Every year is the same – we come out of winter and in August suddenly the wind picks up, swirling dust across the veld, the dry bush shows signs of new life – leaves come out and flowering trees and bushes burst into bloom. No sign of rain, but somehow we know it is coming.
This year we have had a cold winter – not really cold like in the temperate parts of the world with snow and ice, but cold all the same and sometimes frost. In addition, I have been watching the monsoon rains in the Far East and India and no doubt they have been heavy. Almost always that suggests a wet season here.
Economics is no science; mathematics plays only a limited role. It is a social science and we like to think that we understand what is going on and try to forecast what might be around the corner. We usually get it wrong or miss out on the timing and we are well known for debating the options, sometimes endlessly.
I may be wrong, but I sense that we are turning a corner right now in this part of the world, heaven knows, we need a break! Why do I say that? First, it is because we have slowly been getting the fundamentals right in our economy. What they call the macro’s. In 2017 we ran a massive deficit in the budget, our national debt expanded exponentially as a result. We also, for good measure ran a substantial current account deficit – importing more than we could pay for in real money. We did so because we labelled our local money USD when in fact it was nothing of the sort. I illustrated this at the time by saying that if I took a 1000 local currency notes to the Reserve Bank and asked for US$1000 they would laugh at me. If they paid me, then in about 5 minutes there would have been a run on the Bank that would have quickly emptied its vaults.
We were spending 97 per cent of all State revenues on salaries for Civil Servants, the rest of the budget was borrowed – on the local market but in local currency which we called US dollars. We had 23 thousand million dollars in our bank accounts. Not bad for a small third world country to have its taxpayers holding about US$25 000 in their individual accounts. We were living in a completely unsustainable economic situation.
It took the appointment of a professional economist from outside the country as Minister of Finance to bring us back to earth. I will not bore you with the details of what he has done, but in 2020, we will run a balance of payments surplus, a significant surplus in tax revenues over expenditure and our Civil Service wage bill is below 40 per cent. That is quite an achievement but it has been at great cost to all Zimbabweans. Our bank balances have been devalued and our incomes slashed and our taxes have gone up.
What bugs me is that no international agency – or any of the Multinational Agencies like the IMF and the World Bank have given us any credit for taking this tough medicine without beating our Government to death. Sure, the discipline has been there and the threat of State action has kept us indoors but all the same, we should get some recognition for what we have done to get us back to living within our means. In fact, they have done the opposite and continue to impose restrictions on our economy in the form of banking sanctions that inhibit our growth and recovery.
Our situation is like dealing with the aftermath of a crash – the first job is to keep people breathing and stop the bleeding. Then get them to the hospital and do what is necessary to get them back on their feet. We are now out of that phase, the question is what surgery is now needed and then how to we get the body to heal itself?
For me, the surgery is in two parts – dealing with endemic corruption and then dealing with broken institutions. In regard to the first, we need to learn from our friends in the Far East. In Singapore, they follow a simple rule – deal with the people at the top of the pile, not the bottom. In Angola, they have just imprisoned the son of the former President and his daughter is now living in exile and had her Angolan assets confiscated to the State. We need to deal with anyone who is found guilty of corruption on whatever scale, harshly.
In China, they execute corrupt officials. When a new President was sworn in in West Africa he rounded up 15 corrupt businessmen and officials and had them shot on the beach in front of a large crowd of onlookers. The message must be clear, corruption will not be tolerated in any form and the punishment must be quick and serious to act as a deterrent. We in the developing world need to recognise that corruption has become the most important single impediment to our growth and recovery and without growth we have no future.
The second priority we need to pay attention to before we can expect our country to get back on its feet and to start to deliver a decent standard of living to our people is to pay attention to failed institutions. A country depends almost totally on strong institutions that are well led and functional. It’s just like a body, it’s made up of functioning organs and appendages that serve the main body and without which we cannot grow and produce.
Our economy is littered with broken arms and legs and poorly functioning parts. Our Parastatals prior to Independence were generally well run by professionals and contributed 40 per cent to GDP. Now they collectively contribute less than 2 per cent and are almost all badly run, corrupt and bankrupt. Some we can privatise, but that is not always possible or even necessary. But the main problem in all these institutions is leadership. I can recall one example in my own experience – we had a major parastatal in a key sector that was losing money, year after year. A new Minister was appointed and he set about to recruit the best manager in this particular field when he felt he had him he negotiated a salary that was three times his own and in six months the organisation was making money.
We underpay our senior managers in all fields – Permanent Secretaries in Government and top management in State-owned enterprise. We underpay our Head Masters in schools and our top scientists, we underpay our doctors and managers of health institutions. The consequences are there for all to see and no amount of money thrown at the problem will make them productive. It means we will have a more unequal economy, but at least the place would work!
Then we have to get our policies right and this mainly requires that we empower our people. When I was a child I had an accident and spent three years in hospitals with operation after operation. Eventually, a specialist came out from Britain to see me amongst other chronic cases and he said – we cannot do anything more for him, throw him in a pool and make him swim. His body will heal itself. He was right.
If we get our policy right the response from our economy will be immediate and substantive. Just look at Ethiopia and Rwanda.Post published in: Featured