When Finance minister Patrick Chinamasa two years ago announced that he would depart from government’s long-standing tradition of paying out an annual bonus to public sector employees due to an economic downturn, it was hailed as a progressive step.
Chinamasa, who was flanked by then Information minister, Jonathan Moyo, shocked civil servants, long accustomed to a 13th cheque. The disclosure marked a departure in how government went about its business dealings.
In some quarters, Chinamasa was seen as a reformer and the ideal Finance minister Zimbabwe needed in its hour of need.
Since government was failing to pay its workers and revenue collections were dwindling, his move seemed logical.
However, barely a week after his remarks, Chinamasa was thrown under the bus by President Robert Mugabe. Playing to the gallery during Independence Day celebratbions in 2015, Mugabe declared government would defy all odds and pay the 13th cheque to civil servants.
Chinamasa will remember Independence Day of the same year as a day when Mugabe sacrificed economic logic on the altar of political expediency in an address to thousands that attended the independence celebrations at the National Sports Stadium.
With a total stock of Treasury Bills at just over US$2 billion, critics say government could either continue to rely on the debt instruments to finance expenditure or force the central bank, which began printing a promissory currency last November, to print more. The Reserve Bank of Zimbabwe said it would introduce bond notes worth US$200 million, backed by an African Export and Import Bank facility.
Mugabe’s populist remarks may have blocked Chinamasa, but they further undermined the fragile economy.
“I want to make it clear that the reports in the newspapers, that bonuses were being withdrawn, is not government policy. The cabinet did not approve all that and the presidency was never consulted, the three of us, and that is myself and the vice-presidents. And we say it is disgusting to us and it will never be implemented at all. Let the civil servants not be downhearted, that will not happen,” Mugabe said then.
As if that was not enough, Chinamasa’s proposed reforms last year in the mid-year fiscal policy statement that included cutting 25 000 government jobs, reducing the salaries of senior civil servants and suspending annual bonuses for at least two years, were shot down again in September.
Chinamasa has indicated government’s wage bill is now gobbling a whopping 96,8% of total revenue and that Treasury had resorted to borrowing from the domestic market to finance the yawning revenue gap. The reforms were aimed at containing the growing recurrent expenditure which has left Treasury with virtually no fiscal space for capital projects.
On Monday this week, government agreed to spend US$180 million on civil servants’ 2016 bonuses for its estimated 500 000-strong workforce, preventing a potentially crippling strike by the civil servants. Defence and health sectors will receive their bonuses in April, followed by teachers in June, while the rest of the civil service will get paid in August.
Critics say government is paying a hefty price for Mugabe’s populist politics. This, together with his politics of cronyism and patronage, are something that have epitomised his rule since 1980. In doing so, Mugabe has on many instances shifted the blame to his lieutenants and in some cases, he has ridiculed past Finance ministers of practising what he termed “bookish economics”.
In 1997, for instance, the Zimbabwe dollar suffered its worst plunge in a single day in what is now known as “Black Friday” after Mugabe decided to gratify restive liberation war veterans by paying them unbudgeted gratuities. On November 14 that year, the Zimbabwe dollar lost 71,5% of its value against the United States dollar as a result of the populist move. The stock market subsequently crashed, wiping away 46% from the value of shares as investors scrambled out.
At the turn of the millennium, government embarked on the chaotic land reform which triggered a plunge in agricultural output as an electoral gimmick disrupting vertical and horizontal linkages in the economy.
Political analyst Maxwell Saungweme said the unsustainable move to pay civil servants bonuses by Zanu PF’s broke government was a populist manoeuvre ahead of the 2018 general elections.
“As for Mugabe, he is a lost cause whose populist policies are nothing other than reactionary pronouncements for cheap political gain. Mugabe is trying to square the circle. He is out of touch with reality and responsible for civil servants’ plight in the first place,” Saungweme said.
“It’s part of his cheap political gimmicks; it’s calculated to attract civil servants’ votes. But this may not work, as people know that these populist political measures are common during the run-up to elections. Soon after elections, people are neglected and it would be back to reality. This has been repeated one too any times by Zanu PF and its impact this time around can be minimal. People will take the bonus and freebies, but vote the way they want.”
Confirming that the country’s economy was in the doldrums, Chinamasa painted a gloomy picture during the budget presentation, saying in 2017 government will spend US$3 billion on employment costs, leaving only US$400 million for current operations, capital and social projects.
The precarious financial position was amplified when the Zimbabwe Revenue Authority (Zimra) missed its 2016 revenue collection target by US$145 million.
According to Zimra’s 2016 fourth quarter report, annual gross collections amounted to US$3,462 billion, which was 96% of the targeted US$3,607 billion.
Independent economist John Robertson said the economy is saddled with a myriad of problems aggravated by the Mugabe government’s poor policies which have made it difficult to pay bonuses without straining the budget.
“We haven’t moved from our situation and yet the wages paid by the government are beyond our means. It’s beyond the tax revenue collection. Our taxes are going down and the economy is sneezing. The manufacturing sector is suffering from company closures. So government is digging deep in debt. It’s going to borrow and go into debt from new or old lenders,” Robertson said.
“The real problem is lack of new investment and this is a serious problem. We need a new investment climate because we have the worst investment climate in the world. The climate is discouraging and investors feel Zimbabwe is not a good place to bring their investment. We agreed with IMF at Lima and what was promised is now in limbo. It’s not enough to simply agree, what important is to put into practice.”
Labour and Economic Development Research Institute of Zimbabwe economist Prosper Chitambara said under these circumstances government will continue reeling in debt, which will scupper the country’s economic growth prospects.
“It’s something I expected in view of the elections. Cutting expenditure ahead of elections next year is good for the economy, but it’s inconvenient for politicians,” Chitambara said.
“Civil servants are a key constituency. It’s going to affect budget deficit to gross domestic product (GDP) which was 7,3% last year, which is not sustainable. Government is borrowing locally, thus crowding out the private sector from borrowing from local financial institutions. This creates a macro-economic problem. Due to the fact that there is no drought this year, the budget-deficit-to-GDP (ratio) may decline to 6%, but again a deficit above 5% is not sustainable for a country like Zimbabwe.”
With elections looming, Mugabe — who brewed a shocker in the run-up to 2013 polls and ordered local authorities to write off their debtors’ book — is likely to adopt more populist moves that will have far-reaching consequences for the crumbling economy.