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How to put Zim back on the right path
Raymond Parsons, Cape Argus
January 24, 2008

http://www.iol.co.za/index.php?set_id=1&click_id=84&art_id=vn20080124112906820C870473

The birth of Zimbabwe was attended by great rejoicing and high hopes. Twenty-seven years later the country is facing institutional collapse and economic disaster.

The deepening political, social and economic crisis in Zimbabwe has over the past five years and more therefore seldom been out of the headlines.

Irrespective of when President Robert Mugabe decides to go, it seems worth considering the kind of interventions both domestic and external that will eventually be needed to put Zimbabwe back on the right path.

There is a strong tendency to fully ascribe developments in Zimbabwe to Mugabe's particular personality and autocracy implying that his exit from the national stage is all that will be required to return the country to its former status as an admired and successful nation state.

However, neither Mugabe's eventual departure from office, nor even a speedy reversal of failed policies, will guarantee the success of its rebuilding policies.

At the moment a number of post-Mugabe scenarios are possible. Mugabe could hand-pick a successor, step aside and try to orchestrate developments from behind the scenes; there could be a military coup; the reformist faction within Zanu-PF could gain the ascendancy and oust the Mugabe loyalists; or and obviously first prize a broad government of national unity could be formed.

We will also have to evaluate what important facilitation and influential role the Southern African Development Community (SADC) in general and South Africa in particular can play in the processes that lie ahead. All SADC states have a vital stake in the nature of the change in Zimbabwe.

There have been many instances in recent years of improved economic performance and better governance in several parts of the African continent, while several reasons for state failure in Africa and elsewhere continue to be found in the absence of some of the institutional infrastructure necessary to successfully widen and deepen democratic systems.

Also, for countries with limited means, the counterbalancing elements that are traditionally associated with democratic systems including political parties, pressure groups, media organisations, educational and research organisations can be costly to maintain.

Sustaining democracy therefore becomes, in part, a function of the productivity of the economic system.

Economic crises often can, and do, unseat governments. While they may frequently cause political turbulence, it is unusual for them to damage or destroy systems of government.

Alongside these "contextual shortcomings" and an inability to establish and maintain the institutions necessary for democracy to thrive, many African countries suffer from an "institutional multiplicity".

The number of representative business organisations in South Africa, and the difficulty encountered in trying to consolidate and rationalise business representation, could be an example of this as could the fragmentation of opposition groups in Zimbabwe.

This phenomenon of institutional multiplicity tends to subvert the basic principles of good governance by encouraging clientelism, nepotism and other forms of corruption.

In recent years, the emergence of the New Partnership for Africa's Development (Nepad), the African Union
(AU), the Commission for Africa and other related initiatives testify to the new mechanisms dedicated to the upliftment, transformation and better governance of the African continent.

Former United Nations Secretary-General Kofi Annan noted at the fifth Annual Nelson Mandela Memorial Lecture in July last year that "it is a pernicious self-destructive form of reason to rise up and expel tyrannical leaders who are white, but to excuse tyrannical leaders that are black".

"A solution to Africa's problems," he said, "rests on (the) three re-inforcing pillars of peace and security, development and human rights, and the rule of law." Success in these terms is dependent on a government's ability to achieve a symbiotic and reinforcing balance between their political, administrative and economic roles.

In this context, Zimbabwe's initial economic performance was promising.

Zimbabwe achieved its independence much later than most other former colonial countries. From the early 1980s to about the mid-1990s the Zimbabwean government managed to sustain a reasonable balance between the three key functions of state.

Zimbabwe was at this time looked upon as a "going concern". Foreign investors, bankers and aid agencies ignored the official Marxist-Leninist policies and were prepared to invest in or lend to Zimbabwe.

For much of the 1980s, consequently, the Zimbabwean economy therefore produced an average growth rate of about 4 percent per annum.

Zimbabwean agriculture was both efficient and substantial, while rural and urban workforces alike enjoyed relative job security.

Yet it must be argued that the seeds of subsequent economic difficulties had begun to be sown in Zimbabwe even in the 1980s, through an increasing lack of discipline in fiscal policy aggravated by artificial attempts to significantly boost wages by decree.

These trends were superimposed on an economy already made "inflation-prone" by more than a decade of sanctions and import substitution policies under the previous Ian Smith regime.

The balance began to tilt too far in favour of consumption as against the investment needed to rebuild the economy.

Thus, by the early 1990s, the picture started to change, with twin fiscal and current account deficits resulting in severe shortages of foreign exchange.

This, in turn, led to a drop in domestic investment and a rapid increase in unemployment, leading to the subsequent adoption of an IMF-supported Economic Structural Adjustment Programme (ESAP).

Unfortunately, the short-term results of ESAP were not encouraging, due in part to factors such as drought, a failure to control the escalating fiscal deficit, a lack of official enthusiasm, and incorrect policy sequencing.

The net effect was mounting opposition to ESAP from civil society and trade unions, and a decline in political support for Zanu-PF.

The Mugabe government's response was to adopt populist policies aimed at "buying back" political support from the key constituencies.

One of these policies was the announcement, in 1998, of an intention to transfer white-owned farms to black Africans. No one disputed the need for expedited land reform, but the new methods left much to be desired.

While there has been a severe contraction of agricultural output, it would be unwise to think that, once the land issue is out of the way, the problem will be solved, as it has now become enmeshed with a wide range of other concerns.

A steady deterioration in social indicators from the early 1990s gradually filtered into political opinion. This was then reflected in the rise of the urban opposition which, at an early stage, Mugabe took steps to offset and neutralise through the economic and other means at his disposal, including constitutional changes. Some of these have continued subsequently.

Just before the 1990 elections, the "rules of the game" for parliamentary elections were changed. In effect it meant that, even if an opposition party or coalition returned the majority of elected legislators at the polls, it would not necessarily have enough seats to form a government.

This was because 30 seats were now under the direct appointment of Mugabe. Zanu-PF now only required 46 seats to constitute a majority, whereas the opposition would require 76 seats to do so.

Available figures from official sources are riddled with inconsistencies, with the result that it is hard to discern exactly how serious the Zimbabwean economic deterioration has been.

However, strong anecdotal evidence does suggest widespread perceptions of serious economic decline and, indeed, of crisis and widespread impoverishment.

The official figures indicate that, between 1998 and 2006, Zimbabwe's real Gross Domestic Product (GDP) contracted by about a third. It probably deteriorated still further in 2007. Unemployment rose steadily and is now estimated at 80 percent of the working-age population.

A few years ago the agricultural sector employed about 450 000 people. It now employs an estimated 45 000. A
33 percent decline in agricultural production provides some explanation for the estimated five million Zimbabweans who may be in need of international food assistance this year.

Global experience suggests that runaway inflation usually comes packaged with many other policy mistakes, the accumulation of which contributes to a poor and often disastrous economic performance.

Officially, annual consumer price inflation climbed from around 55 percent in 2000 to about 1 300 percent in 2006. However, the calculation of this official rate is thought to understate the true position.

The new black economic empowerment and "indigenisation" drive could further damage an economy already hard-hit by other policies.

Although there has already been considerable "indigenisation" of the Zimbabwean economy in recent years, the plan now is to transfer control of all companies, including foreign banks and some mining companies, to local control under the black empowerment legislation.

This suggests that Mugabe may again be seeking to influence voters. This could make the economy's recovery even more problematical when the time comes.

There is little doubt that the Zimbabwean crisis has had a negative and traumatic impact on the country's people, and the human costs have been high.

However, the regional "contagion effects" have been mixed.

Zimbabwe's neighbours, in aggregate, have gained from the influx of skills, and their regional market share of exports, tourism revenues and other services has increased.

At the same time, however, there can be little doubt that developments in Zimbabwe have affected the attractiveness of the region to foreign investors, and have reinforced stereotypical global Afro-pessimism.

We need to ask what signposts might help to point the way ahead. From friendly observers not wishing to be prescriptive about how Zimbabwe can eventually correct the situation, the following under four broad headings may be offered as only some of the core components of that reconstruction process-to-be:

1. Constitutional, political and public administration aspects: Security and the rule of law need to be re-established. While a large scale demobilisation is neither necessary, nor desirable, it may be important to purge the security forces of elements most closely associated with the Mugabe regime. Stabilisation of the rural areas will also require that the paramilitary "war veterans" are somehow contained. There are those who think that Zanu-PF will or even should stay in power, even without popular mandate. This is partly because they believe an alternative government will be unacceptable to the security forces. Unless a political accommodation can be found, however, and be recognised as such both within and outside Zimbabwe, a mere "changing of the guard" would almost certainly not be enough to bring about economic recovery. The diaspora will not be reversed, and Western aid will not be forthcoming.
2. Monetary and financial issues: To reduce inflation from its current levels whether by "shock therapy" or "gradualism" will inevitably involve painful adjustment for all stakeholders in the economy, especially the poor. A stabilisation plan will be needed, including a substantial reduction in the fiscal deficit.
3. Infrastructural, agricultural, industrial and skills dimensions: The Zimbabwean economy needs to recover its competitive edge after the serious setbacks of recent years and there are several ways in which this can be addressed. Anecdotal evidence suggests only some of Zimbabwe's infrastructure may still be in reasonable shape, and that security of tenure and financing could, with the correct management, accommodate renewed growth once a political settlement is reached. Water, power, roads and other infrastructure will nonetheless need extensive rehabilitation and could require an immediate investment of up to R30 billion. The agricultural sector would need to be given a high priority with attention being given to attracting back farming skills, providing adequate security of tenure and agricultural extension services, and ensuring the exchange rate is appropriately managed. Depending upon the extent to which physical capital is actually destroyed, there remains the potential for quite a strong revival in mining and manufacturing production. While Zimbabwe once possessed one of the best-educated workforces on the continent, many of these skills have been lost to the country as a result of the diaspora.
4. International and regional assistance: While recognising that the decisions ultimately must be taken by Zimbabweans, the global community will need to help, particularly the IMF and World Bank, whose revised charters leave no doubt about their obligations to advise and, as appropriate, assist the wayward or needy. We cannot conclude the subject of Zimbabwe as though its proper treatment only depended on a "failed state" analysis or on economic facts. Explanations of the Zimbabwean situation as a political phenomenon need a different and wider conceptual apparatus if we want to understand and change it successfully. Enough international experience has now accumulated to expose the serious pitfalls that may be encountered in seeking to implement even the best-designed economic and political reconstruction programmes in a post-conflict situation.

The SADC's efforts, especially through Mbeki, to facilitate and assist the political process in Zimbabwe must be strongly applauded and encouraged, and then assessed on their merits.

Here we must recognise, in the world of realpolitik and negotiation, that compromises will no doubt have to be struck. Success will depend on minimising disputes, not on winning them.

It does seem to have fallen to South Africa to persuade an intractable autocrat to do the right thing, while holding so few cards in her hand.

Getting Zimbabwe "right" will call for political and economic leadership and strategic insight of the highest order.

This is an edited version of Raymond Parsons's Presidential Address to the Economic Society of South Africa Biennial Conference.

Parsons hold the position of Extraordinary Professor in the Department of Economics at the University of Pretoria and is Overall Business Convenor at Nedlac.

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