In its nearly two decades of crisis, Zimbabwe’s economy has been defined by struggle. The battle to keep the nation afloat has taken the first post-Mugabe Finance Minister Mthuli Ncube into unchartered waters. Last week he surprised the market with an adjustment in the country’s electronic transfer tax, up to five cents per transaction from two cents per every dollar transferred. The country erupted in anger.
Within four days, under intense pressure from the public, Ncube attempted to pacify the public outrage by exempting transfers of less than $10 from the tax among other corrective measures that has done little to douse the public anger. The latest crisis not only exposed the rot in the new Zimbabwe but the flaws stemming from its incomplete political architecture that threaten the economy with complete collapse.
The scars of the Zimbabwe’s economic crisis remain deep with almost no space for productive sector and huge government arrears. At 36.5 percent of GDP, Zimbabwe’s total debt stands at US$16.9 billion with US$7.4 billion of the debt held by foreigners and US$9.5 billion of domestic debt.
The debt was only US$275.8 million in 2012. So that’s around US$9.5 billion borrowed in just 6 years. Of course, even in post-Mugabe Zimbabwe, the government continues with the rhetoric that light will soon begin to emerge. Tourism is booming and according to government, record levels of joblessness are expected to wane as the economy recovers. Most Zimbabweans wonder, when will this happen?
The fact that the 2018 growth rate was recently revised from 4.5 percent to 6.5 percent was mostly anchored by favorable agriculture yields mainly through tobacco sales that reached record high of over 248 million kilograms. There is also anticipated 30 tons of gold deliver by end of 2018.
For most observers, the Zimbabwe’s economic crisis has primarily been a fiscal one. There are by now an impressive number of news accounts explaining how the deficits and public debt accrued by the ruling ZANU-PF government since 2013 when government debt was only US$275.8 million. But what caused the debt crisis, the panic buying of commodities in shops, and skyrocketing prices? The really are only two possible answers. It was either a matter of disastrous economic management or it originated from deeper flaws in the country’s political system.
Although the electronic transfer tax alluded to above is a contributing factor, the two options above are not inconsequential. For, if the crisis were simply due to economic mismanagement, a badly-crafted economic prescription, no matter how bitter the pill it must be swallowed if it is capable of putting the house in order. But if, as I am to submit, the economic crisis has its origin in pre-existing pathologies inside the political system over the last three decades, a true recovery will require much more than wise economic management. It will in fact require the remaking of Zimbabwe’s whole political and institutional system.
Initial choices
Zimbabwe has always been marked by big political personalities and so it is only fitting that the political arrangement reflects this history. Upon independence in 1980 there stood Robert Mugabe, a brilliant public speaker and political charmer, who went on to rule Zimbabwe for 38 years on ZANU-PF party ticket, a radical party openly opposed to mainstream western social democracy. Mugabe’s project was dominated by ideological rhetoric and political utopianism. His rule was marked by the elevation of supporters to center stage at the expense of political institutions.
The first component of this plan was that Mugabe promoted a program of imprudent economic expansion based on manipulation of the state and its resources without providing a stable tax basis capable of funding a policy of such largesse. The second component was the backing for a large and expensive, albeit not necessarily strong, state geared towards patronage politics. The state, rather than promoting collective national welfare, was meant to provide jobs and social benefits to selected individuals, mostly ZANU-PF party supporters.
Since Mugabe left the scene, the new President Emmerson Mnangagwa has largely kept the patronage system intact. His goal is to purse a pragmatic policy of gradual change and political moderation to bolster democracy and promote Zimbabwe’s chances for regaining lost relationships with western countries led by Britain and the United States.
In short, he is trying to create a state geared towards economic development. However, the national debt and the stringent conditions international creditors demand are hampering progress. Unfortunately, what has been the result is a loss start in the creation of solid institutional framework that can yield a strong government.
Patronage
Patronage, to be sure, has been a feature of Zimbabwe’s political system but, in the past, had mostly involved interpersonal relations between powerful individuals and their political friends. In the past 38 years, the public sector increased both in size and in its deep dependency on the well-connected. Most of government posts were filled with party appointees so that state became essentially subordinated to the party.
The situation is well exemplified by the case of numerous state owned companies suffering chronic structural deficits. When ZANU-PF came to power, far from considering the necessity of layoffs, privatizations, or any combination of both, it decided to keep most operations leftover from British colonialism through a system that amounted to huge state transfers of wealth. The government, moreover, stepped up the hiring of new employees whose earnings become a major factor in Zimbabwe’s increasing operational deficit.
Large-scale patronage, besides causing a large and ineffective state, is also responsible for widespread, and costly, corruption in Zimbabwe. Productivity has remained chronically low in the past two decades. Shortly after coming to power in November 2017, Mnangagwa was obliged to admit that the Zimbabwean public sector suffers from systematic corruption and identified cracking down on it as necessary for reducing the country’s public expenditure.
The results of a 2016 study by Transparency International Zimbabwe (TIZ), a global organization fighting against corruption, shows that corruption in Zimbabwe is quite pervasive and is an amazingly costly phenomena. TIZ stated that Zimbabwe was losing an estimated US$1 billion due to corruption annually.
During recent months, a few political figures have been brought to justice on charges of corruption and fraud, mostly related to the administration of state funds. However, the corruption has largely continued unabated mainly due to the politics of patronage. As such, l can safely state that both disastrous economic management and the malfunctioning of the country’s political system have much more to do with the current Zimbabwean crisis than other factors.
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