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they face Zimbabwean economy

Ringisai Chikohomero

Cost of coercion

The move is also an indication of how the Mnangagwa regime is over-reliant on coercion ahead of consent to enforce its rule. Between the two — consent and coercion — the latter is more expensive as it requires lots of investment in the agents of coercion to keep them onside.

These agents of coercion need incentives to protect the regime and enforce their commands. The Garrison shops facility is part of these incentives for the military, the chief agents of coercion.

In this way, the garrison and Silo shops are part of the regime’s divide and rule strategy as it seeks to widen the wedge between members of the military and civil service on the one hand and members of the public on the other hand.

With members of the military and civil service getting a special subsidy, they might feel special and favoured and derive from this circumstance a false sense of comfort compared to their fellow citizens. In situations of want and desperation, people are very selfish.

Soldiers and civil servants who are getting special benefits from the regime, no matter how small, might feel better and therefore compelled to defend the regime.

The incentives are also designed to prevent agents of coercion from revolting. This is because since they use force to keep the ruler in power, the agents of coercion know they can also use the same force to remove the ruler from power. The ruler knows this too and is therefore vulnerable. Therefore, the Mnangagwa regime, which took power through the military, and is dependent on it to maintain its power, is also highly vulnerable to the military.

However, the garrison shops facility is merely the equivalent of a painkiller where a proper cure is desperately needed. It may numb the pain for a moment but ultimately it does nothing to remove the cause of the pain.

The reason is that the government is unlikely to afford to keep the subsidy running for the long term. In any event, the inevitable corruption and rent-seeking by political and military elites as they exploit the garrison shops facility will only serve to further alienate and enrage members of the military.

The GEMS’ puzzle

This week, the government also announced a plan to establish a mutual savings society for government employees, which bears the inviting acronym, GEMS. Under this scheme, each civil servant would contribute 2,5% of their wage to a mutual savings fund.

The government will invest ZW$100 million seed capital to “kickstart” the fund. Members would be eligible to borrow concessional loans from the mutual fund. Upon retirement, they would be entitled to the total contributions, including accrued interest.

After initially presenting it as if it were compulsory, the government soon qualified its announcement by explaining that participation would be voluntary. Another initial error was presenting the mutual fund together with the Garrison shops’ scheme which gave the impression that the two were linked. This gave rise to concerns that the government was forcing civil servants to fund a subsidy which is exclusive to members of the military. A subsequent intervention clarified that the two schemes were separate and that the mutual fund was a voluntary scheme.

Rational choice?

Nevertheless, despite the voluntary nature, the mutual fund still attracts some important questions. As a rational actor, the civil servant must do a cost-benefit analysis regarding whether to participate in the mutual fund.

The civil servant must ask: is 2,5% of my wage a reasonable price to pay for the promised benefits of the mutual fund? In my assessment, while the idea of savings in an inflationary environment makes no sense, there might be a good reason why the average civil servant might consider on a balance of factors to take the gamble.

First, the fact that the government is putting public funds (ZW$100 million seed capital) into the mutual fund and civil servants are entitled to borrow from it at concessional rates transforms it into an additional pot of money to supplement wages. The civil servant will be paying 2.5% of his wage in return for a lump sum disguised as a concessional loan.

This means civil servants who decide to opt-out would lose access to what is essentially short-term government largesse. Since the government is not providing an alternative way for the civil servant who opts out of the scheme to get a share of those public funds, they are forced to join to get their share.

Second, the cost-benefit analysis must consider the fact that the default rate on government-run loan facilities is very high but the recovery rate by the government is very low to non-existent. The Auditor-General’s reports over the years are replete with government schemes, where funds or materials have been advanced to recipients, but repayments rates have been poor and the government did nothing about it. They have been treated as bad debts that the government has written off. The average civil servant will, therefore, take his chances on the concessional loan from the mutual fund and hope there will be no recourse in the event of default.

Third, the average civil servant might consider that a 2,5% contribution is a price worth paying if a lump-sum from a concessional loan can enable them to buy an asset. It would be a rational choice for three reasons:

First, being a lump-sum, the concessional loan presents an opportunity for the civil servant to buy an asset that they would otherwise not afford to buy on their low wage.

Second, the asset would be a worthy investment because it is a better store of value than local currency which is fast losing value. The Zimbabwe dollar has already lost at least 90% of its value to the US dollar since its introduction last year. They might exchange 2.5% of their monthly wage in return for a lump-sum to buy an asset.

Third, for the same reason, even if the civil servant is honest and sticks to the terms of the loan, by the time they complete repaying it the debt would be minuscule due to the depreciation of the Zimbabwe Dollar.

Furthermore, history has shown that inconsistent currency policies can often work in the interests of borrowers. A recent Supreme Court ruling in which a US dollar debt was converted to the Zimbabwe dollar at the rate of 1:1 because of a statutory instrument may have been a disaster to lenders or creditors, but it worked as a massive windfall to those who had borrowed money in US dollars before February 2019. Suddenly they found themselves owing just a fraction of the US dollar debt they had taken. For these reasons, the 2,5% monthly contribution to the mutual fund might be a price worth paying in return for the short-term rewards of membership such as getting a lump-sum through a concessional loan. For the reasons stated above, the mutual fund works as a short-term benefit to civil servants, with cash benefits being disguised as “concessional loans”.

This means those who opt-out would miss out on this “bonus”. Those at the top might be happier with more opt-outs because that would mean the ZWL$100 million seed capital is shared by a smaller pool of participants. Therefore, the average civil servant might decide to take his or her chances and participate in the mutual fund.

The disincentives

Nevertheless, the above reasoning assumes that there will be equal access to concessional loans by all members of the mutual fund. This might not happen because of the sheer corruption and mismanagement of the fund.

In a country with an Orwellian system where some animals are treated as “more equal than others”, some contributors might find themselves facing unfair discrimination and either not getting the loans or being awarded too little compared to others.

However, the greatest risk is that the mutual fund creates more rent-seeking opportunities for corrupt elites.The elites will not only get access to bigger loans compared to ordinary civil servants, but the fund will simply create another layer of elites to extract wealth from civil servants. Like all mutual funds, the GEMS fund will have to be administered and those administrators will demand and get lavish perks. For a sign of what is likely to happen at the GEMS fund, one only has to take a peek at NSSA, the social security institution.

All workers compulsorily pay monthly contributions in return for pensions and retirement benefits at the end of their working lives. Established in the mid-1990s, NSSA was a noble idea but one that has suffered a torrent of abuse in its life. Political and business elites of a corrupt breed have found much to plunder in this cash-cow. The Auditor-General has documented several cases of abuse of Nssa funds over the years.

The greatest beneficiaries of Nssa have not been the contributors, but its senior executives and political and business elites through generous compensation packages and cheap loans and other facilities which are not repaid.

Despite well-documented cases of corruption, none of the corrupt elites or executives has faced justice. Nssa’s torrid experience is a grim indicator of the fate that the GEMS fund is likely to meet. Without tight systems and controls, it is a ready-made meal for the vultures among political elites and their associates.


“Everyone has a plan until they have been hit in the mouth,” boxing legend, Mike Tyson, said. He was talking about the uncertainties and hazards of life inside the ring. You get in with a game-plan, but it lasts until a punch lands on the mouth. You see stars and the plan becomes yesterday’s dream.

Concerning Zimbabwean politics, as Mthuli Ncube has discovered, it might be said everyone has a plan until they join Zanu PF. You literally lose your head and start hallucinating.

Before he joined the Zanu PF government in September 2018, Mthuli Ncube carried a reputation of some pedigree. If his time at his owner-managed bank, Barbican, in the early 2000s was a dark patch, most had either forgotten or were prepared to give him the benefit of the doubt. He had risen from the ashes of Barbican and redeemed his reputation in stellar circles. He spoke well and seemed genuine; a son of the soil who had was returning home to help his beleaguered country.

He seemed sensible enough and had a clear grasp of the challenges and what needed to be done. He even suggested, to much acclaim, that Zimbabwe needed to rid itself of the pernicious bond note. When he began his tenure, he asked to be judged after six months. But by the time the expiry of the six months arrived, the man was already flailing. 

By the end of the year, even his most ardent backers had either withdrawn into the woodwork or if they could not keep quiet, they had assumed Comical Ali mode. Who would have known that the learned professor would be dusting up a retired Governor’s old recipe book, opening Garrison and Silo shops where Bacossi shops once stood? At least Bacossi shops were open to everyone.

Ncube’s subsidised shops are restricted to a few favourites — members of the military and civil servants. He offers no rationale or justification for excluding millions of other citizens who are facing similar economic challenges. He seems oblivious to the basic wisdom that his scheme will simply create and fuel a black market in these commodities.

It is a long way away from the days of pontificating good economic policies in lecture rooms and proffering advice to governments from lofty offices of international financial institutions. Tyson was right that everyone has a plan until they get punched in the mouth.

In our case, as Ncube has discovered, everyone has a plan, until they get punched in the face by the Zimbabwean economy.

Magaisa is a lawyer, academic and former adviser to former prime minister of Zimbabwe, Morgan Tsvangirai. This article first appeared on the Big Saturday Read blog.

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