Zim’s actual GDP distorted by corruption

The size of any economy, its growth or shrinkage, is generally determined by evaluation of the country’s Gross Domestic Product (GDP).

Column by Eric Bloch

The Zimbabwe Statistical Agency (Zimstat) regularly measures Zimbabwe’s GDP, and assiduously strives to determine it as accurately as reasonably possible.

It commendably does the same with many other statistics which are of significance to aid government in coming up with policy determinations.

The same figures are critical to the private sector in general, and the financial, commercial and industrial sectors in particular.

These statistics cover a significant range of economic indicators, including the Consumer Price Index (CPI), from which inflation data is determined, the Poverty Datum Line (PDL), Food Datum Line (FDL), the number of people employed and unemployed, and population data, amongst others.

Although Zimstat seeks to identify relevant facts and figures pertaining to GDP, certain facets of the Zimbabwean economy are difficult to determine, and are not included in the GDP. Among the foremost of such unidentifiable, non-quantifiable components is corruption; for there is no reliable source from which the magnitude and extent of this phenomenon can be ascertained.

The fact is, tragically, that so many in both the public and private sectors are engaged in corrupt practices.

And yet it is sadly uncontestable that corruption is exceptionally pronounced in Zimbabwe. While almost all Zimbabweans were inherently honest, and corruption was anathema to them, that has markedly changed over the many years of hardships, poverty and suffering that have afflicted a vast majority of the populace.

Even the most honest ended up resorting to dishonest practices when their children were not only crying from hunger, but were dying from hunger!

It is not disputable that widespread corruption does exist in both the public and the private sectors. It is apparent that many (albeit not all) politicians have progressively enriched themselves from the time they first engaged in the political sphere.

That most of them had very limited resources when their political lives began is well-known, but they now possess one or more upmarket houses, numerous motor vehicles, and a vast and diverse range of private sector investments (often including investment beyond Zimbabwe’s borders).

This is clearly also emulated by numerous civil servants, be they permanent secretaries or PAs to ministers, or others further down the public service line.

Similar levels of corruption prevail throughout most of the private sector, from senior management down to general labourers, be they sweepers or cleaners.

Depending on the levels of employment, the nature of the corruption is varied, with some accepting bribes to ensure contract awards while others misappropriate and falsely use invoice and receipt books, and the like.

Many resort to unauthorised usage of employer-owned assets, such as motor vehicles, even to the extent of using such vehicles as pirate taxis. And the magnitude of employee perpetrated misappropriation and theft of monies and goods is extensive, ranging from minor items such as stationery, catering inputs, cleaning materials, and the like, to theft of stocks and other assets.

But, save to the extent that such corrupt practices are only quantifiable if criminal proceedings are brought against the perpetrators, there is no authoritative data that can be obtained as to the quantum of the corruption-based activities which, to all intents and purposes have become a key element of the Zimbabwean economy, and yet cannot be included in GDP calculations.

Another area of economic activity which has grown over many years of embattled economic circumstances, primarily occasioned by negative government policies and by gross disregard for economic needs on the part of the political hierarchy, is that which is known as the informal sector.

The intensification of formal sector unemployment over past years has been a major source of the increasing poverty that is characteristic of Zimbabwe. So too was the stupendous, record-breaking hyperinflation that prevailed in 2008.

Although impressively and effectively halted in 2009 upon adoption of foreign currencies, it was not reversed. Thus the enormously high prices of goods and services created by that hyperinflation continue to prevail, and have marginally risen, albeit to a limited extent.

In desperation, thousands have resorted to generating income for themselves in the informal sector, no matter how limited such income may be.

Some of the informal sector activities are highly unlawful and include gold-panning, diamond-smuggling, and the like. Other informal sector operations are very varied, ranging from the manufacture and sale of goods such as furniture and household accessories, repair of footwear, and much else. Others are engaged in simple trading or in the rendition of services such as plumbing, electrical work, operation of unlicensed transport services, currency-dealing, and much else.

Almost all of such income-generating activities are unlawful, as they do not conform to licensing laws, health and other regulations. Many are not registered with and do not submit tax returns to, the Zimbabwe Revenue Authority. Further, their transactions are not formally recorded and hence are not included in the calculation of GDP.

Yet a further field of quasi-economic activity that is not-documented or reported on, and hence not an element of the calculated GDP, is the “transfer-pricing” engaged in by some importers and exporters, where invoices and other relevant documents are falsified, with the intent of unlawfully externalising funds and minimising taxable income. Similarly, there are many who deliberately understate their cash sales revenues, again with intent of avoiding tax.

It can similarly be argued that the activities of touts, such as those at border posts, at Zesa offices (issuing pre-paid metre units), passport offices and the like, who facilitate “queue-jumping” by the public, are engaged in an economic activity, for they charge fees for their services.

But, as with other informal sector operations, there is no recording of their revenues by Zimstat, nor rendition of tax returns. Hence these revenues also fail to be included in GDP.