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Claims of Zimbabwe's economic recovery mask a collapse in social services
Terry Bell, Business Report (SA)
February 15, 2005

http://www.businessreport.co.za/index.php?fArticleId=2410630&fSectionId=553&fSetId=304

Cape Town - Zimbabwe's economic performance has improved. This is being trumpeted by acting finance minister Herbert Murerwa and by reserve bank governor Gideon Gono, who is playing an ever larger role in economic policy.

"It is a fact that there has been an improvement," says economist Godfrey Kanyenze. "But these things are relative and have to be seen in context."

Kanyenze and a team at the Labour and Economic Development Research Institute feel there will be further improvements in the various economic indices, but at even greater cost to the already impoverished majority of the population.

They point out that the government is managing to improve its economic performance but is cutting back still further on social spending.

"Cost recovery is now the name of the game," says Kanyenze. "This concept was employed in the health sector and has now been extended to schools. These institutions have simply been told that they now have to pay their own way."

But because the majority of Zimbabweans can no longer afford health services, the revenue base for hospitals and clinics has all but disappeared.

Even the slavishly pro-government Herald newspaper recently admitted that the once prestigious Harare general hospital was "in intensive care".

There are no accurate figures, but it is generally admitted that increasing numbers of children are dropping out of school as the fees become prohibitive.

However, there has been no backing off the statement made in November by Murerwa that even examination fees should be subject to "cost recovery levels".

These moves, as well as better control of the foreign exchange market, mean that the government can truthfully boast that economic indicators have shown marked improvement.

Year-on-year inflation, for example, officially stood at 622 percent in January last year. By last December it was probably comfortably within the initial target of 200 percent.

Gono has now announced that the economy was on track to lower inflation to between 30 percent and 50 percent by the end of the year and to dip into single figures next year.

This has been described as "pure fantasy" by Tendai Biti, the shadow finance minister for the opposition Movement for Democratic Change.

Kanyenze's assessment is slightly more diplomatic. He notes: "On the basis of the evidence, I would say it is extremely improbable."

Gono's projections appear to be based on what seem to be wildly optimistic assumptions published in Murerwa's 2005 budget statement. This assumes a 28 percent increase in the performance of the agricultural sector this year.

Other assumptions are that there will be a surge in productive investment and that the foreign exchange position will improve with an projected increase in tourism.

These factors are supposed to see Zimbabwe's gross domestic product (GDP) rise by 5 percent.

Last week the reserve bank admitted there was a gross shortfall in agricultural production and called for a move to "command agriculture". But the projections remain unchanged.

"In a country with virtually no national savings to draw on and where real GDP declined by a cumulative 28.4 percent between 1999 and 2003, the idea of a rise in GDP does seem fanciful," Kanyenze agrees.

He also points out that economic growth has continued to decline over the past two years, although at a slower rate.

"But now we have the 'Look East' policy. Perhaps China is supposed to provide the investment," he says.

There are no accurate crop estimates, but even before the reserve bank's latest revelation, it was privately agreed in government departments that there would again be a large shortfall in the production of staples such as maize.

Tourism has also collapsed, with some hotels reporting occupancy rates as low as 12 percent. Attempts by the government to stamp out the thriving parallel foreign exchange market have also had a negative effect.

Hotels have now been instructed that all foreign visitors must pay their bills in US dollars, sterling, euros or rands. This is done at a rate of exchange lower than the official rate, which, in turn, is nearly half the rate offered illegally "on the street".

If the parallel market is any guide to the real value of the Zimbabwe dollar, the exchange rate for the rand varies from Z$1 500 to Z$1 800, while the US dollar fetches up to Z$10 000.

"It makes for an economic and political situation that is like a piece of elastic that has been stretched and stretched," says Zimbabwe Congress of Trade Unions secretary-general Wellington Chibebe.

"It becomes harder to stretch it more before it snaps, and if and when it does, Africa will face a major disaster."

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