The just-ended three-day national strike ( Monday 13 January 2019- Wednesday 15 January) gave me an opportunity to read the government’s Transitional Stabilization Program (TSP) and try to understand where we are as a nation and whether there is light at the end of the tunnel for our political-economy.
I must state here that I’m often criticized by my Marxist schooled and labour-centered friends for being biased towards capital and “big-business.”
That is a bias I cannot deny- I am a capitalist, perhaps even an elitist.
Nevertheless I also strongly believe that the state is obligated to: 1) facilitate a socio-economic environment where citizens can live decently and with enough opportunity to aspire to become whatever they want to be in life and 2) to build strong institutions that guarantee the rule of law.
It’s with these two themes in mind that I decided to take time to understand whether or not the TSP and the consequent government interventions are going to do Zimbabwe any good in the long run.
Ironically, as it stands today, worker’s organisations such as the Zimbabwe Congress of Trade Unions (ZCTU) and even industrialists unions such as the Confederation of Zimbabwean Industries (CZI) are concurrently calling upon the executive to expeditiously intervene in the economy.
Business and labour are usually on opposite ends. It’s very rare to hear the two singing from the same songbook.
One the one hand the ZCTU (and affiliate bodies) are calling upon the government to remunerate workers in hard currency- United States Dollars in particular- while on the other hand the CZI has been lobbying the government to avail foreign currency so that industry can import raw materials needed for production.
The CZI has unequivocally stated that Zimbabwe’s businesses are left with less than a month’s supply of foreign-sourced raw materials and that the country could come to a complete standstill if hard currency is not availed urgently.
Interestingly, in the midst of this furore, the executive has insisted that the country is on the right track, and that the most recent government intervention (in the form of increasing the price of fuel) is the right move.
In this article, I will try to make sense of the current state of Zimbabwe’s political economy, and attempt to determine whether or not we are moving in the right direction as a country.
Bumpy Ride Ahead
On Christmas Eve 2018, President Emmerson Mnangagwa addressed the nation.
In his address, he informed that while the process of national renewal and economic recovery was started in 2018, citizens should brace for more difficulties lying ahead.
“There is so much more to be done and there will be further bumps along the road. I am aware that many will have a difficult Christmas. I encourage all of us to be patient, resilient and to work harder in collective unity as we create a better, democratic and prosperous Zimbabwe for all.” He stated.
While many misinterpreted this statement to mean that the president is arrogant, uncompassionate and even detached from the sufferings of ordinary citizens, I believe that the opposite is true.
I think the President is well aware of the difficulties currently faced by Zimbabweans, and as he rightly stated- there is no easy way out.The road to the promised land will be a bumpy one.
In fact it is not a secret that Zimbabwe needs to implement extensive political and economic reforms before the country can unlock significant funding from Bretton Woods institutions in the forms of the IMF and the World Bank.
In short, in order to unlock fresh funding, Zimbabwe is required to effect a comprehensive Structural Adjustment Programme similar to the Economic Structural Adjust Programme (E.S.A.P) that we implemented in the early 1990s.
For those who are not in the know, the World Bank backed E.S.A.P came at a time when Zimbabwe’s economy was deep in recession owing particularly to the severe 1991/1992 drought which deeply affected Zimbabwe’s agro-economy.
ESAP was proposed as a World Bank backed intervention which would liberalize Zimbabwe’s economy and put the country back on a growth trajectory.
Essentially E.S.A.P contained the following key deliverables : 1) the reduction of Government expenditure by retrenching 25 percent of the civil service, 2) removing government subsidies on essential products, 3) commercialising and privatising some state-owned companies and 4) introducing user-fees in the health and education sectors.
While it is widely agreed that E.S.A.P assisted in stabilizing the Zimbabwean macro-economy, it is also argued that E.S.A.P did not address unemployment and poverty.
If anything, unemployment worsened owing to retrenchments and privatization.
Arguably, the impact of ESAP fuelled labour strikes and food-riots that characterized the country in the mid-nineties, perhaps in the same way that the TSP is fueling the same today.
In fact, an article on E.S.A.P in the mid-nineties published in the Indiana University Journal of Sociology & Social Welfare stated the following:
“… It has been noted that the programs [E.S.A.Ps] generally lead to retrenchment, skyrocketing of prices of goods, rising inflation to record levels and steep devaluation of local currencies… These situations have lead (sic) to loss of power, instability and /or increased military repression.”
I believe that statement is true even today.
The T.S.P is Another E.S.A.P
Now, it’s important to note that Zimbabwe’s T.S.P has all the characteristics of the neo-liberal E.S.A.P.
I will highlight three key components of the T.S.P that expose its neo-liberal nature.
Firstly, the TSP speaks about restructuring the Civil Service- which should be read as mass-lay-offs.
In fact paragraph 374 of the TSP states that “the imperative for the Transitional Stabilisation Programme is to… reposition, re-dimension and pivot the Civil Service to become a more efficient and cost-effective vehicle to deliver national development results and outcomes”
Simply put, this means the government will effect mass-lay-offs.
Arguably, this is inspired by observations made by the International Monetary Fund (IMF) in recent years that “the public sector employment costs remain at an unsustainable level.”
Consequently it’s no coincidence that in January 2019 Zimbabwe’s government began the process of laying off just over 3,000 workers from its youth ministry.
The most recent retrenchments followed government’s 2018 initiatives to retire senior civil servants who are above the age of 65.
The reason for the “restructuring” is simply that the government has to cut expenditure in order to repay about $2 billion in arrears to creditors — this is a precondition of the IMF before we are able to access fresh support.
While labour unions and other civic bodies may disagree with the intent to implement mass-layoffs in the civil service, personally, I think it’s the way forward, because our civil service is bloated and largely unproductive, and therefore retrenchment of government workers is a noteworthy intervention.
Secondly, the T.S.P speaks to the matter of privatisation.
Paragraph 384 of the T.S.P says the following:
“Public Enterprises Reform 384. Review of the ownership and oversight model of the State Owned Enterprises sector is provided for in the short to medium term Reform Framework whose implementation is now underway”
Furthermore, Paragraph 387 of the T.S.P highlights the following deliverables:
“The privatisation of 11 State Owned Enterprises, 6 IDC Subsidiaries, and 17 ZMDC subsidiaries. • Liquidation of 2 State Owned Enterprises and 3 IDC Subsidiaries. • Merging of 11 entities. • Departmentalisation of 7 State Owned Enterprises into Line Ministries.”
Essentially, privatisation is a key component of structural adjustment, and it is therefore no wonder that the issue of privatisation is contained in the T.S.P.
However, my hope is that while government goes ahead with its privatisation push, state assets are disposed of transparently and at fair market prices. We do not want key state resources to be sold off for a pittance as we have observed recently in Zambia.
Again, privatisation is the right way to go as it will raise much needed revenue for government. In this light, the pandemonium we observed when Olivine announced its indefinite closure was uncalled for.
As it stands Olivine is already on the list of State Owned Entities that are to be privatised, and in that context, there is no need for government to continue pumping scarce foreign currency into a loss-making entity that is soon to be disposed of.
The closure of entities like Olivine is not Armageddon. In fact it is in line with the T.S.P.
Finally two recent pronouncements by the executive are telling clues that demonstrate Zimbabwe is in the midst of structural adjustment. The first was the executive’s pronouncement of the separation of FCA and RTGS bank accounts and the second was the executive’s pronouncement that fuel prices will increase.
While the T.S.P does not explicitly make mention of these interventions, our finance minister did tacitly indicate that our local currency has been devalued.
Responding to questions on the issue during a dialogue at Chatham House in London in October 2018, Prof Ncube said he would not argue against market forces, as he admitted that the bloated RTGS balances were being devalued on the parallel market despite being officially rated at par with the US$ value.
“On the currency front, I think the market is doing all the work for me, I don’t have to announce…it’s very clear that the economy is in essence self-dollarizing… If you look at the RTGS exchange rate and bond note exchange rate, the market has said these are not at par and I am not about to argue with the market” ” said Professor Mthuli Ncube.
The devaluation of the local currency, has not been welcomed by Zimbabwean workers, as it diminishes their buying power and eats into their savings while at the same time fueling inflation.
However from where I’m sitting, there is no other way. Indeed it is a painful intervention, but it is also a necessary intervention. In the middle to long term we will start seeing the results.
Let me conclude by using what happened in South Africa in the past as an example.
When Nelson Mandela became president of South Africa in 1994, the trade union and communist partners of the African National congress (ANC) in the forms of the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP) assumed that the right economic policy for the country was the pro-poor, socialist-centered Reconstruction and Development Programme (RDP).
While that policy was a noble initiative on paper, in flopped in practice.
It was noble, because it sought to address the main socio-economic challenges of black South Africans; particularly: housing, healthcare, electrification, land-reform and access to healthcare.
Nevertheless the RDP policy flopped, simply because the South African government didn’t have the finances or human resources to implement those initiatives at that time.
As a result by the time that the pro-capital economist in the form of Thabo Mbeki took office in 1999, the South African government had abandoned RDP for the neo-liberal and pro-capital, Growth Employment and Redistribution (GEAR) policy, which focused on removing exchange controls, privatisation, and the introduction of flexible labour (which should be read as the ability to fire or retrench easily).
The GEAR policy was a neo-liberal structural adjustment inspired policy, just like the T.S.P is in Zimbabwe today.
The GEAR policy brought positive economic growth to South Africa.Additionally, management of public finances improved drastically under GEAR.
While the policy was constantly criticized by the South African opposition and COSATU for being anti–poor and pro-capital, arguably, South Africa is what it is today because of Thabo Mbeki’s leadership and the GEAR policy.
Similarly, we Zimbabweans should give President Emmerson Mnangagwa, Finance Minister Mthuli Ncube and the T.S.P the opportunity to flourish.
Indeed it will be a bumpy ride, but we are in the right direction.
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