Eric Bloch Column

Zim diplomats ill-informed on privatisation

By Eric Bloch

IT has become highly fashionable for countries whose economies are in disarray to blame the International Monetary Fund (IMF) and the World Bank whilst also placing blame at t

he feet of political opponents and of those who have the temerity to castigate those countries for their economic (and frequent political) instability.


This trend of deflecting blame from themselves is especially pronounced in countries who, because of their economic mismanagement, cease to be recipients of largesse from the IMF and the World Bank and who, in many instances, have been suspended from IMF membership.


Zimbabwe is among the bevy of countries whose governments have abused economic fundamentals and in so doing have become debt defaulters, jeopardising their relationships with the IMF and the World Bank, and not receiving desperately needed funding support from those Bretton Woods institutions. The latest to climb upon the bandwagon of negating and disparaging all that those institutions do and the principles that they espouse, is Zimbabwe’s High Commissioner to Zambia, Cain Mathema.


Whatsoever that diplomat’s attributes may be, they very clearly do not include economics, for he last week waxed vociferously about the IMF, the World Bank, the treasury of the United States, the ineffectiveness of liberalised economies and the need for command economies. In so doing, he inadvertently made a few correct statements, albeit in incorrect context but, in the main, totally misrepresented the realities.


The high commissioner was commenting on the declining economies of both Zambia and Zimbabwe, and this was his first error. Whilst it is indisputable that Zimbabwe’s economy is declining, the same is not true of Zambia. Admittedly, for almost 40 years that country’s economy was in decline (due to the then government policies being advocated by Cain Mathema). However, that economy is now on the ascendancy, albeit very slowly because the depths to which it had sunk preclude a fast recovery. Zambia does not have a bank note crisis, there are no petrol or ATM queues or shortages of other essential products. It is not at risk of an energy crisis.


It is not regarded as anathema and a leper by the international community. Zambia’s economic recovery is in its early stages, but that recovery is under way, including substantial growth in the agricultural sector (to no small extent due to its welcoming the very farmers that Zimbabwe had displaced), and tourism, whilst its small industrial base is also achieving growth. The key difference between the past and the present is that Zambia is increasingly liberating and deregulating the economy and interacting constructively with the IMF and the World Bank, whereas in the past Zambia pursued economic policies completely in line with those which the high commissioner commends.


In his statement the ill-informed diplomat stated that budget overruns and high poverty levels would continue for as long as Zambia and Zimbabwe liberalised their economies “willy-nilly”. He said that, “Development is not just about road infrastructure but must be seen with our workers’ standards of living improving. Their food must show there is development including having good income” and that “for that development to come we must own and control the economy”.


Whilst he is correct that development must be far more diverse than only addressing road infrastructure, it is difficult to understand how he can credibly support the contention of a need to own and control the economy. That was the political philosophy of Zambia from the 1960s to the mid-1990s, and its economy was driven down to its knees.


That too has been the position in Zimbabwe since independence, save briefly from 1994–97, and if Zambia was on its knees, then Zimbabwe is now on its ankles!

Then Mathema arrived at a most incongruous conclusion as to the negative consequences of privatisation. He alleged that the mere fact that poverty has remained high in Zambia despite privatising state-owned enterprises proved liberalisation was a bad formula to economic development. In making that statement he overlooked the fact that Zambia’s economy had been driven to such a disastrous low over such a prolonged period of time that instantaneous poverty alleviation was an impossibility.


Privatisation yields funds for governments to fund development, redeem debt and reduce state deficits (thereby containing state borrowings which are a trigger to inflation), and privatisation usually releases governments from subsidy or guarantee commitments and assures efficiency, productivity and customer service. Moreover, privatisation is only one of many elements of economic liberalisation.


Mathema not only alleged that privatisation was a myth, but he said: “It has never worked, will never work and cannot bring about development.” How then does he explain the successful privatisation, more than a century ago, of certain railway systems and telecommunications in the US, and more recently of Renault in France, and British Telecom and British Gas, and until other factors impacted, of British Airways, to cite a few of hundreds of successful privatisations? And what about Zimbabwe’s successful privatisations of Cottco, Dairibord, Rainbow Tourism Group, Zimbabwe Reinsurance Company and the Jewel Bank?


He extends his diatribe against the IMF and the World Bank by saying that unless government does away with World Bank policies and actively intervenes in the economy, there would be no development. That is exactly what Zimbabwe has done for all too long, and not only does it have little development to show for it, but its principal attainment is intensified poverty and near total collapse of the infrastructure and the economy.


However, Mathema continued that: “To follow IMF strategies will not help us at all” and that the IMF continues “cheating us”. He argued that IMF policies have never worked, are counterproductive to economic growth and wellbeing and that IMF development proposals and plans were not for the advancement of Zambia and Zimbabwe, but to benefit American companies.


Pursuing this line of argument, he said: “There is enough poverty in our region because the IMF/World Bank development plan for us is to market supermarkets for American and British multinational companies. There is so much dead capital in our region which we cannot exploit because we are made to pursue policies that will never develop our economies beyond poverty.” What nonsense!


Of course the IMF and the World Bank don’t get things right all the time. Their personnel are human and, therefore, fallible but have a wealth of experience and a track record of facilitating many economic recovery successes, in contradiction to the high commissioner’s contentions that the policies of those institutions have never succeeded and are only directed to benefiting American and British corporates.


There are numerous examples, including the dramatic economic growth and per capita income increase in the 1970s and 1980s of the “Asian Tigers”, the spectacular turnaround in Mauritius from 1984 onwards, the attainments of many of the countries in eastern Europe in the post-1989 era, the astoundingly rapid recovery of Mexico’s economy from the depths of depression, and many others. Even closer to home there are some pronounced examples, including Botswana and, in recent times, the commencement of economic upturn in Kenya (which has reduced inflation to 8% as compared with Zimbabwe’s inflation of more than 400%), and an impressive start to economic recovery in Mozambique, notwithstanding disastrous climatic conditions for several years.


Mathema appears to be particularly upset that the countries of Comesa, which includes Zimbabwe, are merely producers of raw materials for Western economies. That factually incorrect, for the economies have been, and can again become, providers to the populace of Comesa, value-adders and beneficiaries to primary products, economic exploiters of major tourism resources, and much else. There is nothing wrong with being providers to others of raw materials if, in so doing, employment is created, investment be forthcoming, the economy is stimulated, and foreign currency generated to service needs satisfactorily.


Zimbabwe must remove “the chip from its shoulder” against the IMF, the World Bank, and the precepts of a deregulated economy. Until that occurs (concurrently with restoration of law and order, democracy and political stability), Zimbabwe’s economy will continue its appalling deterioration, shrinking more and more and the population will become increasingly impoverished.

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