HomeBusiness DigestPro-poor economic growth crucial

Pro-poor economic growth crucial

The economy remains in a parlous state typified by weakening economic growth which is expected to slow further in the near future. The rebound recorded during the period 2009-2012 has moderated with economic growth declining from 11,9% in 2011 to 4,5% in 2013 and 3,1% in 2014. This state of economic affairs can be attributed to a number of factors which include: high cost of doing business which has cost the country both internal and external competitiveness.

Prosper Chitambara

Government revenue inflows have been underperforming owing to deindustrialisation. The policy environment remains unstable and inconsistent while the quality of our infrastructure and institutions have deteriorated. Furthermore, the economy is hamstrung by an unsustainably high internal and external debt which is estimated at US$8,4 billion as at December 2014.

The anatomy of the economy has undergone far reaching structural changes (de-industrialisation and informalisation) over the past 35 years with the 2014 National Labour Force survey highlighting that 94% of the economy is now informalised up from 84% in 2011. About 75% of the population is living below the national poverty line. The country is in debt distress with large external payment arrears, against a context of limited fiscal space.

The high public debt burden has been further exacerbated by the structural weaknesses inherent in the Zimbabwean economy such as lack of diversified export base and declining terms of trade and competitiveness, which make it difficult for the country to adjust to changing world demand for tradable goods and changing production patterns.

informal-sector

These structural weaknesses have constrained the country’s ability to generate high and sustainable growth that is necessary to mitigate further indebtedness with its attendant problems.

The country is in an unsustainable fiscal position with the bulk of the fiscal revenues (about 90%) financing recurrent expenditure. Consequently, the current fiscal framework contains very little specific measures to deal with the inherited and now entrenched structural distortion in the current macroeconomic framework.

The demise of the formal sector and the absence of supply-side incentives to resuscitate and engender inclusive, pro-poor growth implies that the decent work deficits that characterise the economy and entrenches poverty and its feminisation continue to abound.

The government has come up with no less than 15 macroeconomic blueprints but none have failed to comprehensively address the structural binding constraints afflicting the economy.

These polices have failed to provide a macroeconomic framework which provides a stimulus for a new paradigm that is pro-poor and inclusive, fails to promote the integrability of marginalised groups. Even at our peak the macroeconomic framework Zimbabwe has implemented over the years has not delivered on the social front as indicated by the high and worsening levels of unemployment, poverty and inequality.

In the context of a dual and enclave economic structure, it will be imperative to ensure the “integrability” of the poor in the growth dynamic.

Economic growth must be translated into productive employment growth which is a key nexus between growth and poverty reduction. It has been demonstrated that economic growth does not necessarily ensure poverty reduction and development but does so when it is accompanied by a rapid expansion of productive employment.

A number of nations that have successful poverty reduction credentials such as the East Asian tigers (South Korea, Hong Kong, Taiwan and Singapore) have also followed robust employment-creation strategies. Economic growth is pro-poor (and inclusive) if it utilises the factors of production that the poor possess. The poverty-reduction records of countries such as the High Performing Asian Economies (HPAEs) demonstrate that poverty reduction was greatest when economic growth made use of those assets.

Our strategic thrusts and objectives should revolve around: adoption of a holistic approach to development, integrating economic and social imperatives (pro-poor, inclusive growth and human-centred development); rebuilding and strengthening the role of the state as a basis for transforming it into a developmental state and promote good governance; expanding and strengthening the national institutional framework for broad-based stakeholder participation in decision-making, implementation, monitoring and evaluation; creating the basis for evidence-based policy-making by enhancing national data collection, analysis and collation; and consolidating macroeconomic stability by restoring the rule of law, bringing to closure the land issue, and enhance fiscal space by, among other things, re-engaging the international community, adopting a sustainable debt strategy, reform state-owned enterprises.

Zimbabwe can learn from its past, where at varying times, the governments strategically manipulated policy instruments to achieve desired goals. The economic management of the period 1966-75 is particularly outstanding in that through strategic import substitution industrialisation, much of the manufacturing sector was built, against a background of international sanctions and war.

During the 1980s, following a modest land redistribution exercise, government provided strategic support to the new farmers in the form of subsidised inputs, finance and extension services, and the result was what became known as an agricultural revolution and earned the country the title of “regional bread basket”. President Robert Mugabe won international accolades for the successful “revolution”. Zimbabwe can draw upon the Chinese, Indonesian and Vietnamese strategies between the 1970s and the 1990s, as we attempt to raise agricultural productivity, boost the links between agriculture, manufacturing industry and other dynamic activities, and increase the output of exportable goods simultaneously.

In order to do this, it may be necessary to reform the land tenure system and invest in better technology and in physical and social infrastructure, for example, seeds and fertilisers, crop selection, irrigation, storage and transportation facilities and so on. These programmes can be funded by a combination of taxation and targeted credit by state-owned and private financial institutions.

In Zimbabwe, like in most other developing countries, the majority of the poor live in rural areas and depend directly or indirectly on agriculture for their livelihood; the factor of production that the poor possess and use most is therefore labour. The informal economy also accounts for a great proportion of the poor people in Zimbabwe. Thus, pro-poor growth must be strategically focused on rural areas and the informal economy.

It must also enhance incomes in agriculture and make intensive use of labour. To make a significant impact on poverty, much greater emphasis must be placed upon improving agricultural productivity. To achieve high agricultural productivity, increased investment in agriculture (including basic and applied research, extension, irrigation, rural credit and expanding technological access to small-holder farmers) is urgently needed. In addition, there is an urgent need to strengthen security and tenurial rights for land.

To support the informal economy and integrate it into the formal economy, investment in basic infrastructure such as roads and energy must be prioritised. Merely relying on the private sector will not be sustainable and successful. It is imperative that government be actively involved in these areas.

Private-Public partnerships should be fully leveraged especially in the areas of infrastructure provision and rehabilitation. Ensuring pro-poor and inclusive economic growth requires that the people and their needs come first, implying a human-rights strategy to development. Thus, the prioritisation of people and their basic needs (such as food security, healthcare, education, housing, logistics, access to public utilities, decent jobs and infrastructure) should occupy pride of place in macro‒economic policy.

Prosper Chitambara is a researcher and PhD (Economics) candidate and economist with the Labour and Economic Development Institute of Zimbabwe. These NEW PERSPECTIVES weekly articles are coordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society (ZES). Email: kadenge.zes@gmail.com, cell +263 772 382 852

Recent Posts

Stories you will enjoy

Recommended reading