An Introduction to ESAP: Zimbabwe 1992
By David Coltart
31st January 1992
Danish Volunteer Service Development Workers Meeting, Maphisa
It is a great pleasure to have been asked to address you today, but before commencing I should warn you that not much weight should be attached to what I and Jonathan Moyo have to say today. According to the Editor in Chief of Zimbabwe Newspapers, Mr Tommy Sithole, in an editorial written by him in The Herald in December 1991, I am only a “weekend adviser” and Jonathan Moyo is merely a “fruitcake lecturer”! The problem is compounded by the fact that it is neither the weekend nor do I see any fruitcake around. Despite these overwhelming odds we hope that together we might be able to adjust your minds structurally today.
I have been asked to cover the basic issues of ESAP and will look at three main areas, namely:
- What ESAP actually is, including its main components;
- Why it was initiated;
- The implementation of the programme in the light of the budget and other legislation passed and about to be passed in Zimbabwe.
- What is ESAP?
With all the radio and television hype and literature on ESAP floating around these days it seems as if structural adjustment has been with us since the beginning of time. It is important to remember, however, that structural adjustment only became in vogue in 1990; prior to that it was a phrase unknown in Zimbabwe. The same does not apply to the rest of Africa where many countries implemented Structural Adjustment Programmes years ago. Without stealing Jonathan’s thunder in this regard, suffice it to say that it has not been the panacea everyone hoped it would be.
Despite all the rhetoric that structural adjustment is a home-grown programme, the fact of the matter is that it is a concoction developed by the International Monetary Fund and organisations like the World Bank. An important point to grasp is that Structural Adjustment Programmes have only been implemented in countries where the economy is in a complete mess. It seems to have been designed by the IMF as an equivalent of a dose of castor oil which, though unpleasant, is nevertheless good shock treatment to cure an economy which is in decidedly bad health. It is important to note that Structural Adjustment Programmes have never been prescribed for countries with thriving economies such as Botswana, Hong Kong and Singapore. In other words, it is only applied to countries which have maintained tight control of the economy and the political environment. It is applied in countries where there is economic stagnation, as a result of rigid, centralised control. It does not seem to have been applied in countries where there is small government, low taxation, few foreign exchange controls and democratic government.
But what exactly is structural adjustment? No one to my knowledge in Government had given a precise definition of the term and I am sure that it means many different things to many different people in Government. As we look at what is happening in Zimbabwe it appears as if we are moving away from a centrally controlled economy to a free-market, capitalistic economy. We are seeing a drift from state ownership or state control to African styled privatisation in which the key players are well connected men and women not too far from the seats of power. Government has not actually admitted yet that structural adjustment marks a shift from socialism to capitalism and a free-market economy. Indeed Government, or rather the ruling party, every now and then reiterates its commitment to socialism/Marxist-Leninism, but this flies in the face of what is actually happening in the country. Furthermore, in all the television programmes organised by Government they have not actually come out and said that they are now committed to capitalism. In my view, the term “structural adjustment†in Zimbabwe is simply a smoke screen or a euphemism; it is a convenient phrase to disguise the “U†turn that Government is now taking. It is too embarrassing for Government to admit that it has formally abandoned socialism to embrace this elitist, tribally-based capitalism. It is not only embarrassing for Government but also, for certain people in Government, painful to come to grips with the reality that socialism and/or Marxist-Leninism has been abandoned. It is important to grasp this fact and it will help us to understand later on why the whole programme is endangered by the very fact that it is being implemented by people whose deeply-held political convictions are absolute anathema to the very spirit of Economic Structural Adjustment Programmes. The important question to be asked when considering structural adjustment in Zimbabwe is the following: “Is the present Government part of the answer to our economic problems or is it part of the problem itself?â€
What are the Main Components of the Economic Structural Adjustment Programme?
I think that we need to look at the theory first and thereafter take a quick look at how it is actually being implemented in Zimbabwe.
The Theory
The underlying premise of any Structural Adjustment Programme is that the market must control the economy of any country. Most centralised controls of the economy are in the long term completely contrary to the objectives of the programme. Bearing in mind this fundamental premise, the following are some of the theoretical components of the Structural Adjustment Programme:
(a) Trade Liberalisation
Domestic business has to learn to compete in the world market and accordingly many measures designed to protect local industry must be removed so that local industry has to become efficient if it is to compete internationally.
(b) Loosening of exchange controls
There must be a gradual progression towards allowing people to import what they want. This is an integral part of trade liberalisation and the removal of existing protections in place for the domestic economy. The loosening of foreign exchange controls is designed to enable a country to import foreign manufactured products which in itself provides considerable competition for domestic industry.
(c) The removal of subsidies and the reduction of Government expenditure
Loss-making parastatals and subsidies generally are taboo. Parastatals should ideally be privatised and food and other subsidies withdrawn, once again to allow the market to determine the pricing of goods and services.
(d) Small Government
An integral part of the programme is the cutting down of Government expenditure generally and the bloated civil service must be cut.
In essence, ESAP is a top-down economic strategy which is designed to resuscitate an economy using massive doses of foreign exchange (acquired mostly through loans) and hugely increased exports. The idea being that the massive injection of foreign capital will enable domestic industry to re-gear itself and thereafter perpetuate economic recovery and growth by dramatically increasing export earnings, and therefore foreign earnings which in turn are used to repay the loans incurred to pay for the initial injection of capital and to build a healthy balance of payments situation for the future. The bottom line, however, is that for it to work Governments must relinquish a large amount of control over the economy so that the private sector can do the work. If the private sector is hindered in any way the whole process can break down catastrophically. To illustrate what I mean one must just imagine the situation which can result where large foreign currency loans are incurred and thereafter squandered through mismanagement, corruption and misdirection. As a result the exports required to repay the loans, and to perpetuate the foreign exchange cycle, do not materialise and the country is left with an economy in the same state it was in prior to the implementation of the project plus a huge foreign debt that it now has to repay.
- Why has Government seen it fit to implement ESAP?
In answering this question I need to remind you of an article written by my colleague in the Financial Gazette on 5th September 1991. Jonathan pointed out that ZANU-PF ran its 1990 election campaign on the ticket of socialism. Its manifesto did not make any mention of structural adjustment and trade liberalisation. Accordingly, in answering this question it is imperative that we go back to the 1990 election to see why Government changed its mind. It is also imperative that we consider the answer to that question in the context of other legislation passed by Government since 1990.
I believe that it is important to grasp the fact that ESAP has not been introduced by Government because it has had a change of ideological heart. It is not because Government, or at least those in the higher echelons of Government, have suddenly realised the error of their socialist ways and are reborn capitalists. I believe that the reason why ESAP has been introduced is simply because Government realised in 1990 that it was in a severe economic mess, and therefore political mess, and that it had to do something dramatic prior to 1995 if it wished to stay in power.
Despite all Government’s bluster after 1990 election that the election provided a landslide victory etc, the fact is that in their terms they took a powerful hammering. The facts of the election are that there were some 4.6 million people registered to vote, less than half the people eligible to vote went to the poll, Government was forced to add one day to the voting, throw the voting open to anyone who could prove identity and place of residence, and of the votes cast there were 138,865 spoilt ballot papers and 396,108 votes for opposition parties. Even more worrying to Government was the fact that there was a dramatic swing against Government by the young and the urban-based. It did not take them very long to realise that in 1995 there would be at least another one and a half million unemployed voters who would have nothing to lose by voting against Government. They realised that their only remaining secure support base was in the rural areas.
To compound the problem was the fact that Zimbabwe’s post-independence economic performance has been unimpressive to say the least. In many ways we have been driving our economy on a tank of fuel filled up many years ago. The tank is now depleted and the economy is spluttering in the form of maize shortages, higher inflation and general stagnation. The facts are dismal; per capita incomes today are only fractionally higher than in 1980. Unemployment has risen fivefold. Inflation in 1990 exceeded 20% and the balance of payments deficit was 6% of gross domestic product. Foreign capital inflows have been negligible and in 1989 investment, at less than 11% of gross domestic product, was at its lowest level since World War Two. Clearly something had to be done about the economy.
I also believe that the Structural Adjustment Programme and legislation such as the Constitutional Amendments, the proposed Land Bill, the University Amendment Acts and the like must all be seen in the same context of the whittling away of ZANU-PF’s support base and the chaotic situation we face. All these policies and acts are entirely politically motivated and are designed to improve ZANU-PF’s political lot more than anything else. Let me explain what I mean by looking at other legislation introduced since the 1990 elections:
(a)Â Â Â University of Zimbabwe Amendments
Government recognised that a major threat to its power base came from young intellectuals in the country who have been able to articulate concerns regarding corruption and mismanagement of the economy. Government has made a conscious decision to clamp down on this and the University of Zimbabwe Amendment Act has been the result. I believe that Government hopes that through this Act it can quell these voices of discontent and thus stem the haemorrhage of urban and young supporters away from Government.
(b)Â Â Constitutional Amendments regarding hanging and whipping
Another source of concern as far as the Government is concerned is the independence of the Judiciary. It cannot attack the Judiciary directly as this would undermine its standing in the world community. It can achieve the same affect, however, by undermining the power of the Court by reversing Constitutional decisions and forestalling the Court from interpreting the Constitution in the manner it wishes to. The Courts are further undermined by the fact that their budget is kept at a minimum.
(c)Â Â Â The Land Bill
Whilst land has always been an emotive issue, Government’s sudden preoccupation with the redistribution of land is not because they have suddenly realised how unjust the distribution of land is in this country. The rhetoric about the Land Acquisition Bill and redistribution of land in the country is simple and effort to shore up the rural support base of Government. The Land Acquisition Bill as presently envisaged is incompatible with the entire Structural Adjustment Programme. As I stated above, the Structural Adjustment Programme is in essence the introduction of a free market economy. The moment one starts designating which land will be acquired and the price it will be acquired for, the entire economic infrastructure of the country will be threatened. I do not propose to go into detail in this as it is not the purpose of this meeting to discuss the Land Acquisition Bill. Suffice it to say, however, that the Land Acquisition Bill as presently constituted will inevitably negate the entire Structural Adjustment Programme as envisaged by Government. If Government is committed to structural adjustment then the only conclusion that can be drawn is that the Land Acquisition Bill is simply a political manoeuvre, a carrot dangled in front of the rural populous to keep their support without Government having any intention of actually implementing it as threatened.
Seen in the context of the other policies and laws implemented, the Structural Adjustment Programme should be seen as a mechanism by which jobs can be created and the demands of the urban population satisfied. Government sees it as its salvation; it sees ESAP as a means to an end of political survival.
It knows that its half-baked socialist state or party capitalism policies have failed the country and if the country drifts any further down this path total chaos will result. Government hopes that it can ride the rough couple of years ahead and that by the time the 1995 elections have come the medicine will have done its work and we will have a healthy growing economy with unemployment dropping and confidence in ZANU-PF rule restored.
- The implementation of the Structural Adjustment Programme to date
I am not an economist and accordingly cannot comment with authority on the success or otherwise of the Structural Adjustment Programme to date. Reading yesterday’s Financial Gazette I see that Mr Christiaan Portman, the World Bank’s resident representative in Zimbabwe, believes that the economic reform programme is on target despite a few setbacks. According to him, progress has been made on monetary policy reform and the reduction of the budget deficit, although Government is still behind schedule on its plans to cut down the size of the civil service. The Editorial in the same copy of the Financial Gazette states that it is worrying that some targets have not been met. In particular they point out that the long awaited plan to trim the bloated civil service and cut the size of the Cabinet seems to be on hold. Government apparently also intended to put 50% of all imports on the Open General Import Licence list by the end of 1991 but only managed 14% mainly due to lack of funds. The same Editorial points out that the drought threatens to make the situation even more perilous. All of this is, of course, a short term view and the reform programme must be given some time to run before we can adequately assess whether or not it is going to work.
The concern I have, however, regarding the long term successful implementation of the programme is summed up in the question I posed earlier: “Is the present Government part of the problem or part of the answer to our current economic plight?†Let me explain what I mean.
For ESAP to work we require a radical loosening up of all kinds of controls within Zimbabwean society. We need to loosen up controls of foreign exchange, we need to loosen up on restrictive business practices which hinder investment and economic growth, and most of all we need an overall reduction in the amount of control that the Government exercises in all sectors of our society. This inevitably means a smaller Government, not just in terms of size but also attitude. It must entail a cut down in Government expenditure in areas such as the military. The moment controls are reduced inevitably there will be a shift of power from state society to civil society and an increase in democracy in the true sense of the word. However, economic controls give power to Government. The more economic controls a Government exercises in any given society the more power it has over that society. Our Government is fully aware of this fact and like any Government is reluctant to relinquish control. I have already spoken about the various acts brought in since the implementation of the Structural Adjustment Programme concerning University Students, the Court and land.
The 1991 Budget reinforces me in my view that Government is reluctant to give up a large degree of control over Zimbabwean society. At a time when Zimbabwe has, on the face of it, committed itself to multi-party democracy and at a time when the whole Southern African region is stabilising the following aspects of the Budget are disturbing:
(a)   The CIO – In the vote for the office of the President and the Cabinet is a grant for “special services†in the sum of $70 million. The Budget estimate states that part of the expenditure on this item will not be subject to audit by the Comptroller and Auditor General. The term “special services†is in fact the vote for the Central Intelligence Organisation. To give you some idea of how this has grown, the CIO was first given a vote in 1971/1972 by the Smith Government of $825,000.00. The CIO’s job is primarily to gain information on Government’s opponents. Whilst I concede that the CIO also gathers intelligence on enemies of the State (which I have no quarrel with), its most visible role in Zimbabwe is to report on political renegades. If Government is truly committed to an open society and multi-party democracy, freedom of association and expression, one questions why the CIO budget is so large and has been increased?
(b)  Defence Spending – When Dr Chidzero delivered his Budget speech he stated that, and I quote, “the defence vote remains as the second largest on the current expenditure allocation at $1.45 million, a nominal increase of 10% over the 1990/1991 out turn. The increase on this vote has been due mainly to contractual obligations. The vote would have otherwise remained stagnant in nominal terms.†Regrettably, the statement does not show the whole picture. Firstly, of the Ministry of Public Construction and National Housing vote of $552 million, over a third was allocated to the Ministry of Defence in the sum of $177 million. During the current year the Ministry of Defence building budge has increased by just under 16%. Included in the building programmes are $6 million spent on Harare KGVI offices and $40 million being spent on Five Brigade Battlefields. To get this vote in perspective one needs to point out that the entire Budget for the Ministry of Health for the same period is $28.7 million and the social fund to cushion the impact of structural adjustment is at present only $20 million. The actual increase therefore of the overall defence budget is 11.1% and the total expenditure is $1.32 billion. Given the changing situation in Mozambique and South Africa, the question has to be asked why Government is still spending so much on defence, and most of it at home? I believe that it is because it needs to maintain control militarily if they cannot retain control through other means.
(c)   The Ministry of Political Affairs – There was much trumpeting about the fact that the Ministry of Political Affairs vote was reduced by $14.7 million in the 1991 Budget. The fact remains, however, that the reduction was effected by reducing the costs of national service which was always a non-starter. The real facts are that the actual salaries for people in the Ministry of Political Affairs went up by 27% and the actual budget for those involved in the Ministry of Political Affairs (aside from National Service) increased from 29.4 million to 33.1 million, an increase of just under 13%. If Zimbabwe is committed to opening up the political system and multi-party democracy, why is some $33 million tax payers’ money going to one political party?
There are other disturbing features of Government policy: The timing of the publication of the Land Bill in last week’s Government Gazette just two weeks prior to the next Paris Donor Conference for Structural Adjustment is bizarre. It goes without saying that the provisions of the Bill, as I have stated above, are entirely contrary to the spirit of structural adjustment in that they seek to control the largest sector of the Zimbabwean economy. In terms of the Bill, Government seeks to designate certain land which will be expropriated at prices determined by Government. Economists will tell you that if the Bill is enacted and Government seeks to enforce it, the entire agricultural sector will be destroyed and the financial sector’s collapse will follow shortly thereafter. Government’s intention of course is to appease its rural electorate. However, the Bill, and especially the timing of its publication, has the potential to stall the entire Structural Adjustment Programme. As I have said before, the essence of the Structural Adjustment Programme is the loosening up of the economy, the Land Bill and other Acts and actions I have mentioned above are a fundamental contradiction of that principle.
I do not propose to steal Jonathan’s thunder by giving a critical review of ESAP. Suffice it to say that as long as Government wishes to have its cake and eat it in the form of implementing structural adjustment but wishing to retain control over several important sectors of society, the success of the programme must be threatened. Whatever one thinks of an IMF-imposed Structural Adjustment Programme, the fact of the matter is that unless it is implemented wholeheartedly and with the utmost vigour without any contradictions being allowed to remain in the system, it will fail. Just as President Gorbachev and President de Klerk set a process of liberalisation in motion in their respective countries, so too the Government must realise that an integral part of structural adjustment is the loosening of all forms of controls in society. That action in itself may well in the long term spell disaster for ZANU-PF Government, but it will undoubtedly benefit the nation. Until ZANU-PF as a Government is prepared to sacrifice its political survival on the altar of structural adjustment, the programme will not work. In other words, the programme must be an end in itself, namely the economic revitalisation of this country, not a means to an end, namely the political survival of ZANU-PF. Because ZANU-PF appears to view it as a means to an end I fear that they themselves are part of the problem, not part of answer to our present woes.