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The ‘turnaround’ people want

By Munyaradzi Mugowo
AROUND the country, people wish “things” could get better before long.
If fact, many expected a “turnaround” soon after Robert Mugabe’s abdication as president in November last year.

The word “turnaround” has become a buzzword in Zimbabwe, as “things” have been bad for decades, and its meaning has changed remarkably since Gideon Gono popularised it during his era as governor of the Reserve Bank of Zimbabwe (RBZ).
By “turnaround”, people don’t necessarily refer to economic recovery from negative growth as Gono implied around 2004-2005, for the trend in national output has remained positive since the end of hyperinflation, though it has dropped close to zero in the last three years.
Almost everyone is anxious to see an end to the cash crisis, reduction in joblessness and poverty, stabilisation of prices, reversal in company closures, improvement in infrastructure services, resuscitation of social amenities and general improvement in the quality of life.
A government which fails to meet these minimum expectations — balancing between development objectives and social needs —has failed to execute its mandate and is even liable to impeachment.
Even if the economy has had a denuded capacity for self-financing over the years, it doesn’t mean that the role of government should shift from serving people through the provision of public goods, from social services, infrastructure to regulation.
The general Zimbabwean citizenry still expects government to raise enough money to fund a “turnaround” that completely reverses Mugabe’s irrational economic and social policies in the public interest.
One of Mugabe’s worst follies was to turn his government into a self-serving polity which operated an inverted social protection system that took care of senior civil servants and neglected millions of impoverished people with poor livelihoods and limited access, if any, to descent housing, clean water, sanitation services, education and health care.
His last years were an epic disaster for the country, as everything came crashing down from the social sector, the private sector to institutions.
The period stands out in sharp contrast to the impressive social successes of his early years, notably the first decade of independence when his government prioritised spending on health care, education, housing, transport and communications.
That’s how Zimbabwe ended up with a bloated public sector — through an expansion in institutions providing public goods and through public service employment.
Within a decade, he had overturned the racialised social and income inequalities of colonialism. So impressive was the “turnaround” of the time that it drew the attention of many, some of whom believed Zimbabwe was naturally assured to be the first middle-income country in Africa.
When political events finally called time on his reign, Mugabe had razed down not only the social sector and large middle-class that he had built earlier on, but also the economy’s diversified industrial base that he had inherited from the Rhodesian ruler Ian Smith’s  government.
It all happened in the last two decades of his reign, marking 20 years of ruinous policies.
State madness started with unbudgeted gratuities to war veterans in 1997; continued the following year through a foolish intervention in the Democratic Republic of Congo war and was sustained by a series of sycophantic and psychotic polices, including the chaotic land reform programme of 1999-2002; State-supported international isolation from 2000-2017; excessive money printing from 2004-2008; the disastrous command agriculture which left government in a US$2 billion short-term debt in 2016 and the notorious abuse of the RBZ credit facility through unfunded real time gross settlement payments in 2016-2017.
Today, the economy is a skeletal remnant of what it was in the 1990s. It is characterised by high economic informality (about 60 percent, according to a 2016 World Bank report), which destroyed the middle-class and formal employment.
What remains of the formal economy — mining and services — is too enclaved to buttress struggling sectors and too small to support the large and extravagant public sector that Mugabe created.
Manufacturing and agriculture, which drove performance in the 1990s when the economy had a balanced structure resilient to external shocks, contracted considerably and are now in need of massive investment both to save the remaining firms and revive fallen ones.
Manufacturing has had the highest number of corporate bankruptcies and job losses during and after hyperinflation, while agriculture is still to return to pre-land reform levels of output and exports.
Massive job losses recorded in these sectors and the collapse of the agriculture market, which sustained the rural economy, have jointly driven poverty to its highest level since independence.  Since rolling back its social protection budget under the 1990s Economic Structural Adjustment Programme, Mugabe’s government never again took strategic action to enhance social protection or reduce poverty. A poverty reduction strategy released last year is still at a proposal stage.
The irony is that as his government cut social spending on the poor to the bone in response to growing budget constraints, it maintained outrageous benefits for its clan of top officials.
Although South Africa has the world’s highest Gini-coefficient used to measure poverty, it also runs the world’s largest social protection system through social grants, unemployment benefits and pro-poor public social amenities.
Contrary to the belief that social protection spending is a cost to be controlled, it has been proved that spending on building the livelihoods of the poor actually plays a bootstrapping role in the economy, boosting household consumption and buttressing aggregate domestic demand.
Through its non-contributory social security schemes, South Africa has managed to bolster consumption and sustain growth at a minimal level of inclusivity.
In situations of extreme poverty and high informal activity and low formal employment like Zimbabwe’s, private consumption is directly affected as spending is restricted to nondiscretionary items.
Industries specialising in non-discretionary goods and services — non-food manufacturing, construction, tourism, non-retail and non-telecoms services, arts, entertainment and sports — have experienced stunted growth due to depressed consumption and aggregate domestic demand.
Since consumption is a key component of gross domestic product, a downward movement in the variable will definitely have an adverse effect on economic performance.
In more developed countries, the key driver of the kind of economic growth termed “sustainable” is consumption, which is invariably buttressed by the middle-class.
After experiencing a protracted slowdown in economic growth in the aftermaths of the global financial and economic crisis, China has dragged itself head and tail to rebalance its economy towards consumption to reduce export and investment dependence as these tend to fluctuate in bad times.
Zimbabwe needs a rebalancing which is slightly different.
The journey towards a balanced, sustainable and inclusive growth in the country will only begin the day Government decides to rebalance the economy away from the informal economy and reduce its high dependence on narrow range of mineral and agricultural commodity exports, towards more sustainable sectors.
In addition to rebuilding the formal economy and the middle class with highest propensity to spend, government will also need to create a new public finance regime leaves workers with more income to spend; allocates enough resources to infrastructure and social services and redistributes income towards poor and vulnerable households to boost consumption demand. But given persistent solvency and financing challenges bedeviling the government and the private sector, it may be difficult to jump to structural rebalancing when the economy is still to be stabilised.
Government’s dilemma is that economic stabilisation — controlling inflation, eliminating trade and fiscal deficits, curbing further growth in public debt and ending cash crisis — will not succeed until structural imbalances are addressed.
In the next article, I will look at the four main options of achieving the “turnaround” people expect.

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