Erich Bloch; Brain Drain Fuelling Inflation

OF the many causes of Zimbabwe’s horrendous, earth-shattering hyperinflation, which is now considerably in excess of 10 million per cent (year-on-year), one of the very significant ones is the massive decline in productivity in virtually all economic sectors.

 

The disastrous hyperinflation is attributable to inflation itself, which is sharply causing more inflation, the impacts of the parallel and black markets in foreign exchange, and of the black market upon commodity prices, and upon grossly excessive governmental spending and concomitant unduly great printing of money.

The hyperinflation is also a result of pronounced public and private sector corruption, which intensely impacts upon business operating costs, and is also a consequence of many other factors.

But one of the significant contributants to Zimbabwe’s soaring inflation is the extremely great burden of fixed costs (including rentals and property expenses, salaries, insurances, and numerous other overheads) that has to be borne by each unit of production, because volumes of production have decreased to an extremely great extent.

At the turn of the century, the manufacturing sector was utilising in excess of 75% of its productive capacity, whereas capacity utilisation is now estimated to average 15%, and is still falling. Thus with only one-fifth of the production of less than eight years ago, each unit now produced has to bear five times as much of fixed costs than then applied. This is a very major cause of inflation, and that cause is exacerbated by the insufficiency of goods in the market-place, markedly due to the reduced production. The product scarcities and consequential excesses of consumer demands over supply are major stimulants of the black market, which market feeds upon endless price escalations made possible by the anxiety of consumers to access scarce products.

In agriculture, the fall in productivity was almost wholly due to the ill-conceived, and even more ill-managed, land reform programme, which displaced skilled and able, in some instances replacing them with others skilled and able, but in many, instances with those seriously lacking in the requisite skills, the unable and the unwilling. The fall in productivity has also been due to the state depriving farmers of right and title to the lands, thereby effectively depriving them of the collateral needed to source working capital, and by prolonged mismanagement of prices by government, precluding operational viability. However, further key factors were the devastatingly poor management by government of essential input availability, and by the gargantuan extent that political and economic conditions have motivated able agricultural workers to seek employment in neighbouring territories (and particularly so in Zambia, Malawi, Mozambique and South Africa).

Very similar conditions have impacted upon productivity in the manufacturing sector. The mammoth non-availability of foreign exchange (intensified by Reserve Bank expropriation of private sector holdings of foreign exchange in Foreign Currency Accounts) has had grievously adverse effects. First and foremost has been erratic availability of manufacturing inputs, resulting in numerous factories having to downsize or resort to part-time operations, and often to interrupt operations until further inputs come to hand.

This has been severely exacerbated by the fast deteriorating infrastructure, with some manufacturers being without electricity for up to 20 hours a week, having irregular and inadequate supplies of water, and sharply increased delivery costs and delivery delays as a result of the deteriorating state of national and urban roads, of national rail services, and irregular fuel availability. The shrinkage in productivity is also due to industrial plant, machinery and equipment becoming more and more aged, as neither foreign currency or cash flow resources are enabling timeous capital expenditures, and due to deteriorating maintenance caused by frequent lack of critical spares, also as a result of the insufficiency of foreign exchange.

Yet another cause of the decreasing productivity is that labour forces are becoming more and more demoralised and demotivated, they being understandably wholly focused upon the overwhelming stresses to which they are subject. Most cannot afford public transport, and are walking distances of eight to 15 kilometres to work each day, with a like distance home at day’s end. They do not earn sufficiently to feed, house, educate and care for their families. Even frequent wage increases (oft beyond the means of the employers) do not suffice to keep pace with inflation. Families are being broken up as more and more seek employment beyond Zimbabwe’s borders, or as wives and children return to rural areas in order to reduce, marginally, essential expenditures. As a result, labour is producing lesser volumes, and much that is produced is of lower quality than required. All this unavoidably impacts upon industries’ pricing policies, and therefore upon inflation.

However, one of the major contributory factors is the gargantuan “brain drain” of Zimbabweans to seek livelihoods further afield. Whilst not all of those who have departed to seek incomes in South Africa, Botswana, Namibia, Zambia, Malawi, Mozambique, United Kingdom, Germany, USA, Canada, Australia, and elsewhere were skilled, and therefore were unable to obtain formal employment in those countries, very many were. Zimbabwe has had a mass exodus of not only doctors, nurses, radiographers, physiotherapists and pharmacists, but also of engineers, accountants, production managers, designers, quality controllers, electricians, diverse technicians, marketers, and innumerable others. This has critically affected the efficiency and quality of operations in all economic sectors, and a resultant indirect consequence is yet further inflation.

Although no absolutely authoritative data exists, reliable estimates indicate that in excess of five million Zimbabweans now live beyond Zimbabwe’s borders. Not only is that more than a third of the population but, if children and aged are excluded as generally not economically productive, then some 50 to 60% of those who could contribute to Zimbabwean economic wellbeing are no longer in Zimbabwe.

Almost all, at time of departure, were genuinely intending to return one day, their motivations for leaving being solely to earn “real” money in order to support many family dependants back home, to fund acquisition of a home (in Zimbabwe), and to accumulate some capital. But those intents disappear as the Zimbabwean economic decline continues endlessly, as they sink new roots and develop new lives, meeting others, having children, acquiring homes, enjoying career development and advancement, making new friends, and so forth. The reality is that few will ever return, save on brief visits.

Therefore, a key facet of Zimbabwean economic recovery will be the determination and ability of the private and public sectors to develop new pools of skills, to enhance the skills of the few who have remained in Zimbabwe, and creating an environment that those in Zimbabwe with skills (including future additions to the pool of skilled persons) are not motivated to depart Zimbabwe, but to remain in the country. This, of course, requires major political and economic policy changes on the part of government, but it also needs commerce and industry, mining, tourism, financial services, and other economic sectors to intensify personnel training, enhance emoluments on an ongoing basis, within the constraints of business viability and survival, to strive to enhance morale, and to access expatriate inputs.

Failure to do so will further fuel inflation, and will accelerate Zimbabwean economic near-total collapse.