Super-normalising the ailing economy

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KATHY Charmaz uncovered the classic grounded model she called super-normalising. She studied heart attack victims and discovered that these patients tended to engage in excessive and gruelling physical exercise in order to prove that they had normal hearts, worsening the condition even further.

Super-normalising is not confined to medical social psychology — the behaviour is widespread. I am afraid our esteemed Finance minister Mthuli Ncube and his advisors are super-normalising an ailing economy. There is a trail of inter-changeable indicators (pointing to the same behaviour) left in the wake of Ncube’s speeches and actions.

Ncube continually exhibits super-normalising behaviour when it comes to his articulation of the country’s fiscal health. Well before legislator Tendai Biti pointed out last week during Ncube’s Public Accounts Committee appearance that the fiscal surpluses Ncube harps on incessantly are questionable, this column picked apart the fiscal performance data and showed that the fiscal surpluses were doubtful.

It was clear from the fiscal performance data it was virtually impossible for government to have a total monthly expenditure that was less than the normal civil service wage bill. The following evidence-based analysis was published in this column well before last week’s appearance by Ncube before the Public Accounts Committee: “The monthly expenditure average for the second-half of 2018, excluding December was US$774 million. The December expenditure dropped to US$101 million. What makes this expenditure figure questionable is that the expenditure for October and November was US$601 million and US$686 million respectively. From the US$600 million expenditure level, expenditure dropped to US$ 101 million. The expenditure figure for employment costs for October-December was reported as US$1,096 billion. This gives an average of employment costs of US$365 million a month. It simply does not make any sense for the December figure to be 3,65 times less than the average monthly employment expenditure.”

The diagnosis for this anomaly pointed out then was: “The expenditure figure for December which does not square with the normal government expenditure levels suggests government may be using a cash accounting basis — this would be hugely problematic in terms of reporting our budget performance. What makes sense in terms of the below-trend December expenditure figure of US$101 million is government delaying payment of its December obligations, leveraging on cash accounting to understate December expenditures and thereby giving a dramatic improvement in budget performance.”

Ncube, to his credit, last week before the Public Accounts Committee admitted that government was applying cash accounting to report fiscal expenditures. Put simply, Ncube implicitly conceded that he was over-stating budget surpluses. International investors I have engaged with intimated that the use of cash accounting in government budget management projects an image of a Treasury that does not know for sure what its expenditures are. These investors hinted that, in general, no investor would put their money where such a system obtains.

Ncube cannot be accused of lying about budget surpluses; it suited his agenda of portraying a picture of a dramatically recuperating patient to exploit the shambolic cash accounting system because though not an international account standard practice, it is not an illegality. I have made Ncube aware that international investors are not being fooled by these clever half measures. Investor confidence is being rattled by not using accepted international accounting standards.

Ncube may offer a rebuttal that International Financial Institutions (IFIs) are showering approbations for his supposed astute stewardship of the fiscus. Ncube, in his Public Accounts Committee responses, stunningly revealed that the Lima Debt Plan crafted by his predecessor had been rejected by IFIs, the very same entities reported to have been happy with the Lima Debt Plan. This clearly shows that IFIs proper-line. Proper-lining is a classic grounded theory methodological term which means respondents will tell you what is diplomatically permissible to advance certain personal interests.

IFIs would be happy about a process that promised to settle arrears from an asset that had practically become a bad debt. Ncube is the new sheriff in town; IFIs will go by what he suggests insofar as clearing arrears is concerned — they are too happy to get their money. However, this does not mean IFIs will bend their lending criteria.

This week, the IMF disclosed that the structured loans from Afreximbank would be a stumbling block in any negotiations with the IFIs. Ncube has been telling us that things are going well with his new debt plan but the IMF has come out saying that the structured Afreximbank loans based on pledging Zimbabwe’s prime commodities (minerals and tobacco) are a stumbling block to reaching a deal with IFIs and by extension the Paris Club.

Ncube, surprisingly, lauded the Afreximbank arrangements indicating that financial assistance for Zimbabwe was very hard to come by. He even boasted that pledging commodities to the Afreximbank was a smart move because the government will have something guaranteed to service the loan. This column has on more than two instances inferred that one of the reasons we are facing a forex crunch during the tobacco season is that the forex generated from the current tobacco season is already spoken for. Ncube all but confirmed what we had conjectured.

Clearly, Ncube is telling the patient is recovering when in reality the patient is dying. Ncube’s plan is to pay IFIs. He has no credible plan to get money from them — he has plan of hope. Hope is not strategy. Super-normalising will not bring us financial assistance — it is chasing it away.

Ncube’s super-normalising is consistent. He oversaw the re-basing of the economy’s GDP. This is a clever way of projecting to the publics interested in the economic affairs of this nation that the economy is bigger than we had assumed — nothing short of saying the economy is healthier that what we officially thought it to be. This is super-normalising. Last year he inflated the GDP by 40% to US$25,8 billion.

Last month he inflated it confusingly to RTGS$70,1 billion which at the time was US$21 billion based on the inter-bank forex rates. Currently, at the average interbank forex market rate, our GDP, despite this padding has shrunk to US$12,7 billion. At parallel market rates, our GDP is currently US$8,7 billion. To super-normalise our economy, Ncube appears to conveniently quote the RTGS$ GDP figure. It is as clear as noon day that the patient is not recuperating.

Consider the official inflation figures; the method of measuring inflation was changed which lowered reported inflation that would have been much higher than would have been the case under the old method. All this is super-normalising. The felt economy, experienced by real people with flesh and blood, is going through astronomical price increases, jumping by multiples, not the snail-paced consumer price index which has no relevance to people on the ground.

Let us get real and stop super-normalising the health of the economy. This is rattling domestic markets. It is putting off international investors. Investors want the truth. We have a reverse of the Glaser and Strauss’s awareness of dying situation — ironically – it is the patients that know that they are dying but the doctors think they are recovering — at least Glaser and Strauss’s doctors knew patients were dying, but pretended that they were not dying.

Brett Chulu is a management consultant and a classic grounded theory researcher who has published research in an academic peer-reviewed international journal. —brettchuluconsultant@gmail.com.

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