The Sunday News
Continued from last week
The 1970s Liberation War and its effects
BY 1979 the war was consuming more than one-third of the national budget, costing the regime about Rhodesia $1 million a day. Between 1975/76 and 1979/80 the budget deficit increased five-fold, primarily as a result of the war and oil import costs. In the long run, therefore, the efficiency and productivity of the economy suffered from the frequent and prolonged absence of skilled personnel. The fact that employers were required to pay men who were doing military service ultimately became such a financial burden that the Government was forced to subsidise the operation.
“We were running out of domestic revenue and foreign currency,” one businessman summarised, “in addition to which the permanent call-up was wrecking what was left of the economy. The cost of the war was too high domestically” (Losman undated).
In 1976, for the first time since the post-UDI panic a decade earlier, more white people emigrated from Rhodesia than immigrated to it. More than 7 000 whites left that year, further draining the country of professional, technical and military manpower (Strack undated).
The first decade of independence, 1980-1990
While the first decade of independence started off promisingly, with Government adopting the aptly titled policy of Growth with Equity in 1981, failure to achieve robust growth during that decade meant that the commendable social programmes pursued (especially in education and health) could not be sustained into the 1990s.
During this period, investment levels remained depressed, resulting in stunted growth, increased unemployment and other social deficits (Kanyenze, G.etal 2011).
Following the boom of 1979-1981, only in 1985 and 1987-1990 was there real per capita GDP growth.
The years 1982-1984 and 1986-1987 witnessed negative per capita growth (in 1984 and 1987, of -4 percent) and 1992 showed an enormous per capita GDP loss of 11 percent followed by a paltry, uneven recovery.
The most conspicuous symptom of stagnation is the incessant decline in the percentage of the population of formally employed which was 50 percent in 1990, as 200 000 young people were discharged from schools and colleges yet they looked forward to job creation of 20 000 in a good year (Bond.1998).
The Government deficit thus typically exceeded 10 percent of expenditures. Government debt repayment to foreign creditors rose from four percent of export earnings in 1980 to an excruciating peak of 35 percent in 1987 with inflation averaging 15 percent during the 1980s.
By the time CZI began doing quarterly surveys in late 1984, capacity utilisation rates were down to 75 percent and they fell to as low as 62 percent in 1987 (Bond, P.1998).With the heavy unemployment burden, which was now becoming a “ticking time bomb”, a consensus eventually developed among the country’s elites under heavy pressure from international financial institutions that the only means of defusing it was the “diametrically opposite” programme (Kanyenze et al 2011) in the form of the draconian, Economic Structural Adjustment Programme (Esap) which was applied from 1990.
During the same period there was also the political strife which affected most of Matabeleland region resulting in massive capital flight from Bulawayo and the surrounding Matabeleland provinces and an associated exodus of skilled and unskilled hordes of people from Bulawayo to seek refuge in Harare and neighbouring countries like Botswana, South Africa and Zambia and some went as far afield as the United Kingdom.
The Esap period, 1991-1996
Predictably, the Esap programme failed to revive the economy and address the social deficits that emanated from the structural deformity inherent in a dual and enclave economy (Kanyenze et al 2011). Esap maintained the bias in favour of the formal sector, meaning that the majority of the people locked in the non-formal sector where economic activities were of a survivalist mode actually grew. Not surprisingly therefore, the number of households living in poverty increased from 40,4 percent in 1990/91 to 63,3 percent in 1995/96.
The World Bank aptly observed and concluded that “Esap entailed considerable pain but little visible gain” (World Bank 1995).
The impact of water shortage in Bulawayo
The shortage of water is a most disabling circumstance for all kinds of economic and social activities for Bulawayo and the Matabeleland region. Bulawayo has traditionally been supplied by five dams (Inyakuni, Insiza, Umzingwane, Upper and Lower Ncema) built between 1958 and 1992.
However, currently the city relies on only two of the five dams, Inyakuni and Insiza dams; the other three have been decommissioned.
No new dams have been built to supply the city in the past 22 years even though the population has grown. Water problems are a perennial issue in Bulawayo and they have a demoralising effect on the average citizen, and then even more for the serious investor. It is not even possible to run a small power station, like the Bulawayo Power Station which has a capacity of 90 megawatts without a secure water source. The problem of deficient water supply in Bulawayo does not stem from poor rainfall patterns in the region. It is rooted in lack of investment in service infrastructure, just like is the case with deficient power supply. The source for sufficient water supply for Bulawayo is within feasible access, namely the Gwayi-Shangani Dam site in Matabeleland North. The Shangani River, in particular reaches flood levels almost every year. The Gwayi River also occasionally reaches flood levels.
The impact of the shortage of power
Zimbabwe is producing 1 237MW of electricity against a peak demand of 2 200 MW of electricity thereby leaving a deficit that has to be imported but because of foreign currency shortages and a liquidity crunch power outages have become the order of the day making industrial capacitation nearly impossible. Countries that are working on industrial expansion programme typically increase their power generating capacity at the rate of at least one additional power generating plant every five years. In the case of Zimbabwe, the last power plant, namely Hwange Power Station was commissioned in 1987, which is 27 years ago (Mtetwa 2010).
The resources for production of electricity excepting for financial capital, exist in abundance as part of Zimbabwe’s natural environment. Zimbabwe has the largest discovered coal reserves in Africa, after South Africa. Vast deposits lie in the Zambezi Basin and the Limpopo-Save-Runde Basins. Therefore, the country has limitless supplies of coal for the installation of thermal power stations. The Zambezi River also has potential to yield for Zimbabwe, almost double the hydro-electricity that the country is presently deriving from the Kariba (Mtetwa 2010). The country also has vast coal bed methane in Lupane which can power the country for up to 5 000 years.
The impact of decay of other infrastructure facilities
A well-developed transport and communications infrastructure network is a prerequisite for the access of less-developed communities to core economic activities and services.
Effective modes of transport, including quality roads, railroads, ports, and air transport, enable entrepreneurs to get their goods and services to markets in a secure and timely manner and facilitate the movement of workers to the most suitable jobs.
Economies also depend on electricity supplies that are free of interruptions and shortages so that businesses and factories can work unimpeded. Additionally, a solid and extensive telecommunications network allows for a rapid and free flow of information, which increases overall economic efficiency by helping to ensure that businesses can communicate and decisions are made by economic actors taking into account all available relevant information (Global Competitiveness Report 2012).
Government’s budgetary expenditure for the year as at 30 September 2013 revealed that only 8,7 percent of total expenditure had gone to capital expenditure while recurrent expenditure accounted for 85 percent of total expenditure. The 2015 budget also gobbles 82 percent on salaries leaving only $798 million for capital projects in an economy with an estimated 80 percent unemployment leaves a lot to be desired of the Zimbabwean situation.
The collapse of railway systems in Zimbabwe
Rhodesian railways were also running at a serious deficit. In 1967 the Financial Mail described the “slow death” of the rail system, attributing it to the “sanctions war”. The railways were in the red to the tune of 8 million pounds sterling by June 1967.
In late 1966 Zambia had declared the entry of all but essential goods illegal if they had been transported at any point on Rhodesian railways. South African goods were thus stalled in Rhodesia, awaiting slow and cumbersome transport by Zambian trucks. By far the largest decline in railway revenue was due to the loss of Zambian copper exports and petroleum imports. Meanwhile, British investment in the rail system was frozen and revenue transfers between Zambia and Rhodesia ceased.
Rhodesia faced a severe shortage of railway wagons, and equipment and rolling stock fell into disrepair (Financial Mail, 14 October 1966). As a result of transport snarl-ups, Rhodesian coal sales suffered. From July to September 1966 an average of 56 000 tonnes of coal per month were shipped from Rhodesia to Zambia and Zaire, less than half the tonnage of the year before. Sales declined even further when Zambia opened its own new coal deposits (Financial Mail, 28 October 1966).
The rail track in Zimbabwe is owned by the Government through the National Railways of Zimbabwe (NRZ), which owns and operates a 2 760km line with an estimated capacity to move 18 million tonnes of goods per year, although a significant proportion of this capacity is no longer available. The decline in freight has continued in the past decade with about 3,8 million tonnes being carried in 2008 and only 2,7 million tonnes in 2009, equivalent to about 15 percent of the original design capacity of 18 million tonnes.
From a peak passenger traffic of 17,4 million in 2007, the number of passengers declined to about 2 million in 2009.
NRZ has 168 locomotives but only 71 are serviceable. This was attributed to many years of failing to carry out scheduled maintenance, rehabilitation and replacement of old and obsolete equipment.
The mainline locomotive fleet, the DE10A is now beyond its designed economic lifespan. The electric locomotives are no longer operating since the decommissioning of the electrified section and this has put a further strain on the diesel locomotive classes which must be used as substitutes.
The Parliamentary Committee that toured the parastatal learnt that DE11A locomotive fleet is unfortunately made up of 13 units only and is left with six years before the end of its designed economic lifespan. Useful life of locomotive is 25 years. Only 13 of the 168 locomotives are within the lifespan with six years remaining. NRZ owns 8 682 wagons of which only 3 427 are operational, and targeted to transport over six million tonnes of goods per year. The committee was informed that all NRZ’s wagons had long gone beyond their designed economic lifespan of 40 years.
NRZ owns a fleet of 309 coaches but only 130 are in service and are in a deplorable and unsafe state (Report of Parliamentary Committee on Transport and Infrastructure Development of March 2012).
The railway network system needs fundamental and extensive rehabilitation in all its aspects.
It will never be possible to have an industrial economy without a functioning railway system, both for the movement of goods — raw materials as well as processed industrial goods — and in addition for the transportation of people.
Workers believe that the NRZ structure is top heavy as compared to the 1992 organogram. In 1992 NRZ had a staff complement of more than 12 000 with a general manager and two deputies. The tonnage moved by NRZ in 1992 was 12 million. At the moment NRZ staff complement stands at 8 000 and has a general manager, five directors, three area managers and five army personnel at director level.
It was stated that staff costs are as a result of a bloated labour force of over 8 000 employees and was said to be excessive compared to NRZ’s current levels of business.
The management said the optimum staff strength would be around 5 000 employees. The workers, however, argued that in 1980 NRZ had 18 000 employees against a track that stretched over 2 700km.
The line is ageing and needs manual repairs and the NRZ management cannot claim that it was over staffed with a workforce of 8 500.
They claimed that there was now more frequency of repairs requiring more employees. Workers also noted that the continued seconding of 191 army personnel to NRZ was an unnecessary cost as the reason for which they were seconded is no longer holding. NRZ pays the army personnel “75 percent allowance for the individual’s corresponding NRZ grade, in addition to the government salary” (Report of Parliamentary Committee on Transport and Infrastructure Development of March 2012).
The road network in Zimbabwe
The state of Zimbabwean roads is appalling, a reflection of the lack of significant funding towards road infrastructure repairs and maintenance. In addition, despite many concerns raised on the number of accidents on the major highways, calling for their dualisation, little has been done due to lack of funding. The road infrastructure network is therefore very poor, with some areas, particularly in the rural areas becoming impassable.
Thus there is a need for partnerships in the construction and maintenance of highways, especially construction of dual roads on major highways.
The Beitbridge-Harare-Chirundu road, which is not only the busiest in the country, but also contributing most to road accidents, has been mentioned as a priority area. Plans are already at an advanced stage for this to be initiated, with the feasibility study under way. The Harare-Bulawayo road has also been identified as requiring dualisation. In addition, all major roads linking various urban centres are also in a sorry state, requiring some significant repairs, which can also be done using partnerships.
The collapse of the Cold Storage Company (CSC)
CSC is a parastatal that dates back to the colonial days, established in 1938 for the purpose of running the beef industry. CSC became the largest meat marketing organisation in Africa, handling up to 150 000 tonnes of beef and its associated by-products a year. In 1984 it handled a record kill of over 700 000 head and put some 250 000 head on the ranches to save them from death in the severe drought of that year.
By 1987, the company had a permanent staff complement of not less than 4 700 people employed in its livestock section, its various factories and in the administration and drawing salaries and wages amounting to $32 million in that year (Mlambo 1996). The current dormant state of CSC which has put most of its workers out of employment except for a few hundred is a reflection of the near collapse of cattle industry in the country, which has in turn translated to the near collapse of the leather industry and of course contributed to the massive loss of employment in Bulawayo and Gweru.
The Zimbabwe Iron and Steel Company (Zisco) Steel
In the past there have been companies that were downstream industries of Zisco, for example Lancashire Steel in Kwekwe and Steel Force in Harare and Bulawayo. Lancashire Steel alone employed around 1 800 people in the mid-1980s to the end of the 1990s.
At one stage when Zisco was in full operation (producing 1 million tonnes of liquid steel a year) employed more than 7 000 people.
Excepting for coal to feed into the coke oven batteries, Zisco has all the raw materials required for the manufacture of steel at its doorstep. The reserves of iron ore lay at Ripple Crick, 15 kilometres away. Gaseous oxygen for the blast furnaces can still be obtained from Sable Chemical Industries through the pipeline between the two sites (Mtetwa E.G.2010).
The crisis period in Zimbabwe, 1997-2008
Government awarded a gratuity and pension of $50 000 per person to war veterans at the end of 1997.
As a result the budget deficit which had been targeted to decline to 3,8 percent of GDP by the end of 2000, shot up from about six percent in 1998 to about 18 percent by the end of 2000 (Kanyenze et al 2011).
During the period of negative economic growth (1999-2008) the economy declined by a cumulative 51 percent.
The unchecked extensive role of the State during this period reflected in unsustainable budget deficits and an unimaginable public sector debt (foreign and domestic), resulted in off budget, quasi fiscal activities by the Reserve Bank of Zimbabwe.
This contributed to the destruction of the economic base, with Government resorting to printing money to sustain itself, which in turn generated hyperinflation and the paralysis of 2007 and 2008 where Government workers salaries could only afford them two days transportation to work and it led to many of them moonlighting or outrightly quitting their jobs to join the more lucrative and teeming informal sector.
The exchange rate system was volatile and unpredictable, characterised by multiple exchange rates and rapid dollarisation as the local currency collapsed.
The productive sector faced a litany of problems, including lack of secure and predictable property rights, a rapidly worsening shortage of skills arising from out-migration, a hostile investment climate, acute shortages of essential inputs, especially fuel, raw materials and intermediate inputs… inadequate and dilapidated productive infrastructure, inefficient and subsidy dependent public enterprises, diminished international competitiveness and gross capacity underutilisation (UNDP, 2008).
The paralysis that followed was demonstrated in the collapse of the formal sector and the resurgence of the informal economy, which became the dominant segment of the economy such that four out of five jobs in Zimbabwe had been informalised by 2004 (Luebker, 2008).
This process also saw the obliteration of the middle class, as poverty became pervasive, implying that this spectra of the “missing middle” will also need to be addressed (Simpson and Ndlela, 2010).
The interlinkages between the sectors, especially between agriculture and manufacturing, were decimated through the fast track land reform programme, which began a worsening disarticulation of the economy and wrenching structural changes that will have far-reaching consequences for recovery.
Also worsening the situation was the implementation of the “clean up” Operation Murambatsvina in May 2005 that targeted the informal economy and resulted in 700 000 people losing their homes, sources of livelihood or both, with a further 2,4 million people indirectly affected (UN, 2005).
The follow up Operation Garikai/Hlalani Kuhle which sought to construct housing and workshop facilities for those affected, could not rectify the impact of Murambatsvina.
Uncompetitive regulations and tariffs
There is a need to remove taxes and other unnecessary hurdles to the commencement of business in Zimbabwe if Bulawayo is to develop for instance manufacturing industry’s competitiveness has been bogged down by unbearably high costs associated with compliance. Institutions that have led to these high costs include NSSA which charges for registration of a factory, elevators, escalators and boilers prior to giving approval for manufacturers to start operations. A manufacturer pays between $100 and $300 for the factory, $200 each for elevators or escalators, between $100 and $1 800 for boilers (depending on the size) while inspection fees for elevators or escalators are charged at $1 000 each. Regulatory authorities in the pharmaceutical sector charge separate premise licences with the Medicines Control Authority of Zimbabwe levying $6 000 or more while the Health Professions Authority charges $1 150. The premise licence fee for HPA is renewed annually upon payment of $575. Pharmaceuticals Council of Zimbabwe charges $75 to register pharmacists, $125 for the practising certificate fee, $185 and $110 of the renewal of practising certificate and pharmacy technicians. Before starting operations firms are required to submit an Environmental Impact Assessment (EIA) report to Environmental Management Agency.
EMA charges 1,5 percent of the project cost for the EIA (that excludes the actual process of carrying out the EIA) therefore for instance a business which wants to invest as much as $500 million like the Kariba South Power Plant will need to pay EMA $7,5 million before starting any operations. It also takes about 90 days for one to start doing business in Zimbabwe that is the time needed to meet all regulatory requirements and registrations as compared to Mauritius where it only takes six days to do all procedures.
This paper was written by Butler Tambo, a Policy Analyst who can be reached on [email protected]