Eric Bloch: Eat only that gathered

ON February 18, very shortly after being appointed Minister of Finance of Zimbabwe’s new “inclusive government”, Minister Tendai Biti reviewed Zimbabwe’s 2009 national budget.

Being well aware of the devastating economic consequences which had been afflicted upon the nation by the endless profligate spending of the preceding governments, he very commendably pronounced a policy that Zimbabwe should only “eat that which it gathers”. He was emphatic that Zimbabwe had to vigorously curb state expenditures, containing them to the extent of available resources. He stated categorically that expenditures should not exceed revenues, and that deficit budgeting was untenable and unacceptable if a Zimbabwean economic recovery was to be achieved.

It is undisputable that the magnitude of the spending excesses of his predecessors had tragically contributed, to an exponential extent, to Zimbabwe progressively sustaining the most pronounced hyperinflation than ever before experienced anywhere in the world. That expenditure was not only funded by grossly excessive, unsustainable borrowings, but also by forcing  Reserve  Bank of Zimbabwe to engage in diverse quasi-fiscal operations far beyond the mandate and functions of any central bank, and that in turn fuelled massively excessive money-printing, unsupported by reserves. This was a major stimulus of inflation, destroyed investor confidence, undermined the credibility and substance of Zimbabwe’s currency, and impacted negatively upon all facets and sectors of the economy. Hence, the Minister of Finance was unequivocally correct in his declared intent to limit governmental spending to available resources.
However, whilst determining upon such a policy was not only very necessary (and long overdue), implementation could not easily be forthcoming. The magnitude of the governmental infrastructure and its attendant fiscal commitments, and of critical needs, is so gargantuan that expenditure reduction is an extraordinarily difficult task, and particularly so as concurrently  with the spending containment  policy, government was (belatedly but very rightly) discontinuing the imposition of quasi-fiscal operations upon RBZ,  enabling RBZ to revert exclusively to core central bank activities, but necessitating  governmental assumption of some of those operations.
At the same time, the distraught  state of the economy could not possibly yield an immediate, adequate enhancement of state resources, and inevitably there would be some substantial elapse of time before significant international funding support would be forthcoming, for the international community would not be speedily convinced  of the reality and continuity of governmental transformation to the fundamentals of good governance, including absolute democracy,  unlimited respect for, and adherence to, human and property rights and the rule  of law.
Drastic and courageous cost-cutting is a prerequisite for attainment of Minister Biti’s declared objectives. It was therefore very heartening that last week the Minister of State in the Prime Minister’s Office, Gorden Moyo, advocated a substantive reduction in Zimbabwe’s diplomatic representation abroad. It is incomprehensible that a country with a population of less than 12 million (excluding those abroad), and with a government recently declared by the Prime Minister to be “bankrupt” should be expending in excess of US$20 million per month to maintain 16 embassies in Africa, nine in Europe, five in the Far East, and eight in other countries, together with one at the United Nations, and three consulates. Zimbabwe cannot afford (and does not need) — 42 diplomatic presences around the world.
Many other countries in need of governmental expenditure reductions have resorted to having fewer embassies to represent them, focusing upon regionalised representation. Thus, years ago, New Zealand closed its embassies in Zimbabwe, Malawi, Zambia, Mozambique, Botswana and Namibia, and facilitated its embassy in South Africa to represent it throughout the region. Israel did similarly, and Denmark and Belgium’s interests in Zimbabwe are addressed by their South African-based embassies. Zimbabwe should engage in similar diplomatic consolidation. Its interests in Europe would be readily and fully addressed by embassies in Brussels (headquarters of the European Union) and, having regard to the numbers of Zimbabweans in those countries, and extensive investment and trade linkages, in the United Kingdom and Germany. That would reduce Zimbabwe’s embassies in Europe from nine to three, with not only the concomitant reduction in costs, but also a saving in critically needed foreign exchange.
In like manner, Zimbabwe could probably be well-served by two embassies in the Far East, instead of five, and by approximately eight in Africa, instead of 16. Admittedly, the scaling down of the number of embassies will reduce the number of opportunities of creating sinecure posts for favored friends, but the expenditure and foreign currency savings for Zimbabwe would be considerable and of immense value in progressing economic recovery.
However, the drive to cut state expenditures needs many other vigorous actions. It is incomprehensible that a country with a population smaller than that of the city of New York should have over 120 000 civil servants (including teachers, healthcare personnel, and administrators) and armed forces, unless much of that number comprises, as widely rumoured, numerous “ghost workers”. Such fictitious employees, a drain upon the near-empty state purse, must be speedily eliminated, and the armed forces markedly reduced. Zimbabwe does not need monolithic defence forces, for it is at peace with all, save and except that it is fighting a war of economic recovery. And why does it need a Central Intelligence Organisation in addition to a Criminal Investigations Department, a Ministry of State Security, and a ministry that extensively monitors telecommunications? Judging by the magnitude of traffic police roadblocks, and the number of police present at a peaceful protest rally, and using uncalled for, oppressive force thereat, suggests that the Zimbabwe Republic Police is also overstaffed.
The Parliamentary Committee for the development of Zimbabwe’s new Constitution should also give very serious consideration to the desirability and necessity for a two-tiered legislature. How can Zimbabwe justify the immense cost of a senate, in addition to a 120-seat parliament, when it has a population of less than 12 million and cannot afford to effect adequate expenditures on education, health services, social welfare, and the like? Similarly, should not the new constitution limit the number of ministers  and deputy ministers to realistic levels,  and reduce the number of provincial  governors  to a maximum of five (if,  in fact, any are needed).
Government must also speedily pursue a major drive to contain public sector corruption. Such corruption prevails worldwide, to varying degrees, but it is widely perceived, with probable justification, as being very pronounced within Zimbabwe. There has been much media coverage recently of alleged massive numbers of ghost workers receiving state salaries and allowances, but undoubtedly there are diverse other corrupt practices. These can range from falsified expenditures to expropriation or unauthorised usage of state assets, or to acceptance of “commissions” for directing contracts to certain suppliers   (who increase their charges appropriately to recover such “commissions”). There have been various instances of government unhesitatingly specifying private sector individuals under the Prevention of Corruption  Act, often for very prolonged and highly prejudicial periods without evident justification, and yet minimal evidence of containment  of public  sector corruption.
Heretofore it appears that the focus of pursuit of “eat which we gather” has  been exclusively upon intensified efforts by Zimra to generate tax and like revenues, including excessively harsh and inhumane actions against informal sector, small-scale vendors  struggling to survive, and dogmatic disregard for cash flow constraints of many mining, industrial and commercial  operations. Short-term enhanced collections are being pursued at the jeopardy of economic recovery and greater future revenue inflows to the state. Whilst tax compliance must be pursued, practically and realistically, with equity, government’s primary focus in achieving fiscal revenue and expenditure parity must be on cost containment.