The 2021 Pre-Budget Strategy Paper (BSP) seeks to build on the Transitional Stabilisation Program (TSP) which is deep rooted in fiscal austerity as a means to stabilise the economy, and in turn achieve “Vision 2030”. Key objectives of the TSP which comes to an end in December 2020, making way for the National Development Strategy (2021-25), sought to stabilise the macro-economy and the financial sector, introduce structural and governance reforms, promote private sector-led growth and launching quick wins to stimulate growth. However, despite the BSP offering a plausible position on the means to achieving Vision 2030, it falls short on the need to promote a just, equitable and prosperous Zimbabwe.
The BSP lays out an economic development plan that largely neglects the everyday challenges that women and young girls face. It focuses on fiscal austerity and private sector led growth which largely creates inequalities and worsens poverty. As such, this paper seeks to analyse the BSP and justifies why the Zimbabwe Coalition on Debt and Development (ZIMCODD) thinks that the BSP can do more to achieve inclusive growth that also targets opportunities for women and young people, protecting the vulnerable groups, thus promoting social justice.
The current economic policy trajectory is not working for most Zimbabweans
The Ministry of Finance and Economic Development (MoFED) applauds the TSP for its achievement in managing to contain the fiscal deficit and the current account deficit. However, according to the Labour and Economic Development Research Institute (LEDRIZ) (2020), the TSP has a number of missed targets which include missed growth rates(6.3 % Vs 3.4%; 9% Vs -6.5%; 9.7% Vs -10% for 2018/9/20 respectively); missed inflation targets (4% vs 10.6%; 5% vs 255%; 5% vs 221%); industry capacity utilization slammed (48.2% 2018, 36.4% 2019 & 27% 2020; fall in FDI (717.1m to 259m 2018-2019) and is expected to worsen in 2020, worsening unemployment (16.4% in 2019 Vs 4.8 in 2014); extreme poverty (22.5% to 29.3% for 2011/2 & 2017) and rural poverty worsened (84.3% – 86%); missed revenue targets (22.5% to 29.3% for 2011/2 & 2017) and rural poverty worsened (84.3% – 86%); Fiscal deficit almost balanced (2019 surplus, 2020 almost balanced from -10.5% in 2017), according to Ministry of Finance and Economic Development, 2020.
Further, from a social justice point of view, fiscal austerity and private sector-oriented growth is disastrous. The focus on private sector led growth has led to the shrinking of the state and its capacity through cutbacks even at a time of the pandemic when robust public service delivery is needed the most. It has also resulted in increased rent seeking behaviour where economic powers are centralised in the hands of a few elites, thus further worsening inequalities in the distribution of income. Private sector driven growth poses threats to the environment and the welfare of workers as it perpetuates food production, resource extraction, and wealth creation processes based on the exploitation of people and the environment.
The BSP should do more for women and young people
Women are only mentioned 9 times in the BSP, implying they have largely been side-lined and not given much priority. The burden that women bear in times of economic crisis should not be underestimated, and worse in this time of the Covid-19 pandemic. It is important for policy makers to note that feminisation of poverty is a major drawback to national development, and that in this time of lockdown and heightened tensions women and young girls are more vulnerable to domestic violence. The pandemic is likely to worsen inequalities experienced daily by women and young girls in terms of access to finance and wealth creation, education, legal justice, food, water, energy. All these and other challenges that women and young girls face have not been properly addressed in the BSP, and this is a cause for great concern.
Economic burdens and benefits must be shared equitably
Austerity measures have largely affected the poor and vulnerable, thus widening the gap between the rich and the poor working majority. A wealth tax could be an efficient way to mobilise domestic resources and would have a redistributive effect. Again, wrong budget priorities should be avoided, for example, the prioritisation of allocations and disbursements to the security sector for a democratic country at peace amidst the marginalisation of women and youth is unjustifiable.
The BSP should do more to fix resource leakages
Zimbabwe has lost an estimated $32 billion through illicit financial flows in the last two decades. These are resources that could have contributed to the achievement of national development priorities. Zimbabwe is also bedevilled by a huge and unsustainable debt, and available statistics from the Reserve Bank of Zimbabwe (RBZ) indicate that the public debt stock is unsustainable with domestic debt growing by an alarming 2 789 percent between 2013 and 2019 from US$0.36 billion to US$10.4 billion respectively. At the same time, external debt has also grown by 27 percent over the same period from US$10.22 billion to US$13.13 billion. There is need for a national debt audit and a Debt Management Framework to help resolve the debt crisis.
Efforts to weaken legal challenges and legislative oversight and scrutiny over deals with foreign nationals increase the risk of corruption, illicit financial flows and public resource mismanagement. All mega deals must be subject to legislative scrutiny. There must be clear mechanisms to ensure the transparency and accountability of efforts to restructure and reform State Owned Enterprises and to dispose mines owned by the ZMDC. The restructuring and reform of State-Owned Enterprises must not pave way for the privatisation of entities providing basic public goods and services. Although the Strategy places faith in oversight bodies including the ZACC and the NPA the preponderance of the catch and release phenomenon and regular cases of high-level corruption point to the need for more robust actions to address high level corruption amongst the ruling elites. The national effort to fight corruption cannot be left to oversight bodies alone.
The mining sector is one of the major contributors to economic development in Zimbabwe. It has taken the centre stage in driving economic development following the collapse of the agricultural sector. This sector now accounts for over 70% of the export earnings and contributes 18% of the Gross domestic Product. The sector has been dominated by Artisanal and Small-scale Miners (ASM). ASM sector remains the major contributor to gold deliveries to Fidelity Printers and Refineries. Despite being the major producers of gold than the large-scale miners, ASMs are not recognised by government as formal businesses. This lack of formalisation of the ASM sector implies that government is losing mineral wealth through revenue leakages. There is therefore need for the government to urgently consider the formalisation of the ASM sector and bring artisanal miners into the mainstream economy so as to widen the revenue base.
The Government must urgently develop the Economic Empowerment Act clarifying how Community Share Ownership Trusts will continue to exist under the new policy regime (following the repeal of clauses in the Indigenisation and Economic Empowerment Act implying that foreign owned mining companies are no longer required to cede their 51% ownership to indigenous Zimbabweans and to pay any dividends to local mining communities)
Again, many sectors of Zimbabwean society feel left out and unrepresented in increasingly partisan and polarised decision-making processes. As such, inclusive national dialogue is necessary to help the nation resolve the unresolved historical issues and arrive at a shared national vision. Giving voice and a vote to the Zimbabwean diaspora is vital not only for the sake of the Billions in remittances but in order to tap into vast skills, expertise and contributions to national development. It should also be noted that shared commitments to constitutional order, respect for the rule of law and democratic decision making are what ultimately sustains the social contracts between the rulers and ruled; workers and employees, haves and have nots.
Towards an equitable, just and prosperous Zimbabwe
The paper highlighted how the BSP has done little in promoting an equitable, just and prosperous Zimbabwe. It has highlighted that the austerity program and the private sector driven growth strategy have not done justice in alleviating challenges that citizens face on a daily basis. It is therefore recommended that the government should ditch austerity and invest in a public sector recovery program, and stop hiding behind budget surpluses while the masses are suffering. There is need to invest in housing, transport, energy, water, education health and social protection. Though huge public expenditures might create fiscal deficits, it would go a long way in fostering economic development by complementing private sector business. Policy implementation in Zimbabwe is still rocked with key challenges such as corruption, lack of transparency and accountability, all of which result in resource leakages. As such, building resilience and economic recovery requires structural transformation and to this effect the following recommendations come to mind:
- There is need to democratise economic decision-making power and access to wealth and economic opportunities by giving the poor and marginalised greater voice and power to veto unfavourable economic decisions
- There is need to increase women’s say in economic decision making by adopting the zebra 50/50 representation between men and women in corporate and private sector Boards
- There is need to wean ourselves off fossil fuel dependent economic growth by investing in a public led and inclusive green economy that optimises Zimbabwe’s vast natural resource base in a sustainable manner.
- There is need to free ourselves from the unsustainable debt cycle by investing in unlocking alternative domestic resource mobilisation including through giving diaspora Zimbabweans a vote and a voice
- There is need to gradual redress historical inequalities across regions, genders, classes and races through equalising developmental investment with long-term strategic objectives
- There is need to build in resilience in national budgets by legislating automatic stabilisers to kick in and unlock fiscal reserves during periods of significant unexpected shocks with major impacts on society.
Janet Zhou is the Executive Director of the Zimbabwe Coalition on Debt and Development