HomeBusiness DigestDeficiency of political will imperils economic reforms

Deficiency of political will imperils economic reforms

THE raft of measures to breathe life into the comatose economy promised in a letter of intent to the International Monetary Fund (IMF) by Finance minister Patrick Chinamasa and Reserve Bank of Zimbabwe governor John Mangudya, mainly focusing on cutting down the wage bill and restructuring parastatals which are a huge drain on the fiscus, will remain a pipedream unless there is sufficient political will to implement them.

Kudzai Kuwaza

The letter of intent to the IMF managing director, Christine Lagarde dated April 17 2015, gives insight into government’s plans to revitalise the economy and tackle a wide range of key issues from strengthening the financial sector to dealing with the thorny issue of indigenisation.

But it is the two issues of cutting down the wage bill and weaning off money-gobbling parastatals which have become synonymous with corruption and mismanagement that present the greatest test to government’s sincerity in implementing what it has promised the IMF.

Zimbabwe is implementing a 15-month Staff-Monitored Programme (SMP) with the Bretton Woods institution, but the IMF has ruled out financial assistance until Zimbabwe settles its debt of US$142 million in overdue payments.

An SMP is an informal arrangement between a country’s government and the IMF to monitor the implementation of the government’s economic programmes.

“On the expenditure side, we have kept the overall wage bill below budget projections in 2014 and intend to lower it as a share of GDP in 2015,” the government officials said in its letter to the Bretton Woods Institution.

“The Civil Service Commission has been working on streamlining public sector employment by conducting a restructuring exercise to align ministries’ staffing with their mandates to identify duplication and redundancies. By end-2015 we expect to complete decentralisation and modernisation of the Salary Service Bureau, which would place a payroll assistant in every district, strengthening control over the wage bill and minimising irregularities.”

Reducing the wage bill would involve retrenching part of the 236 000 civil servants on its payroll which gobbles more than 80% of the governments’ revenue, a move government has no appetite for given its promise to create 2,2 million jobs between 2013 and 2018.

Continued company closures and retrenchments, which have seen the unemployment rate exceed 85%, mean government’s job target remains a pie in the sky.
The culling of civil servants would have political ramifications for Zanu PF, as retrenching workers would all but confirm that the government has failed in its quest to create the 2,2 million jobs.

In any case, an audit of the civil service was done in 2011 during the tenure of the Government of National Unity (2009-2013) but was never implemented.
Chinamasa last month said the Ernest & Young audit report recommendations were not implemented because the coalition government partners were fighting over the findings as some thought it was not complete —confirming a political will deficit.

The report which was never made public but was leaked to the media established that the government had irregularly employed 75 000 workers with the majority employed between March and June 2008.

Labour minister Prisca Mupfumira, who with Chinamasa is spearheading a cabinet committee tasked with looking at ways to reduce the wage bill, said the committee is still engaged in the process and would address “all the issues” pertaining to the wage bill.
“We have not finished the process. It is ongoing,” Mupfumira said.

“We are going to look at all the issues and see where we can save and how we can reduce the wage bill without necessarily retrenching people, unless it is absolutely necessary because ZimAsset does not talk about throwing people onto the streets.”

Former Zimbabwe National Chamber of Commerce president Oswell Binha has serious doubts about government’s political will to reduce the astronomical wage bill.
This is despite government struggling to fund its public sector wage bill in the face of dwindling revenues as more and more companies retrench or close shop due to the economic crisis.

“The labour market has formed the basis for strategic political capital over the years and populist policies continued to undermine efforts to streamline and right size this sector. On the contrary, effort was invested in the ballooning of the civil service across the board,” Binha noted.

“Commitments made by the finance ministry and the RBZ are technical in nature offering a realistic perspective. However, I doubt their capacity to galvanise necessary political will at this stage. It’s one thing to present a commitment on paper and it’s another to follow it through,” he added.

Binha’s views are shared by economist Godfrey Kanyenze who doubts government’s sincerity over civil service retrenchments.

“The culture of political populism would imply government cannot go ahead with such decisions (to retrench),” Kanyenze said.

“Such decisions are an anathema to their DNA. Political will and political courage are very critical. The government is too steeped in consumption and lacks the attributes of creating developmental space.”

Chinamasa and Mangudya also pledged to restructure 10 parastatals as a way to cut costs to government’s shrinking revenue base.

Parastatals continue to be a huge burden on the fiscus with the likes of the National Railways of Zimbabwe and Air Zimbabwe mired in serious financial difficulties that have resulted in poor service delivery and failure to pay employees.

“We have started work on restructuring parastatals to reduce fiscal costs, improve accountability and service delivery. We have identified 10 state-owned enterprises that after restructuring will play a more important role in the implementation of ZimAsset,” they wrote.

ZimAsset is government’s latest economic blueprint which many economists have argued is — like the civil service retrenchments — is unlikely to be implemented as the uncreditworthy government simply does not have the approximately US$27 billion needed to implement it.

The parastatals to be restructured include Agricultural and Rural Development Authority, Cold Storage Company, Grain Marketing Board, Air Zimbabwe, Tel One, Civil Aviation Authority of Zimbabwe, National Railways of Zimbabwe, Industrial Development Corporation of Zimbabwe, Zimbabwe National Water Authority and Zimbabwe Power Company.

However, given that parastatal restructuring this has been on government agenda since the early 1990s when the Privatisation Agency of Zimbabwe was formed, which resulted in the privatisation of just a handful of entities including Dairibord, Kanyenze is sceptical government will privatise 10 entities.

“This (restructuring) has been on the agenda since 1991. Minister Chinamasa made the undertaking in his 2015 budget last year that they would privatise these parastatals but we are almost half the year through and nothing has been done,” Kanyenze noted.

“The correspondence to the IMF is a letter of intent, and I am sure it will remain as such.”

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