........................................................... 18
3.7
Zimbabwe Millennium Economic Recovery Programme (MERP) (2000-2001) .................... 19
3.8
The National Economic Revival Programme (NERP) ............................................................. 20
3.9
Macro- Economic Policy Framework (MEPF) (2005-2006) ................................................... 21
3.10
National Economic Development Priority Programme (NEDPP) (2006-2008) ..................... 22
3.11
Zimbabwe Economic Development Strategy (ZEDS) (2007-2011)........................................ 22
3.12
Short Term Emergency Recovery Programme (STERP) (2009) ............................................. 24
3.13 STERP II: The Three Year Macro-Economic Policy and Budget Framework for the years
(2010 – 2012) .................................................................................................................................... 25
3.13.1 Challenges to STERP ........................................................................................................... 26
3.14
Medium Term Plan (MTP) (2010-2015) ................................................................................ 28
3.15
Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET) ............... 29
3.15.1 Challenges to ZIMASSET ..................................................................................................... 32
4.0
4.1
4.2
Economic Performance since 1980 ........................................................................................... 34
Current Economic Situation .................................................................................................. 39
Notable policy announcements which upset the economy ................................................. 40
5.0
Recommendations .................................................................................................................... 42
6.0
Conclusion ................................................................................................................................ 45
References ............................................................................................................................................ 46
1
1.0 Introduction and Background
Since independence in 1980, policy makers in Zimbabwe have come up with quite impressive
economic policies some of which if pursued and implemented judiciously would have
resulted in notable prosperity for the country and its people. Sichone (2003) notes that soon
after independence, the country embarked on a programme of post-war reconstruction with
the support of some foreign donors. In general terms, he argues, the reconstruction was
successful as the economy was re-capitalised and reintegrated into the world economy. The
new Government faced the pressing challenge of reconstituting and realigning the inherited
national policy making structures in line with the new socio-politico-economic dispensation
that had set in. Inherited national policy making systems and processes needed to be
transformed from minority-focused to majority-focused institutions. The inherited economy
was also fraught with embedded inequalities in income and wealth distribution, with the
agricultural, education, industrial and banking sectors among the most visibly affected.
Against this background, the need to address inequalities and injustices wrought by
yesteryear policies underpinned policy making during the first decade. It also underlined the
state-centric nature of policy making in parastatal, agricultural, health, education, labour and
social welfare sectors. The new Government viewed itself first and foremost as the central
instrument through which yester-imbalances were redressed (Zhou & Zvoushe, 2012).
The government hosted the Zimbabwe Conference on Reconstruction and Development
(ZIMCORD) in Harare on 23-27 March 1981 and the conference sought financial assistance
from the international community for reconstruction of the country and to lay groundwork for
sustainable development in future. Subsequent to that conference the government embarked
on rebuilding and for the past 36 years it has been coming up with several economic reform
programmes. From 1980 to date, Zimbabwe’s economic performance has been mixed, the
instability has been influenced by policy lapses, adverse weather conditions that affected
agricultural output, high levels of foreign capital inflows at independence in 1980,
redistributive fiscal policies that focused on increased Government spending on health,
education etc. and other social welfare programmes within the framework of the economy.
The country recorded its strongest post-independence growth performance during the period
1980-90 with gross domestic product (GDP) growing by an average of around 5.5 percent
and a record low performance of -17.70 percent in 2008. The government has over the years
put in place different economic policies.
2
2.0 Economic Policies Since Independence
Table 1 below shows a timeline of some of the most notable programmes in date order.
Table 1: Economic policies timeline (1980-2018)
DATE
1-Feb-81
18-Jan-91
20-Feb-98
29-Mar-00
1-Aug-01
1-Feb-03
1-Nov-04
1-Apr-06
30-Sep-07
19-Mar-09
23-Dec-09
1-Jul-11
1-Oct-13
POLICY
Growth with Equity (GWE)
Transitional National Development Plan (TNDP)
First Five Year National Dev Plan (FFYNDP)
Economic Structural Development Programme (ESAP)
Zimbabwe Programme for Economic and Social Transformation (ZIMPREST)
Vision 2020 & Long Term Development Strategy
Millenium Economic Recovery Programme (MERP)
National Economic Revival Programme (NERP)
Macro Economic Policy Framework (MEPF)
National Economic Development Priority Programme (NEDPP)
Zimbabwe Economic Development Strategy (ZEDS)
Short Term Emergency Recovery programme (STERP I)
Short Term Emergency Recovery programme (STERP II)
Medium Term Plan (MTP)
Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET)
PERIOD
COVERED
1981
1982-1985
1985-1990
1991-1995
1996-2000
1997-2020
2001-2002
2003-2004
2005-2006
2006-2008
2007-2011
2009
2010-2012
2011-2015
2013-2018
According to Gibbon (1995: in Sichone, 2003), “Zimbabwe’s social and economic policies
can be grouped into four main phases in post-colonial era.”
“The first, from independence to 1982 was accompanied by an economic boom and
characterized by twin phenomena of the adoption of redistributive policies and a high
level of mutual suspicion between government and capital. A second phase, from 1982
to around 1986, contained two major economic recessions, a check on redistributive
policies and continuing cool relations between government and capital. The third,
dating from 1986 to 1990 involved the resumption of a degree of economic growth and
the downplaying of redistribution. The fourth, that of structural adjustment began in
1990 and has been marked by a very severe drought and economic contraction, an
implicit rejection of redistributivism and liberal economic policies.”
From 1995 many more phases were also observed and in particular, 1995-2000 was the
beginning of economic decline marked by economic shocks induced by the 1997 unplanned
payouts to Veterans of the Liberation War and the cost of engaging in the civil war in the
Democratic Republic of Congo (DRC). A sixth phase can be added and this covers 20002008 which was highlighted by the chaotic fast track land redistribution programme,
3
emergence of vibrant opposition politics which sent the ruling party into panic mode and the
unprecedented hyperinflation period which culminated into the discontinuation of the
Zimbabwe dollar. Between 2009 and 2012 the country recorded tremendous economic
growth of 5.4%, 9.6%, 10.6% and 4.4% in that order which was a big relief after a decline of
17.7% in 2008 and that coincided with the Inclusive Government which saw ZANU PF and
MDC formations working together. Unfortunately since 2013 to date when the Inclusive
government was replaced by a wholly ZANU PF government the country has been slowly
reversing those gains as highlighted by slow growth rates of 4.5%, 3.5% and 1.5% for 2013,
2014 and 2015 respectively, company closures, rising unemployment and rampant street
vending as people struggle to survive punctuated with the recent wave of demonstrations in
2016 as people vent their frustrations with the Government.
In 2016 the economy contracted by 0.3% according to the International Monetary Fund
(government in its 2016 Fiscal policy review announced a more optimistic 0.6% growth). The
forecast for 2017 is higher negative growth rate of 2.5%, a return to inflation of 4.6%
(inflation rate has been negative in the past few years).
3.0 Review of economic policies
3.1 Growth with Equity (GWE) 1981
According to Zhou and Masunungure (2006) the new government in 1980 inherited a dual
economy of white large-scale farms and a stagnant impoverished communal sector. The new
black government only had one option, to prioritize socio-economic policies and adopt stateled development strategies so as to address the colonial imbalances that were in existence.
Anything short of this could have amounted to the state reneging on its liberation promises.
To this end the black government adopted the Growth with Equity policy in 1981 as the first
post-independence economic policy statement. Growth with Equity sought to:
"Achieve a sustained high rate of economic growth and speedy development in order
to raise incomes and standards of living of all our people and expand productive
employment of rural peasants and urban workers, especially the former.”
This policy was meant to address social economic disparities inherited from the colonial era
and was used predominantly in 1982. It also formed the backbone of the 1982-85 Plan. The
government wanted to vest control of economic activities in the hands of majority black
4
people. It allowed politically marginal large-scale white farming, industry and mining to
continue their economic dominance. The policy mainly focused on redistribution of wealth,
expansion of rural infrastructure and redressing social and economic inequality including
land reform. The economy recovered significantly in the early years of independence
averaging 10 percent growth during 1980-82. This was mainly because the country had
inherited one of the most structurally developed economies and effective state systems in
Africa. At the time there were favourable domestic and external conditions, including the
lifting of economic sanctions, motivation of overall demand in the economy with
redistributive economic policies as well as the opening up of external markets.
The Growth with Equity policy was also characterized by land resettlement on a willing
buyer willing seller basis. The blacks did not have resources to purchase land and as such the
policy did not effectively address the land question. There were massive subsidies for
services such as education and health. The new government promoted socialism and partially
relied on international aid which as such was not sustainable. This also negatively affected
growth in the private sector as there was no promotion of foreign investment resulting in
inflation.
3.1.1 Growth with Equity Success Stories
According to Zhou and Masunungure (2006), the first decade of redistributive policies
witnessed marked improvements in access to health and education by the previously
marginalised black majority as well as marked improvement in resource allocation. Health
indicators such as life expectancy and infant mortality improved. The free for all basic
education policy saw a rapid growth in schools and enrolment, in both primary and secondary
schools by 1990.
Primary schooling was made tuition free, and this resulted in gross admission rates that
exceeded 100%. By the end of the first decade of independence, Zimbabwe had achieved
universal primary education for all (Shizha & Kariwo, 2011). Zhou and Masunungure (2006)
further note that the government’s expansionary income policies of the first decade of
independence also promoted security of employment as well as raising living standards
through the setting of minimum wages. The economy experienced very high growth rates of
10.7% and 9.7% in 1980 and 1981 respectively engineered by external factors on growth,
fiscal driven redistributive programmes and the return of access to external markets
5
(Mzumara, 2012). The Government as observed by Zhou and Zvoushe (2012), viewed itself
first and foremost as a benevolent father with a historical mandate to decide what it thought
was good for its people in the long term pursuit of the aspirations of the liberation struggle.
The new government was led by a political party that had waged the armed struggle that
yielded political independence.
In summary the positives from the growth with equity policy were mainly on the social front
where access to education, access to health and employment creation greatly improved from
1980 to 1990. This led to an improvement of the general social being of the black majority.
Therefore, it can be said that on the social front the policy was a significant success.
3.1.2 Problems with Growth with Equity
One explicit assumption of Growth-With-Equity was that the economy would grow at a fast
rate enough to generate sufficient revenue to fund national projects. This optimism was a
result of the boom that was experienced from 1980 to 1982 as due to excellent weather,
lifting of sanctions, easy access to foreign aid and a decrease in defence outlays. The
economy experienced an 11% growth in 1980 (Zhou & Masunungure, 2006).
Mzumara (2012) however, observes that during the period from 1980 to 1990 the growth in
social sectors was not matched with the growth in productive sectors, reduced demand of
Zimbabwean exports due to an overvalued currency, a decline in investment and capital
formation as well as severe shortages of foreign currency combined to bring in recession
towards the end of the decade.
The arguments above show that the main assumption, on which Growth-With-Equity was
based, was not well researched and somewhat too optimistic. The policies adopted were not
sustainable as they drained the fiscus. According to Zhou and Masunungure (2006), the
socio-economic development goals could only be achieved through a subsidy policy that
enabled parastatals to undertake and provide affordable services to the public. This removed
the motivation to perform as poorly performing parastatals could be bailed out from treasury
creating a government dependency culture in public enterprises.
The government also controlled the price of goods and services often setting them below the
market levels and in the process making it difficult for public enterprises to cover their
operating costs. This led to these public enterprises to be loss making entities all in the name
of focusing on social issues even if they were not economical viable. Barett (2005) observes
6
that by the late 1980s, the control regime was inhibiting the dynamism of the domestic
economy and generating structural problems that were systematically undermining its
economic and political sustainability. The rapid growth in civil service employment and
spending on social services, drought relief, and parastatals generated a chronic budget deficit,
a high tax regime, and a rapid increase in public debt.
In summary, the policies taken up by the government in 1980 were necessary so as to address
the imbalances but the way they were implemented was not sustainable. Socially the policies
were a success but economically they were not sustainable.
3.2
Transitional National Development Plan (TNDP) (1982-90)
This plan focused on achieving social justice and equity. It called for a greater role by the
state through creation of state enterprises (SEs) to implement government programmes,
worker participation and social cooperation. At the core of this plan was the desire to
accelerate economic growth through promotion of productive sectors.
Government had a leading role to provide services and redistribution of resources to redress
inherited inequities and imbalances and access to basic needs. Black people had limited
capacity to meet these needs themselves. Employment and business opportunities were
restricted, few people could develop the skills needed to prosper through own enterprise
hence the state felt compelled to actively assist in the allocation of resources. Major successes
of this era were on social services where primary education for instance was provided for free
while secondary schooling was heavily subsidised with many schools being constructed.
Table 2: Selected Economic Indicators during TNDP
Year
1980
1981
1982
1983
1984
1985
Real GDP
Inflation Budget
Money Supply External Debt
Current A/t
Growth Rate
rate (%) Deficit (% of Growth (%)
Service Ratio (%) Deficit as % of
(%)
GDP)
GDP
10.8
7.3
-9
21.5
9
-4.9
13.5
13.5
-7
13.1
10
-10.9
3.3
14.6
-9
13.6
16
-11.6
1.3
19.6
-10
11.7
25
-8.9
-2.2
16.3
-11
10.5
27
-1.8
10.5
9.2
-8
17.7
29
-1.9
Source: Central Statistical Office
During this period of the TNDP, economic growth rates remained subdued, falling short of
the target of 8%, largely due to; low investment levels in the productive sectors, world
7
recession and severe drought in the 1983 to 1984 agricultural seasons. The plan failed to
address issues like; equitable land redistribution, indigenisation and empowerment, product
beneficiation, fiscal restraint among other measures. The TNDP was largely a failure but to
its credit it created over 150 000 jobs and enhanced agricultural production of small scale
communal land farmers (Mapuva, 2015). Due to the failure of the TNDP the government
embarked on another policy to try and remedy the TNDP failures.
3.3
The First Five Year National Development Plan (FFYNDP) 1986-1990
The First Five Year National Development Plan (FFYNDP) was formulated after
comprehensive and detailed review of economic performance during the first five years of
independence. During the period 1980 to 1985, the economy registered an average growth
rate of around 5% compared to the target of 8% largely due to low levels of investment in the
productive sectors. Inflation remained high during the period, averaging 13%, coupled with
rising budget deficits. The overall domestic and external debt positions escalated
concomitantly with budget deficits.
It is against this background that Government unveiled the First Five Year National
Development Plan targeting an average GDP growth of 5.1% per annum during the life span
of the plan and it sought to achieve the following objectives:
x
Control and transformation of the economy as well as economic expansion;
x
Land reform and efficient utilisation of land;
x
Raising the standards of living of the entire population, in particular, the peasant
population;
x
Enlargement of employment opportunities and manpower development;
x
Development of science and technology;
x
Maintenance of a correct balance between the environment and development.
To achieve the above objectives, the following key policies were announced under NDP:
x
Establishment of new enterprises in strategic industries by the state;
x
State participation in existing strategic enterprises with the role of state gradually
increasing until majority or full ownership is attained by the state;
x
Joint ventures between state and private capital on terms which allow for eventual
ownership or control by state;
8
x
Establishment of cooperative ventures in industry, commerce, trade and agriculture as
well as participation of local authorities in the economy;
x
Workers education in management, technical skills and ideology in order to increase
their efficiency and ability to manage enterprises;
x
Encouragement and acceptance of private local investment and foreign investment on
terms consistent with social transformation;
x
Improvement of marketing facilities and the infrastructure in communal areas;
x
Irrigation schemes in rural areas were introduced ;
x
Prioritised the development of industries that were involved in production of
agricultural inputs;
x
Increased the number of state farms;
x
Government intensified education of communal farmers in modern agricultural
practice.
The government experienced another severe drought during the 1986/1987 agricultural
season that adversely reduced output for both rural and commercial farmers. Erratic
economic performance coupled with the channeling of substantial amounts of resources in
redressing social inequalities, which were characteristics of the Plan period, resulted in
limited resources being available for productive public investment.
Public investment expenditure as a proportion of GDP stagnated at less than 1% and was thus
largely recurrent, with salaries and wages, interest on debt and transfer payments accounting
for over 90% of total government expenditure. During the same period capital expenditure
only accounted for 5% of total government expenditure. The manufacturing sector was the
chief economic growth driver, followed by agriculture and the retail and hotel industry as
shown in Figure 1 below:
9
Figure 1: Sectoral Contribution to GDP during 1985-1990 era
During the preriod1986 to1990, the country’s budget deficit remained high against a
backdrop of substantial foreign financing. The economy was faced by internal and external
imbalances reflected in relatively high inflation, high unemployment levels (around 30%) and
high budget deficits. The first three economic policies that Zimbabwe embarked on the first
decade after independence are as summarised on the table below:
Table 3: Economic development for the first decade (1980 to 1990)
Plan
Orientation
Performance
Growth with Equity
-Social rhetoric combined
-High growth of 11% and
with conservative policy on 10% in 1980 and 1981
the ground
-Welfarism and limited
redistribution
Transitional National
Development Year
National Plan
-Economic growth of 8%
-Low inflation rates of
around 15%
-critical issues of land
redistribution were not
addressed
-growth rate target was not
achieved
First Five Year National
- Emphasis on economic
growth, employment
10
-economic decline of
Development Plan
creation and poverty
reduction
growth rate by about 3%
-subdued average
productive sector growth of
1.7%
Adapted from Kanyenze (2007)
In order to address the challenges of the first decade the government sought to stabilize the
economy in the second decade.
3.4
The Economic Structural Adjustment Programme (ESAP) (19911995)
In 1990, ten years after independence Government felt that the economy was not growing
adequate income and employment while population was increasing at a faster pace.
According to the ZIMPREST document, formal sector was creating only 18,000 jobs and this
was only10% of the required level. It was imperative for the Government to develop policies
aimed at encouraging and assisting people to use own initiatives and enterprise to meet their
aspirations. In January 18th 1991 the government launched the Economic Structural
Adjustment Programme (ESAP) which covered the 1991-1995 periods. The main theme of
the programme was to transform the economy from being heavily regulated to liberalisation.
ESAP’s objectives included the following:
x
Reducing deficit from 10% of GDP to 5% by 1994/5.
x
Reforming public enterprise to eliminate large budgetary burden caused by subsidies.
x
Civil service reform to reduce number of civil servants in noncritical areas. The plan
was to cut the wage bill while properly paying those retained workers.
x
Labour law reforms through amending the labour act to streamline hiring and firing,
facilitate quick retrenchments and to replace direct intervention in wage setting by
collective bargain.
x
Monetary and fiscal reforms- It was necessary to strengthen monetary management,
slow credit creation to reduce inflationary pressures, and liberalise the financial sector
to encourage savings and improve intermediation efficiency.
x
Trade and exchange market liberalization to create market based foreign exchange
systems and shift to a tariff based systems of protection. This was meant to encourage
exports and allow competition for local industries.
11
x
Liberalise investment and deregulate prices and agricultural marketing.
x
Implementation of a social dimension of adjustment programme to protect the poor
and vulnerable groups from the negative transitional effects.
3.4.1
Outcomes of ESAP
The programme had some success but was largely hampered by lack of compliance to
government policy by both ministries and SEs management. This was to be expected since
senior civil servants in Zimbabwe are not usually appointed on merit but through political
patronage. SEs continued to make losses which drained the fiscus while profitable SEs were
not paying dividends to government and were misusing the profits.
In an interview with Zfn published in the Banks and Banking Survey, former permanent
secretary in the Ministry of Finance during the ESAP era Elisha Mushayakarara had this to
say: “not everyone in government was supportive of ESAP as some harboured serious
suspicions against foreign institutions especially the IMF and the sceptics called it the
Economic Suffering of Africa People” (Makwata, 2013). He argued that ESAP despite
causing some pain to the people it helped to put the economy right on track.
“.. before ESAP shelves were empty but through reform measures shops restocked
again. The dual carriageway from Harare to Chitungwiza was constructed during
that time while bigger commuter vehicles were introduced after transport
liberalisation to compete with ZUPCO to ease urban transport problems.”
The suspicion on the IMF is still present within government and as recent as in September
2015, the then War Veterans Minister Chris Mutsvangwa hit out at “some of ministers in the
cabinet who still think the white man is superior” adding that the IMF wants to remove
President Robert Mugabe and replace him with opposition leader Morgan Tsvangirai (New
Zimbabwe, 2015). This was probably aimed at Finance Minister Patrick Chinamasa who has
been working hard to normalise relations with the IMF and other multilateral institutions in a
desperate bid to secure debt relief, new financial support and to improve the country’s
battered image in the West, the report inferred.
During ESAP commercialisation was successful on SEs like Dairy Marketing Board, Cotton
Marketing Board and Cold Storage Commission which went on to become prosperous
commercial entities before some like CSC and Cottco encountered problems later. On civil
service reform the ZIMPREST document indicates that 94% of target posts were abolished
12
and the wage bill was reduced from 16.5% GDP in 1990/1 to 10.4% in 1994/94. Removal of
barriers of entry resulted in more new merchant banks, discount houses and commercial
banks which were started by black Zimbabweans.
On trade and exchange market
liberalisation, ESAP resulted in the deregulation of exchange control regimes. For instance it
allowed individuals and companies to operate foreign currency accounts; it ushered in bureau
de change to handle currency exchange and also resulted in the unification of official and
interbank exchange rates. By 1995 all price and distribution controls had been removed while
transport deregulations ushered in more players to compete with ZUPCO. ESAP reforms also
allowed for remittance of profits and dividends by foreign investors.
In Makwata (2013) Mushayakarara identified two mistakes or omissions at implementation
which negatively affected the ESAP Programme. The first one was lack of full commitment
by some people in government suspicious of the IMF. These were the same people who
should have worked hard to make the programme a success but somehow their suspicions
‘sabotaged’ the reforms and acted as self-fulfilling prophecies of doom. The second mistake,
he added, was the failure by the work stream task force to bring on board tariffs to protect the
local manufacturing sector from import competition. The programme was of course also
affected by exogenous factors, in particular the devastating 1991/2 drought. By the end of
ESAP in 1995 the deficit had worsened to 13% of GDP and government funded this gap
through domestic borrowing in the process crowding out indigenous business people of
resources. Inflation also got worse and it eroded people’s purchasing power (ZIMPREST
document, 1998). The table below summarises some of the key performance indicators
during the ESAP period.
Table 4: Selected Economic Indicators during ESAP
Year
Real
End Period 90 – Day
Commercial
Budget
GDP
Inflation
NCD Rate Bank Lending Deficit (%
Growth
Rate (%)
(%)
rate (%)
of GDP)
Rate (%)
1991
5.0
30.2
22.5
14.6
-7.6
1992
-4.8
46.4
37.0
34.6
-8.9
1993
2.9
18.6
29.0
37.9
-5.4
1994
4.2
21.1
30.3
36.4
-9.7
1995
-0.2
25.8
31.0
35.1
-12.6
Source: Reserve Bank of Zimbabwe and Central Statistical Office
13
Broad
Money
Growth
(%)
20.4
22.1
43.8
33.8
30.0
External
Debt
Service
Ratio (%)
24.0
30.0
30.0
25.0
20.0
Current
A/C
deficit as
% of GDP
-5.3
-8.9
-2.1
-2.0
-5.0
The performance of the economy under ESAP was largely unimpressive such that significant
decline in real incomes were noted. Real GDP fell from about 4% in 1990 to about 1.4%
during the reform period well below the expected 5% growth rate and this was mainly due to:
x
Poor programme support: There was a delay in donor funds release such that funds
were diverted from old projects to new projects. Donor support started to be
negotiated eight months into the programme.
x
Initial conditions failure: ESAP was designed to shift resources from non-tradable
and protected import competing to tradable and unprotected import competing
sectors. There was no fiscal stabilization in the beginning.
x
Lack of consultation: Mumvuma et al. (2006) noted that the failure to consult with
stakeholders was a mistake since there was no awareness about the policy reforms
hence resulted in ignorance and lack of ownership on the part of many relevant
interest groups.
x
Exogenous factors: Poor policy advice from the World Bank and the global
economic recession during 1991/2 also led to the failure of ESAP for example cutting
capital spending while it’s the key enabler of growth. The 1992 drought also saw
resources being channeled to food shortages.
x
Lack of implementation of key reforms: During the ESAP era there was slow
progress in civil service reforms and privatisation. The civil service was downsized
without adequate compensation. Due to this reduction there was failure to sustain
macroeconomic stability due to government inability to substantially reduce money
supply, government expenditure, inflation levels etc.
Realising that the public was not satisfied with ESAP due to its failure to meet its objectives
the government then decided to focus on fiscal discipline on its part. It launched the ESAP
successor in the mould of Zimbabwe Programme for Economic and Social Transformation
(ZIMPREST).
3.5 Zimbabwe Programme for Economic and Social Transformation
(ZIMPREST)
ZIMPREST was expected to run from 1996 to 2000 but was only unveiled belatedly in 1998.
It was to continue the unfinished business of ESAP i.e. parastatal reforms, financial sector
reform, civil service reform etc. and aimed at overcoming the constraints to economic
growth, employment creation and poverty alleviation as well as facilitating public and private
14
savings and investment. President Mugabe in the foreword to the ZIMPREST document
described it as a second phase of the social and economic reform initiated by government in
1991. It was meant to "…provide a firm basis for sustainable growth, greater employment
and equitable distribution of incomes. Thus ZIMPREST sought:
“to prop up private sector role in production and distribution of goods and services
with government to act as enabler while private sector was to lead in growing the
economy and employment creation.”
The immediate objective of the plan was to mobilize savings and investment and use them to
generate growth, create employment, encourage entrepreneurial development and foster
economic empowerment in a way that guaranteed sustainable poverty alleviation. The key
targets of ZIMPREST were:
x
Grow the economy by 8-10% in non-drought years.
x
Urgent restoration of macroeconomic stability through low inflation and interest rates,
stable exchange rate.
x
Reduce deficit from 10% to 5% and inflation from 20% to single digit by 2000.
x
Promote the public and private savings and investment needed to attain growth.
x
Pursuing economic empowerment and poverty alleviation by generating opportunities
for employment and encouraging entrepreneurial initiatives.
x
Investing in human resources development
x
Providing safety nets for the disadvantaged.
The targets of ZIMPREST are as summarised on the table below:
Table 5: ZIMPREST targets
Economic Indicators
Annual Growth Rate
Employment Creation
Budget Deficit
Inflation Rate
Savings and Investment Levels
Export Growth
Target
6%
42 000 jobs per annum
Decrease from 10% to less than 5% of GDP
Decrease from 20% to single digit
23% of GDP
9% per annum
Source: Central Statistical Office
ZIMPREST was supposed to build on the moderate achievements of ESAP but this plan fared
poorly and the economy got worse. During the same period of 1996-2000 government
embarked on programmes which worked against the objectives of the envisaged reforms of
ZIMPREST. The Zimbabwean government in 1997 decided to provide once-off payments of
15
Z$50 000 dollar (then worth $1 315) and long-term pensions to 60,000 veterans of the
nation’s liberation war. Notwithstanding the noble intentions the fact is that this was not
budgeted for, and dramatically increased government expenditures, costs that could not be
met through increased income or reductions to other programmes (Wharton, 2014). At about
the same time the government chose to participate in what the BBC termed an ‘expensive’
civil war in the Democratic Republic of Congo to prop up the Laurent Kabila regime. Those
massive off budget expenditures undermined confidence in Zimbabwe’s fiscal policy. On
November 14, 1997, a day subsequently referred to as “Black Friday”, the Zimbabwe dollar
lost 71.5% of its value against the United States dollar while the stock market subsequently
crashed by 46% as investors scrambled out of the Zimbabwe dollar (Marawanyika, 2007).
Even the government controlled newspaper, The Herald attributed the Black Friday to ‘fiscal
imprudence’ adding that the “government shot itself on the foot by awarding unbudgeted
massive packages to war veterans.” Then, in the wake of political setbacks in 1998, the
government announced the seizure of white-owned farms even in violation of bilateral
investment promotion and protection agreement (BIPPA), which exacerbated the instability
(Madise, 2009). According to statistics by Kingdom Financial Holdings, foreign currency
reserves fell from $760-million in January 1997 to a then all-time low of $255-million by
November (Marawanyika, 2007). In response to worsening macro-economic fundamentals,
the government reintroduced regulations and controls that it had abandoned earlier in the
decade. The exchange rate was fixed, but inflation reached 70%, interest rates doubled to
80%, business activity slumped, unemployment increased and government’s unpopularity
increased (Robertson, 2009).The rejection of the draft constitution which had provisions
considered necessary to speed up land acquisition procedures in a referendum in February
2000 was Zanu (PF)’s first failure at the polls in 20 years (Robertson, 2009):
“With the parliamentary elections due within months and the possibility that the new
opposition party, the Movement for Democratic Change, might win the election the
party used State resources to start the widespread occupation of white-owned farms.
The police were instructed not to respond to calls for protection from the invaders as
they were engaged in a political demonstration, not in criminal activities.”
The fast track land reform resulted in massive displacement of white commercial farmers,
violence and general lawlessness which drew wide condemnation from other countries with
Western countries imposing sanctions on the country’s political leadership. From then on it
was a rollercoaster ride as the economy descended deeper into depression. Many economic
16
interventions were put in place to address the problems which came as a result of that. These
included rising inflation and interest rates, foreign currency shortages and growing national
debt. Nevertheless, some of the positive outcomes specifically attributable to ZIMPREST are
as summarised below.
3.5.1 ZIMPREST Outcomes
x
The highest growth rate was achieved in the first three years at about 7% in 1997 and
deteriorated in the following years.
x
Reduction in budget deficit from 12% in 1994 to 7% in 1997/8
x
Weak performance in the consequent years due to:
o a sharp depreciation of the Zimbabwean dollar in 1998 caused by low prices
of the country’s major minerals on the international market.
o a slowdown in global economic performance in 1998 which reduced demand
for exports
o a sporadic rainfall pattern during the 1997/98 season which reduced
agricultural output
o unstable macro-economic environment, characterized by high inflation rates,
high interest rates and weak currency which negatively affected performance
in most sectors of the economy especially the manufacturing sector.
x
GDP growth rates slumped during this reform period as shown in the graph below
Figure 2: Real GDP Growth 1991-1998
Source: World Bank Database
17
Policies under this period lacked local ownership. They were viewed as IMF and World Bank
imposed measures as access to balance of payment was on condition of compliance with
these measures (Zhou, 2009).They also carried high political and social costs for society and
political leadership. There was also absence of enabling legal and institutional frameworks
hence policy implementation under protest. Largely, ZIMPREST suffered from lack of
international financial support to fund programme implementation. It was also too ambitious,
encompassing a host of goals to be achieved: poverty reduction, land reform, employment
creation, institutional reforms, decentralization, and others, without clearly spelling out the
budgetary implications of each one of these policy objectives.
3.6
Vision 2020 and Long Term Development Strategies
Launched on 29th March 2000 this policy document covers 23 years from 1997-2020. Under
the vision 2020 programme, government sought economic revival which was to be
spearheaded by good governance and political stability, sustainable macro-economic growth,
regional and provincial management of human and natural resources. The government sought
to work towards the provision of adequate, affordable and accessible social services as well
as promoting culture, sport and family. It was to be the basis for any upcoming short and
medium term policy announcements and its specific targets are:
a) Doubling current GDP per capita in 23 years
b) stabilize inflation to single digit
c) achieve and maintain positive real interest rates
d) reduction of budget deficit to manageable levels
e) substantial decrease in unemployment rate
f) increase investment and national savings to at least 30%
To meet these targets, the following actions were to be pursued:
(i) Efficient public sector resources management in which government lived within its
means, reduce deficit, SEs reforms, enhance revenue generation.
(ii) Industrialisation – promoting value addition to local raw materials, further processing
of manufactured outputs.
(iii)Agriculture - target full commercialisation and expand output ahead of inflation.
18
3.7
Zimbabwe Millennium Economic Recovery Programme (MERP)
(2000-2001)
This was a continuation of the commitments and targets of ZIMPREST and was supposed to
run concurrently with the Millennium Budget announced in October 1999. This policy
framework covered 30 months from July 2000 up to December 2002 and its aim was to “fight
spiralling inflation" which was cited as a major cause of macroeconomic instability. The
prime objective was to rebuild mutual trust and confidence among citizens and also reducing
budget deficit to 3.8% of GDP through mobilisation of all stakeholders i.e. government,
private sector, labour, civil society to implement measures that would restore macroeconomic stability. It further aimed to restore vibrant economic growth by removing causes
of inflation, achieve sustainable investment capacities, stable real incomes and improve living
standards. It also sought to restore normal cooperative relations with the international
community. Some more specific objects of MERP were to consolidate fiscal adjustment
policies, accelerate and complete the Public Enterprise Reforms, stabilize prices at lower
levels, lower interest rates, stabilize the local currency and resolve the foreign currency crisis,
stimulate rate of growth and deepen the financial sector reforms, establishment and
implementation of accountability and monitoring institution.
The action plans for the Millennium Economic Recovery Programme (MERP) included:
x
Consolidating the fiscus –embarking on cash budget to avoid spending overruns,
reforming Public Enterprises to stem losses, restructure public debt and enhance
revenue collection capacity;
x
Monetary policy was aimed at reducing inflation, lowering interest rates and reducing
RBZ lending to government and financial institutions;
x
It also marked the beginning of concessional financing of major sectors of the
economy; manufacturing, agricultural and mining. Other measures included reducing
duty on inputs, input schemes to beneficiaries of the fast track land reform as well as
reducing duties and tariffs for the mining sector.
The MERP objectives were to be achieved under its principles of:
x
Government committing itself to use market forces in the allocation of resources and
pricing of goods and services with the possibility of limited government intervention
in some cases
19
x
Equitably sharing costs of adjustments among the social groups
x
Use of balanced and flexible strategies to resolve macro-economic imbalances
x
Direct market interventions would be of limited duration and confined to resolving the
market distortions. Market institutions would be developed to efficiently allocate
resources
x
Government and stakeholders to have the prime responsibility if implementing the
programme.
However, MERP failed to revive the economy mainly as a result of non-implementation of
recommended policies and loss of macroeconomic balance due to the size of the budget. It
was later succeeded by the National Economic Recovery Plan (NERP).
3.8
The National Economic Revival Programme (NERP)
This policy document was released in February 2003 and was meant to respond to ‘hostile’
external and domestic environment; ‘sanctions’ and “vibrant opposition politics’. Inflation
then had climbed to more than 200% and the country was facing unprecedented foreign
currency shortages. By the end of 2003, inflation had reached 600% and GDP declined by
7.4%.The economy was characterised by cash shortages, parallel market activities and
decline in capacity utilisation. In view of the foregoing the Government introduced NERP to
address these inherent economic challenges. NERP focused on macroeconomic stability;
reduce inflation and increase aggregate supply; improve foreign currency supply and reverse
de industrialization. It also focused intensely on land reforms; through giving input support to
farmers and announcing attractive producer prices. NERP was underpinned by a desire to
embark on sectoral led economic revival and enunciated sectoral policies with
recommendations to revive as summarised below:
Table 6: Sectoral Reforms
SECTORIAL POLICY
Agriculture
RECOMMENDATION
x
Secure land tenure through land reform
x
Producer pricing to ensure viability and stimulate
production
x
Encourage contract farming
x
Development programmes in dairy, livestock and
irrigation to boost dairy products ,national herd and
20
winter cropping respectively
Manufacturing
x
Increased value addition
x
Promote diversification of exports
x
Attract foreign investments
x
Promote technological linkages
x
Set up productivity centre to come up with
benchmarks and standard to enhance productivity
Mining
Tourism
x
Increased old production
x
Increased value addition
x
Setting up of Mining Industry Loan Fund
x
Amendment of Mining Fiscal Regime
x
Intensify marketing activities and broaden tourist
x
Boost public relations campaigns to improve country
image
x
Invest in tourism infrastructure
Since the prior broad based macroeconomic policies were not successful it was difficult for
the sectoral policies to be successful and there was no agricultural output reaped from the
land redistribution.
3.9
Macro- Economic Policy Framework (MEPF) (2005-2006)
In November 2004 the Zimbabwean government embarked on another policy called the
Macro-economic Policy Framework to cover the period 2005-2006. Again this document
aimed at reducing inflation and increase capacity utilisation with concessional funding
becoming even more available as the RBZ just printed currency for it. It also focused on
sectoral objectives crafted to take into account the realisation of Zimbabwe Millennium
Development Goals targeted at reducing poverty and improving education and health
services. During this period the policy succeeded in enhancing the provision of financial
support to agriculture and other key sectors though most of the objectives were not met
prompting the formulation of a new short term policy.
21
3.10 National Economic Development Priority Programme (NEDPP)
(2006-2008)
This was launched to restore economic stability through the implementation of quick –win
strategies during the last half of 2006. This came as a result of Public Private Sector
Partnership under the auspices of the National Economic Consultative Forum. Its architects
opined that Zimbabwe had to forget the sad memories of a myriad of other past failed
programmes as NEDPP was a panacea meant to reverse the severe effects of ten years of
recession within nine months (Chikukwa, 2013). The specific objectives of NEDPP were to
reduce inflation and stabilise the local currency, mobilisation and stabilization of foreign
currency, food security, grow output and productivity, generate foreign exchange, enhance
expenditure and revenue management, remove price distortions and effective policy
coordination and implementation, reduction of both internal and external debt to sustainable
levels maintaining infrastructure, improving delivery of public services and building business
confidence and lastly, restoration of a positive image of the country hence economic
empowerment (Macro-economic Convergence Report, 2006).
However, NEDPP died a
natural death as it was rolled out in place at a time when the Government was working on a
new five year development strategy. Thus before NEDPP could be implemented, the
government came up with yet another programme, the Zimbabwe Economic Development
Strategy (ZEDS) which was billed to run from 2007 to 2011.
3.11 Zimbabwe Economic Development Strategy (ZEDS) (2007-2011)
The Zimbabwe Economic Development Strategy (ZEDS) contained nothing new but a
repackaging of policies contained in the previous policy announcements. Its primary
objective was to achieve sustainable, balanced and robust economic growth and development
that was oriented towards poverty reduction. It came into effect when the country’s woes
were at their worst.
During the crisis era real GDP further declined significantly by an
average of 6.2% as shown on the graph below. By the end of NERP annual average inflation
had reached 365% up from 5.8% in 1999. However, in 2004 through the implementation of a
combination of policies contained in the National Budget of that year and Central Bank
monetary policies prices temporarily stabilized with inflation dropping from 622.8% in 2004
January to 251.5% by September 2004 (Government of Zimbabwe, 2005).
22
Figure 3: GDP Growth at 1990 Prices, 1996-2007
Source: Central Statistical Office
The third decade post independence was generally characterized by turmoil and uncertainty
(Cousins, 2003; Phimister, 2004; Raftopoulos, 2009; Kanyenze, et al., 2011). For the first
time since independence in 1980, the ruling party ZANU PF felt politically threatened in
elections at the local, parliamentary and presidential levels. This prompted it to adopt a
somewhat violent approach to fend off opposition. The government endorsed the fast track
land reform, a process that received mixed reviews within and outside the country with most
extreme reviews describing them as processes driven by political motives of expediency and
survival (Zhou & Zvoushe, 2012). A lot of questionable and controversial policies and
activities were bankrolled by the Government such as the unpopular Murambatswina
programme aimed at demolishing all unregistered residential settlements in urban areas. This
tense and emotional political climate produced regressive policies and the accompanying
restrictive legislation the nation has to date under the Public Order and Security Act (POSA)
and Access to Information and Protection of Privacy Act (AIPPA). This political mood was
also manifest in most major policy decisions and actions of the decade. On the economic
front, the country experienced an unparalleled hyperinflation year after year, with a rate of
7982 percent in September 2007(MDGs Report, 2009:3). There was also an acute shortage of
basic commodities which included maize meal, drugs, fuel, electricity and foreign currency.
Unfortunately at the end of September 2007, the government indefinitely postponed the
launch of ZEDS.
23
3.12 Short Term Emergency Recovery Programme (STERP) (2009)
This was a nine months programme from March to December 2009 focusing on political and
governance issues, social protection programmes, supply side reforms and macro-economic
reforms. This policy came after the formation of an Inclusive Government by ZANU PF and
MDC formations. Economic ministries were headed by MDC ministers and had the task to
reverse the ills of the hyperinflation era. It had the following specific objectives:
x
Political and governance issues: i.e. constitution and the constitution making process,
media and media reforms, legislation reforms intended at strengthening governance
and accountability, promoting governance and rule of law;
x
Gender equality: promoting equality and fairness;
x
Social protection programmes: i.e. food and humanitarian assistance, education,
health and strategically targeting vulnerable sectors;
x
Stabilisation: i.e. involve implementation of a growth oriented recovery programme,
restoring value of local currency, increase capacity utilisation in all sectors;
x
Labour Market and National Employment Policy: i.e. people centred, nurture the basis
of people driven development agenda;
x
Economic stabilization; revive industry capacity utilization from below 10% in 2008;
ensure availability of fuel, food and electricity.
STERP had significant positive benefits as summarised on the table below:
Table 7: Sectoral STERP Achievements
ECONOMIC SECTOR
ACHIEVEMENTS
Economic growth
x
inflation reduced due to the adoption of multicurrency
which helped ease inflationary pressures i.e. form 230
million percent in July 2008 to -7% by December 2009
x
price distortions in goods and foreign exchange markets
x
introduction of cash budget for Government to operate
were removed
within available resources restrained expenditure
overruns
Agriculture
x
Liberalisation measures led to stimulus and
empowerment for small scale farmers e.g. in the tobacco
24
sector
Manufacturing
x
Utilisation levels of over 70% were realised by October
2009
x
Food industry capacity utilisation increased to around
30% due to a backdrop of increased domestic demand
and stable macro-economic environment
Social Sector
x
Health and education sector benefited immensely from
donor funding arranged by cooperative partners
x
There was smooth administration of the schooling
activities though education fees increased and reduced
the ‘O’ and ‘A ‘level sitting
The short term nature of STERP meant that some programmes and projects would not be
fully implemented within the time frame of nine months and little support on donor funds to
implement the programmes, hence the launch of STERP II to consolidate gains from the
initial recovery efforts under STERP.
3.13 STERP II: The Three Year Macro-Economic Policy and Budget
Framework for the years (2010 – 2012)
This was launched on 23 December 2009 with a three year macroeconomic policy and budget
framework by the Ministry of Finance. After STERP successfully stabilised the macroeconomy, STERP II was to facilitate sustainable rapid growth and further development of the
economy. More broadly, STERPII sought to put a price tag on the ‘critical financial
investment needed to restore the economy to 1997 levels, emerging with a grand total of
US45 billion of which $20 to $30 billion of this amount was needed over the three years to
2012 (Chikukwa, 2013). According to Zimbabwe Government (2009c:22-382) the objectives
of STERP II were:
x
Sustaining macro-economic stabilisation and consolidating STERP;
x
Support for rapid growth and employment creation;
x
Ensuring food security;
x
Restoring basic services;
x
Encouraging public and private investment;
x
Promoting regional integration;
25
x
Restoring basic freedoms;
x
Restoring of international relations;
x
Turn around agricultural sector: this was to be done through land audit to solve the
problem of security tenure, prevent new farm disruptions, attain growth rates in
agriculture of up to 20%;
x
Increase capacity utilisation in manufacturing: from 10% to above 60%;
x
Improve the mining sector: through removal of surrender requirements, beneficiation
added value, exploration, new regulations, reform in pricing of minerals;
x
Rehabilitation of both urban and rural network: in the transport sector.
The impact of political will in fostering economic growth is well demonstrated in STERP
because its first 3 years were very successful as politicians worked together coherently to
operationalise it. After embracing STERP II, inflation dramatically fell to single digit levels
and stabilized at below 5% by the end of the year of 2010. Capacity utilisation in the
manufacturing sector increased from about 10% to 40% and GDP per capita increased from
US$403.1 in 2007 to USD$499 in 2010.There was improved macroeconomic stabilisation
and improved socio political system. Professor Tony Hawkins from the Graduate School of
Management at the University of Zimbabwe also weighed in arguing that STERPII was more
realistic than previous programmes that were based on the printing of money to drive the
economy. Unfortunately, this was short lived as politics started to interfere with economics
again as parties in the government tried to outshine each for political gain in the process
somewhat sabotaging each other. It was not helped by the fact that elections were beckoning
in 2013. Inter-party fights which had subsided between 2009 and 2011 emerged in 2012 and
became vicious and disruptive towards the 2013 polls. Although the economic sector
improved a bit, international donors unfortunately, shunned the policy hence the introduction
of the Medium Term Plan (MTP).
3.13.1 Challenges to STERP
In spite of the gains discussed above, STERP faced a number of challenges as discussed
hereunder. At the time of its implementation electricity generation by the power utility
Zimbabwe Electricity Supply Authority (ZESA) could not power the local industry whilst the
National Railways of Zimbabwe (NRZ) could not move inputs and goods. Local authorities
could not supply adequate treated water to industry. The coal miner, Hwange Colliery
Company (HCC) had no capacity to provide enough coal to power ZESA’s thermal power
26
stations or to the agricultural entities and heavy industries. Sable Chemical Industries and
Zimphos Limited could not supply fertilizer for the agricultural sector and SeedCo, Pannar
and other seed breeders had no capacity to meet the seed needs of the local farming sector.
The assumption made by policymakers, was that there existed international lines of credit
ready to finance the local productive sector if an arrangement is made (Financial Gazette,
2009). To the contrary, the global financial crisis had left many international banks struggling
to deal with toxic assets stemming from the sub-prime crisis which happed in 2008. The few
who had the financial capacity did not consider Zimbabwe a credible borrower given its huge
debt arrears with international funders.
The absence of an overarching developmental vision to anchor STERP was one of its major
limiting factors. The development strategy should have provided a guiding and allencompassing framework of where the country was going. Kadenge (2009) argues that
STERP was only a short-term economic revival document and it did not address the structural
development challenges inherent in the economy. STERP contained no specific measures to
deal with the structural distortions and rigidities arising out of the dual and enclave economic
structure. The demise of the formal sector coupled with the likely adverse impacts of the
global financial crisis and anti-inflation measures, implies the decent work deficits that
characterize the economy and entrenches poverty and its feminization will abound. More
importantly, STERP failed to provide stimuli for a new paradigm that is pro-poor and
inclusive, failed to promote the integrability of marginalized groups (women, youths, people
with disabilities and people living with HIV/AIDS) and sectors, especially the informal and
rural economy, and unleash a more employment-intensive pathway out of poverty (Kadenge,
2009).
Some of the major reasons that resulted in the failure by the government to achieve the goal
of STERP are: political disagreements or lack of progress in constitutional reform leading to
policy reversals within the inclusive government (African Development Bank, 2009).
Revenue or budget shortfalls had an immediate impact on expenditure, thus aggravating
social and humanitarian problems for the government. The inclusive government also
received inadequate support from the international community, and lack of visible
improvement in day to day conditions for most Zimbabweans, called into question the rigor
27
needed for effective change and reform. The government also did not make meaningful
progress on property rights and the rule of law, and the rehabilitation of physical
infrastructure and the related systems. Private sector confidence could not return. In short
STERP did not succeed in turning around the country, had the factors discussed above been
implemented it would have succeeded.
3.14 Medium Term Plan (MTP) (2010-2015)
This was launched in July 2011 by the Ministry of Economic Planning and Investment
Promotion with a view to guide all Government plans and programmes beyond short term
stabilization and build foreign exchange reserves sufficient to cover at least three months
imports by 2015. Its theme was restoration and transformation of capacities for sustainable
economic growth and development. Its objectives (Government of Zimbabwe, 2010) were
among other things; infrastructure development with emphasis on rehabilitation and
completion of outstanding projects, employment creation, human centered development,
entrepreneurship development, macroeconomic stability, ICT and science & technology
development, good governance, investment regulation, coordination and promotion, resource
utilization and poverty reduction, gender mainstreaming into economic activities all focusing
on promotion of programs that endure gender parity in access to education, health and other
social services.
MTP specific targets:
x
Average annual GDP growth rate of 7.1%;
x
Single-digit annual inflation;
x
Interest rates that promotes savings and investment;
x
Current Account Deficit of ≤ 5 percent of GDP by 2015;
x
Average annual jobs creation rate of 6 %;
x
Sustained Poverty Reduction in line with MDGs targets;
x
Foreign Exchange Reserves of at least 3 months import cover by 2015;
x
Double-digit savings and investment ratios of around 20 percent of GDP by 2015;
x
Budget deficit of less than 5 percent of GDP by 2015;
x
Reduce sovereign debt to at least 60 percent of GDP by 2015.
28
MTP required approximately $9.3 billion for full implementation which was a very big
resource constraint to the country. It lacked consistency and donor support on which the blue
print was underpinned hence it failed to meet its target between 2011 and 2012. This was
hastily abandoned when ZANU PF won the 2013 elections paving the way for the
ZIMASSET Programme.
3.15 Zimbabwe Agenda for Sustainable Socio-Economic Transformation
(ZIMASSET)
Following the end of the Government of National Unity (GNU), the Government launched
the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET).
According to Government of Zimbabwe (2013) this economic blue print was developed
through a consultative process involving political leadership in government, private sector
and other stakeholders. The ZIMASSET blue print was crafted whilst recognizing the
continued existence of the ‘illegal’ economic sanctions, subversive activities and internal
interferences from hostile countries. This therefore, called for the need to come up with
sanctions busting strategies, hence ZIMASSET’s focus being on the full exploitation and
value addition to the country’s own abundant human and natural resources (Government of
Zimbabwe, 2013). The policy was developed to guide national development for the next five
years up to 2018.The vision of ZIMASSET is ‘Towards an Empowered Society and a
Growing Economy’ a well thought and crafted statement whose dream is assumed to be
easily shared by any patriotic Zimbabwean.
ZIMASSET is built on four strategic clusters envisaged to enable the country to achieve
economic growth and reposition itself as one of the strongest economies in Africa. Based on
the President of Zimbabwe’s speech, there is hope for economic modification:
“In pursuit of a new trajectory of accelerated economic growth and wealth creation,
my Government has formulated a new plan known as the Zimbabwe Agenda for
Socio-Economic Transformation (ZIMASSET): October 2013-December 2018.
ZIMASSET was crafted to achieve sustainable development and social equity
anchored on indigenisation, empowerment and employment creation which will be
largely propelled by the judicious exploitation of the country’s abundant natural and
human resources.”
29
The document describes ZIMASSET as a Results Based Agenda built around four strategic
clusters namely: Food Security and Nutrition; Social Services and Poverty Eradication;
Infrastructure and Utilities; and Value Addition and Beneficiation. This will assist the
government to prioritise its programmes for implementation with a view of realising broad
results to address the socio economic challenges. With ZIMASSET the economy is expected
to grow by an average of 7.3% and continue a trajectory growth to 9.6% by 2018 as shown in
Figure 4 below.
The success of ZIMASSET depends on the stability of its assumptions which may change
either side. They need a lot of commitment and consistency on all activities to be transacted.
The assumptions are:
•
Improved liquidity and access to credit by key sectors of the economy such as
agriculture; - this is only possible if we increase exports and value addition to our
products;
•
Establishment of a Sovereign Wealth Fund; - no turn back is required in this case;
Figure 4: Projected GDP Growth Targets for ZIMASSET
Projected GDP Growth Targets:2013-2018
12
PERCENTAGE
10
8
6
4
2
0
2013
2014
2015
YEAR
2016
2017
2018
Source: Ministry Of Finance and Economic Development
•
Improved revenue collection from key sectors of the economy such as mining;
•
Increased investment in infrastructure such as energy and power development, roads,
rail, aviation, telecommunication, water and sanitation, through acceleration in the
30
implementation of Public Private Partnerships (PPPs) and other private sector driven
initiatives;
•
Increased Foreign Direct Investment (FDI) into Zimbabwe;
•
Establishment of Special Economic Zones;
•
Continued use of the multi-currency system;
•
Effective implementation of Value Addition policies and strategies
•
Improved electricity and water supply
ZIMASSET is a socialist policy where everyone in the country is considered to benefit from
the policy hence its broad based. It also acknowledges its broadness and highlights that it will
implement initiatives that can yield rapid results. It also takes into account the shrinking tax
base against recurrent expenditure, hence appropriate care will be taken to utilize the little in
the country. Abundance of minerals in the country has been identified and the mining sector
is aimed to grow and provide the much needed revenue. Other key drivers of the economy to
create employment have also been identified as: agricultural sector; infrastructural sectors
primarily focusing on power generation; transport; tourism; ICT and enhanced support for the
SMEs and cooperative sectors.
The implementation of the policy will rely on the following key success factors:
x
Strong collaborative partnerships among Government agencies, the private sector,
citizens and other stakeholders;
x
Total commitment and the strong desire to meet the people’s development
expectations;
x
Undertake human resource capacity development programmes to enhance the
acquisition of requisite Skills;
x
Continued use of the multi-currency regime to consolidate macroeconomic
stabilization;
x
Introduction of Special Economic Zones;
x
Creation of special funding vehicles such as, acceleration of the implementation of
PPPs;
x
The establishment of the Sovereign Wealth Fund;
x
Institutionalization of RBM across the public sector (civil service, parastatals, state
enterprises and local authorities);
31
x
Value addition and beneficiation in productive sectors like as mining, agriculture and
manufacturing
x
Rehabilitation, upgrading and development of key infrastructure and utilities
comprising power generation, roads, rail, aviation and water;
x
Deliberate implementation of supportive policies in key productive economic sectors
such as agriculture, mining, manufacturing and tourism in order to quickly grow the
economy.
The key success factors of the policy are not rigid and certain because it rests on the ability of
the government to set them. Actual facts and attributes of the economy must be used to draft
policies. This cluster approach was meant to enable government to prioritise its programmes
and projects for implementation given the resource constraints.
3.15.1 Challenges to ZIMASSET
ZIMASSET being the current socio economic development plan does not in any way provide
reference to Vision 2020 nor link its development aspirations to the country’s’ vision
(Matutu, 2014). During the inclusive government there were attempts to develop Vision
2040.There is no doubt that the country’s vision has been abandoned therefore, reducing the
country’s development to short term myopic plans divorced from the long term vision more
so considering that publicity has been more on the economic blue prints than its
implementation. A shared national vision can be a powerful force and rallying point for
uniting citizens. It is the contention of the analysis that ZIMASSETs’ capacity to turnaround
the economy is highly impaired due to its short sightedness and unclear link to the country’s
vision. The Government has since independence, reduced development to five year blocks
defined by various economic blue prints at different epochs explained above. Five years is
too short to transform even the smallest economy or community in the world.
Just like any other policy, ZIMASSET development plans will always be diluted by elections
which are carried every five years, wherein political survival and electoral victory becomes
the prime goal for most politicians. In the second and third year the momentum gathers for
preparations for the next elections (Matutu, 2014). The continuous election mood coupled
with development frameworks whose cycle is attached to the election cycle is inimical to
development in a country. ZIMASSET remains trapped in the development planning
shortcomings of the country, thus limiting its capacity to attain its defined goals.
32
ZIMASSET lands itself in a country with serious challenges on transparency, accountability
and corruption which are one of the country’s challenges. The prevalence of corruption in
Zimbabwe has increased over the last decade. According to the Transparency International
Corruption Perception Index (CPI), Zimbabwe’s score declined from 3.0 out of 10 in 2000 to
2.2 in 2011(Matutu, 2014). Over the same period, Zimbabwe’s CPI ranking has fallen from
65th out of 90 countries to 154th out of 183 countries. Similarly, the World Bank’s Control of
Corruption Index ranks Zimbabwe in the 5.2 percentile, down from 15.1 in 2000 (Matutu,
2014).While the CPI is a contested indicator due to the fact that it’s a perception based
indicator which is also value laden. However, what cannot be disputed in Zimbabwe is the
fact that corruption is at its worst levels in both the public and private sectors. Weak public
accountability systems sustained low civic engagements have added to governance challenges
facing the country. In addition, institutions for public service delivery are weak with serious
capacity challenges thus a weak engine for ZIMASSET. The government cannot deliver the
public goods which are the base for total economic and social development. The current
governance crisis prevailing in the country whose redress requires a time period which is
beyond the ZIMASSET implementation time frame, the capacity of the government to
deliver the ZIMASSET goals remains blurred. A new value system is required to address the
current governance crisis and this is a mammoth task which is beyond frameworks and
policies.
The performance of the public sector which is at its worst at the moment remains critical to
the turnaround of the country. The quality and performance of the public sector combined
with its effects and impact are pervasive to both the public and private sectors thus ultimately
determining the country socio -economic development (Matutu, 2014). The public sector
determines the country’s capacity to meet its goals with respect to poverty reduction,
economic growth and unemployment. The success of ZIMASSET is also determined by the
quality and performance of the public sector. The current efforts to institutionalize Result
Based Management (RBM) in the public sector is going to have little impact due to limited
resources to fully fund the public sector and more so the same efforts are not being duplicated
in the private sector. Efforts by the Government to institutionalize RBM and the corporate
governance framework shall only provide a framework for good governance and performance
management with little positive change during the life span of ZIMASSET. As argued above,
the implementation time frame for ZIMASSET despite its well-intended cause remains too
short to transform the economy due to complexity of the challenges bedeviling the country.
33
In order for ZIMASSET to succeed it would require resources and the major one is funding to
its development plan. According to Government of Zimbabwe (2013), the country requires
about USD 27 billion to fully operationalise ZIMASSET. The country is struggling to fund a
USD 4 billion budget whose bigger share is going towards recurrent expenditure. Zimbabwe
has been isolated from the international community over the past decade thus denying the
nation international financial support. While the rationale of sanctions upon Zimbabwe as
well as the qualification and conceptualization of these sanctions have remained a contested
terrain but what cannot be contested is the fact that the country has not been able to access
funding from international financial institutions due to these measures and sanctions.
ZIMASSET risk being reduced to a mere piece of paper waiting to be retired in the dust bins
of history due to challenges of funding its complete implementation. Kanyenze (2014) further
argues that the ZIMASSET blueprint would not succeed due to the fact that its position is
more of a party manifesto and not necessarily a consultative and all-inclusive framework.
From the above analysis, we can conclude that ZIMASSET remains far away from being a
reality in the lived realities of Zimbabwe due to key issues noted above which are related to
its successful implementation. The blue print is projected to have little positive impact on the
lives of Zimbabweans though it will record a significant economic growth whose dividends
shall remain marginal to the poor people of the country. ZIMASSET will, however, remain a
framework which shall guide various socioeconomic efforts by the government and non- state
actors who believe in it.
4.0 Economic Performance since 1980
The economic performance of Zimbabwe since independence is as summarised below.
34
Figure 4: Annual GDP Growth Rate in Zimbabwe (1980 - 2017)
Source: Zfn, Zimstats, Ministry of Finance
Figure 2 above shows that the country has experienced an almost fair share of ups and downs
from 1980 to 2016. It is also clear that 15 years between 1980 and 1995 have generally been
characterised by positive growth except for years which suffered from severe droughts as
marked on the graph. This period coincides with the Growth with Equity, Transitional
National Development Plan, and ESAP as shown in the time line in Figure 1. It can therefore
be argued that these early policies despite some evident shortcomings were moderately
successful in as far as they delivered positive economic growth rates. Using the same
analysis, it can be said that policies from ZIMPREST in 1996 to NEDPP which ran up to
2008 were dismal failures.
From 2000 to 2008 the Zimbabwe government took a number of decisions that resulted in
hyper inflation, the near total collapse of the economy, a massive humanitarian crisis with 7
million people on food aid and a third of the population migrating to other countries –
especially South Africa. This resulted in the intervention of the South African government
and eventually a GNU with the MDC following the hotly contested elections in 2008.
The GNU stabilized the economy and both GDP and revenues to the State rebounded
dramatically. This is shown in the following table:
35
Table 8: Economic Performance during GNU
Year
2008
2009
2010
2011
2012
2013
Revenue $b
0,28
0,98
1,6
2,8
3,8
4,3
GDP $b
1,28
3,92
6,40
11,20
15,20
17,2
Growth %
0
+306%
+163%
+175%
+136%
+113%
Source: ZimStats, 2014
The table above shows that revenue to the State grew by a factor of 14 over 5 years. In each
of these years a small budget surplus was generated and inflation fell to almost zero. Total
expenditure on employment costs was maintained at about 60 per cent of revenue.
In 2013 the country went through another election in which Zanu PF party assumed a two
thirds majority in Parliament and President Robert Mugabe was given another 5 year term.
This resulted in an immediate increase in State expenditure to $4,8 billion a year and
employment costs to nearly 80 per cent of total revenue. At the same time business
confidence declined and the stock market fell by one third, a billion dollars left the banks
followed by the failure of 9 commercial banks and the loss of a billion dollars in depositor’s
funds (Cross, 2016). In the following years, revenues to the State declined and this has
continued into 2016. The following table shows what has happened:
Table 9: Performance of Economy after the Collapse of GNU
Year
2013
2013
2014
2015
2016
Revenue $b
4,30
4,30
3,80
3,60
3,20
Expenditure $b
4,20
4,80
4,80
4,60
4,60
Deficit $million
+100
-500
-1,000
-1,000
-1,400
Percentage
+0,24%
-10,4%
-20,83%
-21,73%
-30,43%
Source: ZimStats, 2016
The impact of the fiscal changes in 2013 can be seen from the above table – the first year was
the budget under the GNU team and then the final outturn after the changes to staff costs. The
subsequent changes show an accumulative 37 per cent decline in revenues and GDP and the
fiscal deficit rising from 10 per cent in 2013 to 30 per cent in 2016. The cumulative deficit of
$2,5 billion between 2013 and 2015 was funded mainly by treasury bills which pushed
domestic debt to nearly $6 billion. This is on top of $11 billion in foreign debt under
discussion with the IMF and this continues to grow rapidly.
36
What should be clearly understood is that when the State issues a Treasury Bill, it is
exchanging real cash with a paper IOU with no intrinsic value other than the trust the people
have on the government of the day. This exercise therefore, withdrew from the local market
$2,5 billion in cash assets and replaced this with TBs or paper “money”. This means that
essentially the State was printing money.
STERP I and II were associated with positive and steadily improving gross domestic product
growth rates implying some success of some sort while three years into ZIMASSET have
been marked by rapidly deteriorating growth rates. In fact the Ministry of Finance (MoF) has
had to revise downwards growth rates for 2015 from 3.2% to 1.5% while ZIMASSET was
predicting at least 6% in the same year. The economy is expected to register at best 1.5%
growth in 2016 (MoF) with less optimistic forecasts below 1% to even negative growth as
government continues to introduce unfavourable policies. One of them was the
announcement to introduce bond notes which has caused serious panic withdrawal of cash
from the bank and was widely condemned by citizens (Nyavaya & Mtomba, 2016). During
the same time the RBZ directed exporters to remit 50% of their export proceeds to the central
bank (RBZ Directive, 2016) depriving the economy of those foreign currency earnings with
debilitating consequences. In June 2016 the Ministry of Industry and Commerce gazetted
Statutory Instrument 64 of 2016 which effectively banned importation of several products
with only few licensed entities allowed to import them. The ban was also condemned by
citizens, caused massive protests by cross border traders at Beitbridge Border Post and has
seen businesses in neighbouring countries urging their governments to retaliate (Daily News,
2016).
In addition to mopping up local cash through TB issuance, the RBZ also took and used up
foreign currency held by local banks in foreign nostro accounts. It took advantage of the fact
that though owned by individual banks, it still controlled and managed all foreign currency in
the country. As the nostro accounts continued to be depleted it became increasingly difficult
to make foreign payments and banks also could not order US dollars cash from foreign banks
resulting in a serious cash shortage.
Another monetary system at the central bank’s mercy is the real time gross settlement
(RTGS) account which contains funds in transit to and from local banks for the purpose of
the transfer of funds electronically. In 2015 this account handled $45 billion or $170 million a
37
day and the average delay on transfers was three days. Therefore, at any one point in time this
account held $500 million in cash – real money in transit to and from private bank accounts.
In the first six months of 2016 the State withdrew an undisclosed amount from this account.
Given the size of the fiscal deficit this must have involved at least $800 million. These
withdrawals are illegal and in violation of IMF rules and have crippled the transfer system.
Currently external payments are being held up for months and are being prioritized against a
list of 4 categories of imports. Shortages are emerging and many firms are under severe and
growing pressures. When it became apparent that they could no longer continue to draw
funds from this system, the State began to expropriate foreign earnings from exports. This
now involves 100 per cent of gold and diamond exports and 80 per cent of tobacco earnings
and 50 per cent of all other mineral exports – over 70 per cent of export earnings or $2 billion
a year. What they are doing is to retain the hard currency earnings in the Reserve Bank
accounts and then send an electronic credit for the same sum to the exporter’s private bank
accounts. This is in effect “virtual” money and is not convertible. The hard currency from
these export earnings is now being used by the Reserve Bank to fund essential payments
externally.
Overall this means that the liquid cash reserves of the banks are now virtually depleted and
banks are no longer able to pay out their depositors in cash. So called “plastic money” is the
main means of exchange but this does not meet the needs of the majority. This situation is
being exacerbated by the payment of civil service salaries in virtual currency and trying to get
the banks to convert these funds into hard currency through their ATM’s or from tellers.
In August it became more evident that this was not going to be possible and cash shortages
began to reach critical levels with salary delays becoming the order of the day. The “Bond
Note” proposal was intended to fill this gap and despite assurances about convertibility, no
such arrangements are in place, the line of credit from the Afrexim Bank has not been
concluded and a sizeable quantity (just under $80million) of these notes have been printed
and introduced into the economy triggering a series of legal battles.
Clearly the failures of several economic policies cannot be blamed on the policy documents
because all have been well structured and consistent on issues that needed to be addressed
since 1980. As shown in the section evaluating ESAP and ZIMPREST, the failures are
largely because of poor implementation and detours from the policies caused by the political
38
pressure which has been forcing national leadership into knee jerk reactions to perceived
threats to political power. Robertson (2009) argued that many of government’s policy choices
in the past years reflected anxiety about possible voter responses at the elections.
4.1
Current Economic Situation
The period 2009 to date saw the introduction of the multiple currency system and the
following economic changes occurred;
Table 10: Current Economic Situation
Sector
Situation
Economic growth
GDP
The economy grew at an average rate of 11%
x
Decelerated sharply from 10.6% in 2012 to 4.5% in 2013
x
estimated growth of 6% in 2015 backed by planned
and 3.1% in 2014.
investments in agriculture, mining, communications,
power generations etc did not materialize. Instead it was
1.5%.
Manufacturing
x
Declining industrial capacity estimated at 36.3% due to
underproduction and lack of competitiveness
Inflation
x
Relatively low due to the appreciation of the US dollar
against the South African Rand
Trade
Overvaluation of the South African Rand has caused loss in
external competitiveness making imports cheaper and locally
produced goods expensive hence there has been an increased
demand of imports and dwindling exports causing an
estimated current account deficit of around 25%
Unemployment
x
This has been on an increase due to the closure of
companies with at least 4610companies having closed
between 2011 and 2014 causing 55 443 people to lose
jobs (2015 Budget Statement)
x
At least 80% of the employment population is engaged in
informal employment.
External debt
The country is at high risk of debt distress with an
unsustainable external debt estimated at USD8.4 billion at the
39
end of 2014 though it has engaged in a debt resolution
strategy with African Development Bank
Mining
Has replaced the role of agriculture and became the leading
export sector due to high mineral prices of platinum, gold and
diamonds growing from an average of 10.2% of GDP in 2009
to 16.9% in 2011
Foreign Direct
This has declined due to the political situation and to a large
Investment
extent the Indigenization Act regulations which has killed
investor confidence in the country and caused capital flight
The table below also gives a summary of a few economic indicators since the dissolution of
the Government of National Unity (GNU) in 2013.
Table 10: Selected Macroeconomic Indicators
Macroeconomic indicator
2013 2014(e) 2015(p) 2016(p)
Real GDP growth
4.5
3.1
1.5
-0.3
Real GDP per capita growth
1.4
0
0.2
0.5
CPI Inflation
1.6
-0.1
0.6
1.5
Budget Balance %GDP
-2.4
-2.4
-1.3
-1.1
Current Account Balance % GDP
-25.4
-23.1
-17.8
-17.2
Source: Data from domestic authorities; estimates (e) and projections (p)
4.2
Notable policy announcements which upset the economy
In addition to war veteran gratuity payments, participation in DRC civil war and the fast track
land reforms, the 2007 price reduction directive and the indigenisation laws have been often
cited as having caused some damage to the economy. On the 27th June 2007 the government
ordered all companies to roll back their prices to the levels of June 18, a reduction of roughly
50% which was dubbed ‘the closing sale of the year’. This was done to control rampant
inflation but it resulted in acute shortages of basically everything as merchants who had lost
stock at ridiculously low prices were unable to restock. The government promised to seize the
assets of industries and businesses that evaded controls and several business people were
arrested for failing to heed the directive. This was largely viewed as bad advertisement to
investors who were considering investing in the country. During the same hyperinflation
period a number of companies had their foreign currencies raided from their accounts by the
central bank and were given worthless Zimbabwe dollars. Some of the affected companies
have not fully recovered from those losses even up to now.
40
The theme of privatising SOEs has been going on for too long and even after the collapse of
such businesses as ZISCO there has been little urgency to resuscitate them. When a $750
million deal where ESSAR was to acquire ZISCO was announced in 2011 it was regarded as
one giant step forward but five years after the announcement ZISCO remains closed amid
speculation the transaction could be off the table because the government dillydallied. This
failure to fully commercialise SOEs continues to drain the fiscus since these entities are
perennial loss makers who are relying on government funding for existence.
The Indigenisation Law has also caused jitters among investors especially the requirement
that 51% be ‘ceded’ to black Zimbabweans. Many deals have stalled after that announcement
as no investor is interested in putting money into an operation where 51% ownership can be
taken without proper sale arrangements. In a 2012 article in the Zimbabwe Independent South
African business people that had come for trade and investment mission expressed
apprehension over the country’s Indigenisation Act, saying it was inconsistent and open to
abuse since it gave the responsible minister too much discretion on important areas. In the
same report then acting chief executive officer of the Zimbabwe Stock Exchange Martin
Matanda attributed the poor stock market performance then to among other issues,
uncertainty over the Indigenisation Act further showing the negative impact of the policy on
investment.
In addition to these, events such as the recent (2015) one where government unilaterally
cancelled the license of mobile operator Telecel for reasons linked to its shareholding and
license fees have also been counterproductive. The cancellation was only set aside by the
High Court but already damage had been done as subscribers had moved to other network
operators fearing a blackout. Such events are not good for the economy as they send a
message that Zimbabwe is not friendly to business hence its low ease of doing business
rankings of 171 out of 185 according to the 2015 World Bank Report.
Another area that has been cited as hampering investment in the country is the stringent
labour laws especially the inflexibility in hiring and firing workers. While the recent Supreme
Court ruling was used to terminate several thousands in a painful fashion given the already
high unemployment rate, it actually found support from some economic agents because it
gave businesses flexibility. By hastily amending the law without considering employers’
41
input the government may have missed an opportunity to improve its ‘Ease of Doing
Business’ rankings.
Another problem the country has to deal with is corruption which is also turning away
investors. In an article in the Herald by Maodza (2012) President Mugabe revealed that he
was told by his then counterparty President of South Africa Thabo Mbeki that business
people in South Africa had been asked as much as $10million to facilitate meetings for them
with him by some cabinet ministers.
5.0 Recommendations
What needs to be done to address the current Zimbabwean economic situation?
Instead of blaming sanctions or external parties the government has to change the way it
manages the economy to more progressive methods. As Wharton (2014) argued Zimbabwe’s
sovereign policy decisions are the most powerful factors in the nation’s economic
performance. Below are some of the things that need to be done to address the current
difficult economic situation:
Land reform: Everyone probably including the evicted farmers acknowledges the
irreversibility of the land reforms but there is a need to expeditiously carry out land audit to
flush out multiple owners. The government can adopt the use-it-or-lose-it policy to encourage
utilisation of the land. Robertson (2009) argued that after land reform land in Zimbabwe now
has no market value and no collateral value, and the people to whom it has been allocated
have no ownership rights, no security of tenure and neither the means nor the incentive to
invest in production. This has to be addressed through giving qualifying farmers title to their
land so that they can use it as security to borrow from banks to fund farming operations. If
land is optimally utilised the impact on the economy will be huge as agriculture is the
backbone of this country.
Indigenisation Law: Investors are not disputing the indigenisation laws but they want more
clarity and consistency for them to plan their investment without concerns about losing them
to empowerment partners for anything other than arm’s length ownership sale. This has to be
addressed to assure owners of capital that their investment is safe.
Corruption: There is a lot of talk about zero tolerance to corruption but the government has
to do more than talking by actually stamping hard on offenders notwithstanding their
standing in society or politics. Merely stating that some ministers or senior government
42
officials have been found demanding bribes without prosecuting them is unhelpful. The
country has an anti-corruption commission but unfortunately it is probably being undermined
by those in power and tends to only prosecute less important people while high profile
offenders go scot-free. The Government should also lead by example and give the Zimbabwe
Anti-Corruption (ZACC) complete independence and autonomy to execute its mandate.
Government role in business: Government should stop interfering with private business and
actively protect private property rights. As noted in earlier sections of this paper, government
must play the role of an enabler to private businesses. It is the attack (perceived or real) on
property rights that has done most to bring private sector investment virtually to a stop
throughout the economy. Investors are prepared to invest even in the most unstable
environments with high security threats as long as their investment is not under threat.
Zimbabwe has fewer to no security threats but is perceived to be lacking on protecting private
property rights and hence attracting very low investment. The country wants investment
(foreign and local) to resuscitate the ailing economy and the government must create that
enabling environment.
Partnerships: Reengagement with the multilateral financial institutions like the IMF, World
bank and African Development Bank as well as every possible country as opposed to the
Look East policy which has so far failed to bring notable investment. This is good for
attracting investment but also could be used to access technical assistance. Lenders across the
world take a cue from these institutions to lend to sovereigns in emerging and frontier
markets. If these institutions are lending to a country it will be easier to get others to lend to
it. Finance minister Chinamasa has been actively reengaging these institutions and this should
continue.
Recurring deficits: The IMF is encouraging the country to reduce primary deficit and
achieve balance by 2016. This can be achieved by reducing public sector employment cost to
free up funds for capital spending to raise growth and social spending to protect the poor.
Right now the deficit is being funded by domestic borrowing through issuance of treasury
bills but this is unsustainable because the market’s capacity to absorb this paper is shrinking
daily due to tight liquidity in the economy.
Restoring Investor Confidence: Restoring confidence in the financial sector will enable it to
attract savings and foreign lines of credit which it can lend to productive sectors to boost
economic activity. This can be done through reducing non-performing loans in the market to
give the banks some capacity to lend more. Furthermore, investment climate may be
improved through putting in place business friendly policies such as tax exemptions on new
43
investment for a set period say 5 years. Also the country has to make it easier for business
seeking to establish operations in the country.
Foreign Debts: Make plans to clear arrears with multilateral institutions so that the country
becomes able to access grants and loans from these lenders.Zimbabwe’s debt situation
remains an albatross to medium-term fiscal and external sustainability. This has been making
Zimbabwe’s financial risk profile high and financiers would be unwilling to give loans to
Zimbabwean entities and the few who do so would be charging a risk premium. In order to
address this scenario a debt-resolution strategy is therefore critical to resolving external
payment arrears and re-engaging the international community to unlock international credit
lines. This would require a comprehensive arrears clearance framework underpinned by a
strong macro policy framework.
Infrastructural development and massive retooling: An urgent rehabilitation and
expansion of power stations and construction of road networks, and upgrades to water and
sewer infrastructure is needed to usher massive investment and economic growth. At the
moment the cost of doing being is very high as a result of the infrastructural development
which is lagging behind. For example, industry incurs huge costs to transport coal from say
Hwange to Harare to fire the factories as this is done by road as opposed to rail which is
cheaper but cannot be done using the later because the system is dilapidated. So if the policy
makers are to address this it would make Zimbabwe a favourable investment destination. A
combination of these policies would be able to address most of the current economic
problems.
Social contract: Engaging in social contract and implementation of agreed position would
help in containing some social and labour problems bedevilling the country. In view of the
trade-offs in policies (e.g. containment and reduction of the share of revenues taken up by
employment costs), there is need for Zimbabwe to negotiate and implement a Social
Contract. A Social Contract helps restore good faith (trust) amongst the social partners; make
them accountable to each other; help parties subordinate sectoral interests to national
interests; develop and share a common vision; and inculcate a smart-partnership win-win
mind-set (Kanyenze, 2014).
Other recommendations include:
•
A competent and politically independent judiciary, particularly in the area of
commercial law.
•
An autonomous Central Bank charged with the conduct of monetary policy.
44
•
Independent regulatory agencies charged with the supervision and prudential
oversight of key sectors, such as financial institutions, insurance companies, public
utilities, health.
•
Agencies that guard against anti-competitive practices in private industry, banking
and trade.
•
A parliament that has access to all the information needed to exercise oversight and
control over the executive branch and the resources necessary to do so effectively.
6.0 Conclusion
The Zimbabwean economy still remains fragile and most of its economic policies have failed
due to lack of proper implementation and resource constraints. Current recovery programmes
may not be sustainable without meaningful and deeper reforms being undertaken to sustain
GDP growth and other crucial indicators. There is also need for necessary institutional
framework for the success of Zimbabwean policies. Institutions of government must have
clearly defined responsibilities and competencies as well as the required human and financial
resources.The implementation of these suggestions among other things would improve the
economy and promote domestic and foreign investments. The success of this would require
cooperation and involvement of all stakeholders in the economy as some of the suggestions
would involve taking radical steps such as job cuts especially in the public sector in order to
create fiscal space for other things like infrastructural development. The current scenario
where recurrent expenditure takes up to 95 % of the budget is not sustainable and spells doom
for the future of Zimbabwe. Total commitment is also necessary especially from the business
and political leadership of the country in order for this to succeed.
45
References
African Development Bank (2004). Zimbabwean, African Economic Outlook.
African Development Bank, 2009. Zimbabwe Short-Term Strategy: Concept Note, Harare:
ADB.
Brett, T. (2005). Crisis States Programme From Corporatism To Liberalisation In Zimbabwe:
Economic Policy Regimes And Political Crisis 1980-1997, London: Development
Destiny Studies Institute.
BBC NEWS (2000). Mugabe’s costly Congo War. [Online] Available from:
http://news.bbc.co.uk/2/hi/africa/611898.stm[Accessed: 15 September 2015]
Chikukwa, J. W. (2013). Zimbabwe: The end of the first republic. Author-House, Uk Ltd.
Cousins, B. (2003). “The Zimbabwean Crisis in its Wider Context: The Politics of Land,
Democracy and Development in Southern Africa”, in Hammar, A, Raftopoulos, B
and S. Jansen (eds), Zimbabwe’s Unfinished Business: Rethinking Land, State and
Nation in the Context of Crisis, Harare: Weaver Press, 2003, pp: 263 – 316.
DAILY NEWS (2016). Zambia bosses call for retaliation to Zimbabwe exports. [Online]
Available from: https://www.dailynews.co.zw/articles/2016/07/19/zambia-challengeszim-imports-ban
Dixit, A. (1989). Intersectoral Capital reallocation under price uncertainty. Journal of
International Economics, 26, 309-325.
Hoogenveen, H., & Mumvuma, T. (2002). Manufacturing Export Performance,
Macroeconomic Adjustment and the Role of Networks. In J. W. Gunning & R. H.
Oostendorp, Industrial Chnage in Africa: Micro Evidence on Zimbabwean Firms
under Structural Adjustment. Basingstoke: Palgrave Macmillan.
Hoogenveen, H., & Mumvuma, T. (2002). Manufacturing Export Performance,
Macroeconomic Adjustment and the Role of Networks. In J. W. Gunning, & R. H.
Oostendorp, Industrial Chnage in Africa: Micro Evidence on Zimbabwean Firms
Under Structural Adjustment. Basingstoke: Palgrave Macmillan.
Jenkins, C. (1997). Economic Objectives, Public Sector Deficits and Macroeconomic
Stability in Zimbabwe. Oxford: The Centre for the Study of African Economies
(CSAE).
Kanyeze, G. (2014). The Zimbabwean Economy. Ledriz Crisis Coalition, Harare, Zimbabwe.
Kanyenze, G., Kondo, T., Chitambara P., and Martens J. (2011). (Eds), Beyond the Enclave:
Towards a Pro-Poor and Inclusive Development Strategy for Zimbabwe, Harare:
Weaver Press.
Macro-economic Convergence Report: 2006, Ministry of Finance, Harare, 2007.
Madise, K. M. (2009). An Appraisal of Zimbabwe’s economic performance: Issues,
problems and prospects.[Online] Available from:
http://marshalmadise.blogspot.com/2009/11/appraisal-of-zimbabwes-economic.html
Makina, D. (2009). Recovery of the Financial Sector and Building Financial Inclusiveness,
Working Paper 5, Comprehensive Economic Recovery in Zimbabwe Working Paper
Series, United Nations Development Programme.
Makwata, R. (2013). From bureaucrat to banker: Mushayakarara’s five decades in finance
and banking. Banks & Banking Survey 2013. Zimbabwe Independent.
Maodza, T. (2012). Corrupt Ministers face axe: President. Herald. [Online] Available from:
http://www.herald.co.zw/corrupt-ministers-face-axe-president
[Accessed:
20
September 2015]
46
Marawanyika, G. (2007). Zimbabwe marks 10 years since black Friday. Mail and Guardian
[Online] Available from: http://mg.co.za/article/2007-11-11-zim-marks-10-yearssince-black-friday[Accessed: 20 September 2015]
Mashakada, T. J. (2013). Macroeconomic Consequences of Fiscal Deficits in Developing
Countries: A comperative Study of Zimbabwe and Selected African Countries (19802008). University of Stelenbosch, Department of Economics. Capetown: University of
Stelenbosch.
Matutu, V. (2014). Zimbabwe Agenda For Sustainable Socio-Economic Transformation
(ZIMASSET 2013-2018) A Pipeline Dream Or Reality. A Reflective Analysis of The
Prospects of The Economic Blue Print. Research Journal of Public Policy, 1(1), pp.
1-10.
Mehlum, H. (2002). Zimbabwe: Investments credibility and dynamics following trade
liberalisation. Oslo: Frisch Centre, Department of Economics, University of Oslo.
Ministry of Finance (2011). The 2011 Mid Year Fiscal Policy Review: Riding the Storm:
Economics in Time of Challenges. Harare: Government of Zimbabwe.
Mumbengegwi, C., & Mabugu, R. (2002). Macroeconomic and Adjustment Policies in
Zimbabwe (1980-2000): an Introduction and Overview. In C. Mumbengwgwi,
Macroeconomic and Structural Adjustment Policies in Zinmbabwe (pp. 3-20).
Basingstoke: Palgrave.
Mumvuma, T., Mujajati, C., & Mufute, B. (2006). Understanding Economic Reforms: the
Case of Zimbabwe. In J. Mensah, Understanding Economic Reforms in Africa: A tale
of seven Nations (pp. 237-268). Basingstoke : Palgrave Macmillan.
Nyavaya, K., Mtomba,V. (2016). Cash crisis bond notes trigger panic withdrawals. The
Standard [Online] Available from: http://www.thestandard.co.zw/2016/05/11/cashcrisis-bond-notes-trigger-panic-withdrawals/[Accessed: 29July 2016]
Phimister, I. (2009). “South African Diplomacy and the Crisis in Zimbabwe: Liberation
Solidarity in the 21st Century”, In Raftopoulos, B. and Savage, T., Zimbabwe:
Injustice and Political Reconciliation, Harare: Institute for Justice and Reconciliation,
Pp: 271 – 291.
Raftopoulos, B., Hammar, A., and Jansen, A. (2003). (Eds), Zimbabwe’s Unfinished
Business: Rethinking Land, State and Nation in the Context of Crisis, Harare:
Weaver Press, pp: 263 – 316.
Reserve Bank of Zimbabwe Annual Reports, (1998; 2003; 2005).
Reserve Bank of Zimbabwe, Bank Licensing, Supervision & Surveillance Annual Reports.
Reserve Bank of Zimbabwe (2016). Exchange control directive RR:101/2016. RBZ. [Online]
Available from: http://www.rbz.co.zw/assets/directive-rr101.pdf
Robertson, J. (2009). Zimbabwe-An economy on the edge, since 1980 [Online] Available
from:http://www.economic.co.zw/index.php?option=com_content&view=article&id=
1185:zimbabwe--an-economy-on-the-edge-since-1980&catid=111:zimbabwe-history
&Itemid=557[Accessed: 15th September 2015]
Robinson, P. (2002). Macroeconomic Performance under the Economic Structural
Adjustment Program: an Essay on Iatrogenic Effects. In C. Mumbengegwi,
Macroeconomic and Structural Adjustment Policies in Zimbabwe (pp. 23-52).
Basingstoke: Palgrave.
Sydney, E., M. (2001). Monetary Policy Framework in Zimbabwe.
The Economist Intelligence Unit (1998), Zimbabwe 1998-1999.
UNDP. (2009). Comprehensive Economic Recovery in Zimbabwe: Restructuring Public
Enterprises and Rehabilitation of Infrastructure in Zimbabwe Working Paper Series
No. 8. Harare: UNDP.
47
Wharton, B. (2014). Remarks on US policy on post-election Zimbabwe. [Online] Available
from: http://harare.usembassy.gov/about-us/ambassador-bruce-wharton/speechesand-statements/remarks-on-u.s.-policy-in-post-election-zimbabwe [Accessed: 23rd
September 2015]
WORLD BANK. (2014). Doing Business 2015: Economy profile of Zimbabwe. 12th Ed.
[Online] Available from:
http://www.doingbusiness.org/data/exploreeconomies/zimbabwe/~/media/giawb/doing%20bu
siness/documents/profiles/country/ZWE.pdf [Accessed: 20 September 2015]
Zhou, G. (2006). From Interventionism to Market based Management Sytles: The Case of
Zimbabwe, ZAMBEZIA Volume XXVIII (ii) Harare: SAPSN, ZIMCODD and
AIDC.
Zhou, G. and Zvoushe, H. (2012). Public Policy Making in Zimbabwe: A Three Decade
Perspective. International Journal of Humanities and Social Science Vol. 2 No. 8
[Special Issue – April 2012] Pp. 212-222
Zimbabwe Democracy and Economic Recovery Act of 2001, 107th Congress, Senate and
House of Representatives of the United States of America Congress.
Zimbabwe Millennium Development Goals, (2009). Midterm Progress Report (2000-2007),
Harare UNDP/Government Publications.
Government of Zimbabwe Documents
(i) Government of Zimbabwe, (1980). Budget Statement, Harare, Print flow.
(ii) Government of Zimbabwe, (1981). Budget Statement, Harare, Print flow.
(iii)Government of Zimbabwe, (1981). Growth with Equity. An Economic Policy
Statement. Harare: Ministry of Finance, Economic Planning and Development.
(iv) Government of Zimbabwe, (1982). Transitional National Development Plan 1982-85,
Harare, Government Printers.
(v) Government of Zimbabwe, (1983). Budget Statement, Harare, Print flow.
(vi) Government of Zimbabwe, (1985). Budget Statement, Harare, Print flow.
(vii) Government of Zimbabwe, (1990). Budget Statement, Harare, Print flow.
(viii) Government of Zimbabwe, (1991). Budget Statement, Harare, Print flow.
(ix) Government of Zimbabwe, (1995). Budget Statement, Harare, Print flow.
(x) Government of Zimbabwe, Zimbabwe, (1996). Programme For Economic and Social
Transformation (ZIMPREST), 1996-2000, Harare Jongwe Printers.
(xi) Government of Zimbabwe, (1982). Transitional National Development Plan, Volume
1, 1982/83, Harare.
(xii) Government of Zimbabwe, (1986). First National Five Year Plan1986-1990,
Volume 1 Harare: Government Printers.
(xiii) Government of Zimbabwe, (1991). A Framework for Economic Reform (19911995), Government Printers, Harare.
(xiv) Government of Zimbabwe (1991). Zimbabwe A framework for Economic Reform
(1991-95) Government Printers.
(xv) Government of Zimbabwe, (1998). Budget Statement, Harare, Print flow.
(xvi) Government of Zimbabwe, (2000). Budget Statement, Harare, Print flow.
(xvii) Government of Zimbabwe, (2004). Budget Statement, Harare, Print flow.
(xviii) Government of Zimbabwe, (2005). Budget Statement, Harare, Print flow.
(xix) Government of Zimbabwe, (2005). Budget Statement, Harare, Print flow.
(xx) Government of Zimbabwe, (2008). Government Political Agreement, Harare,
Print flow.
(xxi) Government of Zimbabwe, (2008). Budget Statement, Harare, Print flow.
48
(xxii) Government of Zimbabwe, (2009). Budget Statement, Harare, Print flow.
(xxiii) Government of Zimbabwe (2009). Short Term Emergency Recovery Programme.
Government Printer.
(xxiv) Government of Zimbabwe, (2011). Medium Term Plan, 2011-2015, Harare, Print
flow.
(xxv) Government of Zimbabwe, (2011). Budget Statement, Harare, Print flow.
(xxvi) Government of Zimbabwe, (2012). Budget Statement, Harare, Print flow.
(xxvii) Government of Zimbabwe (2013). Zimbabwe Agenda for Sustainable SocioEconomic Transformation (ZIMASSET). Government Printer.
(xxviii) Government of Zimbabwe, (2013). Zimbabwe Agenda for Sustainable SocioEconomic Transformation October 2013-December 2018, Harare: Government
Printers.
49
View publication stats