Austerity measures: Is Zim drinking poisoned chalice?

By The NewsDay | Aug. 20, 2019 | 6 Min read

Guest column: Cliff Chiduku

On September 7, 2018, Mthuli Ncube was appointed as Zimbabwe’s Finance minister. Being a technocrat he is, his appointment brought a breath of fresh air. At least, Zanu PF was breaking with its past of recycling deadwood, especially when it comes to those presiding over the Treasury. Ncube’s message soon after he was sworn-in resonated well with most Zimbabweans. The former African Development Bank chief vowed to suspend the use of bond notes as he went all out to deal with the liquidity crisis. The currency question had become a contentious issue on the back of biting cash shortages and spiralling commodity prices in the last two years.

But the launch of the Transitional Stabilisation Programme (TSP) a month later, signalled the start of austerity measures which Ncube wants everyone to believe is the best remedy for the country’s ailing economy. The neo-liberal policy, which will run up to December 2020, acknowledges the need for reforms to stimulate production, exports, the rebuilding and transformation of the economy to an upper middle income status by 2030.

So, Zimbabwe sought to grow from a low-income country with a gross national income (GNI) per capita of $995 or less to an upper middle-income economy with a GNI per capita of between $3 896 and $12 055. However, in an upper middle class income country, wide gaps exist between the rich and poor. South Africa is a typical example of a country with an uneven distribution of wealth — where the rich are getting richer and the poor sinking deeper into poverty. Countries that fall into this category are China, Mauritius, Botswana and Brazil, among others.

In the 2019 national budget, Ncube announced a slew of measures anchored on reforms aimed at stimulating the economy after years of stagnation. There are parallels between the TSP and the tried but failed Economic Structural Adjustment Programme (Esap) of the 1990s. After pressure from international financial institutions (IFIs), in April 1989 the government adopted Esap as a prescriptive solution to economic crises. Just like Esap, the TSP is anchored on reducing government expenditure by streamlining the civil service, withdrawal of subsidies, privatising parastatals, taming inflation and reducing the budget deficit. With the STP, Ncube is trying to please IFIs, no wonder Zimbabwe has since 2016 been implementing the IMF staff-monitored programme. However, there are pitfalls to chasing capital. With Zimbabwe’s economy on a free-fall, questions are being asked if austerity measures, prescribed elsewhere, are the best model for the economic development for Zimbabwe. Are there no other pro-poor alternatives besides going the route that appears to be creating problems for us?

The problem with the TSP is that it is a cut-and-paste job. There is need to consult other local social partners such as labour and civil society in coming up with solutions to economic problems. Former World Bank country representative Tom Allen attributed Esap’s failure to lack of national ownership, saying “the Zimbabwe case demonstrates the importance of popular ownership and participation throughout the adjustment”. The TSP is essentially a foreign concept, with limited, if any, involvement of locals. One could then assume that the 2019 national budget was crafted in Washington and then delivered in Harare.

Soon after independence, Zimbabwe pursued a free primary school education and primary healthcare policy. This contributed to high literacy rate which the country boasts of today. But the withdrawal of government support as espoused in Esap culminated in the introduction of school fees and user fees at government hospitals. This has had disastrous repercussions on women and children, as it contributed to gender inequality as families were forced to prioritise educating the boy child at the expense of the girl child. Child mortality rate increased as expecting mothers couldn’t afford user fees. These cuts are normally concentrated on social services. Even now, it is social services that are bearing the brunt of austerity measures. In June, the government acquired an assortment of weapons — including AK47 assault and sniper rifles to quell looming street protests against misrule.

In line with the TSP, government has removed fuel and electricity subsidies and the results are manifesting in the skyrocketing prices of basic goods and services. The removal of subsidies is having a toll on production. Many companies are closing shop because they can’t sustain their operations using diesel or petrol generator power. Inflation is running away. Living standards, life expectancy and production are plummeting and so is repression. President Emmerson Mnangagwa’s regime is now resorting to unorthodox means to suppress dissent. The resultant increase in inequality, exclusion and disaffection with the government will deepen opposition to government. Imagine more than 20 civil society and political activists have been arrested and are facing treason and subversion of a constitutionally-elected government charges in the post-coup period. The Zimbabwe crisis is becoming more pronounced, with a mounting foreign debt, declining exports and urban strife due to increased food prices, rising cost of living and unemployment. If these crises are attributed to austerity measures, Zimbabwe will soon be another Venezuela or Greece. Now that the economy is on a free-fall and inflation rate has risen to world record, second only to Venezuela, this will surely trigger some brain drain. Salaries and savings are being wiped out. A few patriotic professionals who have been driving the economy are migrating in droves to foreign lands in search of greener pastures. In the process, Zimbabweans will be robbed of the value attributable to family structures, as parents leave their children in the hands of maids and guardians.

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Ncube, who is the chief architect of austerity measures as envisioned in his 2019 budget statement, said government will shed off a quintet of TelOne, NetOne, Telecel, Zimpost and POSB for a paltry US$350 million. This is a case of asset stripping. Most likely, these companies will be sold to acolytes, fronts and elites in a repeat of what happened in Russia in the 1990s; a period that gave rise to oligarchs who stripped the country of its gas and oil resources, leading to the emergence of overnight billionaires. The Russian ultra-rich, such as Chelsea owner Roman Abramovich, amassed wealth during the economic and social turmoil that followed the collapse of the Soviet Union and introduction of the market economy. There are pitfalls to this. Oligarchs are monopolistic by nature. Such arrangements usually invite headaches to governments and Billy Rautenbach’s GreenFuel is a case in point. The absence of competition in ethanol production has created a harmful monopoly that is preventing the cost of fuel from dropping after blending. Rautenbach is connected to top government officials, no wonder in November 1998 he was appointed chairperson and managing director of the DRC State-owned Geccamines in order for him to oversee the exploration of diamonds.

Greece has travelled this bumpy road before. In 2010, Athens imploded after Parliament approved draconian austerity measures aimed at unlocking €120 billion of emergency loans for the debt-stricken country to avoid insolvency. Greece is still feeling the pinch nine years later. A study by the Committee for the Abolition of Illegitimate Debt reveals that austerity measures imposed on Greece by IFIs had criminal consequences on its population. For the period between 2010 and 2016, “Greece was faced with a five times greater rate of annual all-cause mortality increase as compared with pre-austerity”, three times greater compared to countries in Western Europe.

Modern development thinking has evolved a long way from the theory that broad economic development is good for all — few today would argue that the “trickle down” theory works in practice. Pro-active approaches in addressing poverty may focus on one or more aspects of the phenomenon, depending on the context and theory of change brought by the intervening agency. All these aspects may be addressed at different levels, from social protection measures at policy and legislative level to micro-interventions.

There is need for Ncube to proceed with the austerity measures with caution because they are likely to invite trouble for Zimbabwe in the long run. It seems Ncube learnt nothing and forgot nothing from the Esap-era. The Greece story is a good example of how cruel austerity measures could be. Austerity measures will leave a large part of the Zimbabwe population in dire straits. Cuts in public expenditure, coupled with this year’s drought and Cyclone Idai after-effects, will leave many people either destitute or close to it. Pro-poor policies are the sure way to sustainable development. With the rate at which the economy is regressing, achieving an upper middle-class economy remains a pie in the sky.

Cliff Chiduku is a journalist. He writes in his personal capacity. He can be contacted at [email protected]