Early this week the Minister of Finance, Tendai Biti, deserved commendation when he announced that Government and the International Monetary Fund (IMF) had agreed that Zimbabwe would implement an IMF-staff monitored Sovereign Debt Management Programme, which would progressively ensure reduction of Zimbabwe’s US$10,7 billion national debt (including debt rescheduling and potential partial debt forgiveness).
The Erich Bloch Column
Such a programme, with the implementation of it being strongly interactive with IMF’s personnel expertise, would enable removal in due course of Zimbabwe’s suspended membership of IMF and would facilitate reinstatement of good credit rating internationally for Zimbabwe. That is in pronounced contrast to Zimbabwe’s very negative international credit rating at the moment.
However, counterbalancing that meritorious development, Biti also misrepresented the views of “textbook economists” on the magnitude of Zimbabwean unemployment rate. At the launch of the Poverty Income Consumption and Expenditure Survey 2011/12 Report, issued by the Zimbabwe National Statistics Agency (Zimstat), Biti said that it was unfounded when such economists stated that the extent of unemployment exceeded 85%, and that the actual unemployment rate in Zimbabwe is only 9%. In attacking the alleged textbook economists, he was clearly oblivious of the Disraeli maxim that “there are lies, damned lies, and statistics”.
Equally, he was unaware of the contention by a leading US investor that, “Statistics are like a bikini – very revealing but concealing the essentials”.
When diverse Zimbabwean and international economists, and many other statisticians refer to unemployment in Zimbabwe exceeding 85%, they consistently say that “in excess of 85% of Zimbabwe’s employable population do not have formal sector employment”. In other words, they are specific that assessment is not of numbers gainfully employed, be they so engaged in the formal or informal sectors, but only of those without formal sector employment. Indirectly, the minister substantially corroborated that an overwhelming majority of those unemployed in the formal sector were closely aligned with the contentions of those described by him as “textbook economists”, for he acknowledged that only 22% of the employable population were engaged in the formal sector.
In fact, according to the Zimstat Survey, at least 57 % of Zimbabweans are engaged in informal sector activities, generating almost 20% of Zimbabwe’s total economic output (measured as Gross Domestic Product). Moreover, if more than half of the population are earning less than one-fifth of the national economic output, it is very evident that many within the informal sector are not realising any substantive income. That supports the assessment of many in the private sector and international authoritative economic evaluators, that a vast majority of Zimbabwe’s population are struggling to survive on incomes below the Poverty Datum Line (PDL) and many of them do not even earn to the extent of the Food Datum Line (FDL), and therefore they and their families suffer grievous malnutrition.
In addition, the survey undoubtedly only includes those informal sector economic operators who are engaged in legal, or quasi-legal operations, excluding those who resort (often out of financial desperation) to illegal activities such as theft, gold-panning, diamond smuggling, hijacking, and the like, as well as those who seek a livelihood as “runners”, carrying imports or exports circuitously, in order to evade liability for customs duties and like imposts, or to avoid import or export restrictions and constraints. The survey contends that at least US$1,7 billion (equating to approximately 19,5% of GDP) is earned by informal sector operatives, but if the unlawful, and therefore undisclosed, incomes are brought to account, the quantum of informal sector earnings would be considerably greater, and would represent a markedly higher percentage of GDP.
The magnitude of informal sector operations results in several major national prejudices. These include the competition to formal sector operations, by virtue of minimal overhead operating costs, and tax evasion, contributing to the decline of many manufacturing and other sector enterprises. This results in diminished formal sector employment, and much reduced fiscal inflows. Those inflows are a critical necessity for government to address its ongoing state of virtual bankruptcy, with concomitant inability of the state to fund fully essential services such as Education and Health, maintain and enhance infrastructure, and the like.
Moreover, many of the informal sector operations place the wellbeing of the operatives, and of the populace in general, in jeopardy, for there is frequent non-compliance with governmental and local authority health laws, road safety regulations, and with many other laws intended to be protective of workers, consumers, and others. Among those operations are also considerable numbers that encompass externalisation of currency from Zimbabwe, thereby intensifying the constant negative balance of payments which further constricts Zimbabwe’s achieving its needed economic recovery and growth.
The magnitude of the informal sector becoming formalised is driven by diverse factors, the foremost being:
- Constructively addressing the non-availability of formal sector employment, which will endure until government facilitates the procurement of considerable foreign investment, lines of credit, and funding for the banking sector. That facilitation must include actions which will imbue potential investors with confidence of investment security, will maximise an environment of substantive adherence to respect for property rights and maintenance of law and order, a conducive tax regime, and effective infrastructural service delivery.
- Minimisation of bureaucracy constraining formal sector operations, including significant devolution of administration to all areas of the country, instead of absolute centralisation thereof to the governmental head offices in the capital city.
- More effective enforcement of compliance with law, evaded by many in the informal sector, instead of evasion of law being facilitated by the corrupt willingness of many authorities and law enforcement officers to accept bribes in order to be oblivious to the constant evasion of the law.
- Practical and realistic incentives and inducements being extended to those who can migrate their informal sector-operations to the formal sector.
- Because of the intensity of the widespread national poverty, primarily driven by the inadequacy of formal sector employment, and non-accessibility to funding needed for effective formal sector operations, most of the population are driven to informal sector engagement, in order to survive, and with such engagement not generating enough for essential needs. Thus, instead of gleaning satisfaction from the number allegedly in employment (being almost wholly within the informal sector), government needs belatedly to recognise the ills that afflict Zimbabwe and its populace, and must effectively address those ills.