Esap, 1990s-2000, 2018 to present (I)

ZIMBABWE decided to embrace the Economic Structural Adjustment Programme (Esap) in the 1990s. Many politicians and economic leaders then generally believed that the low level of economic development in the 1980s was due to the ideology of Marxist-Leninist socialism espoused by the ruling Zanu PF.

Socialism was a highly popular and very powerful ideology. It was combined with the traditional religion, led in the 1890s by influential spiritual leaders like Nehanda and Kaguvi, to form an ideology which was widely supported by the 1970s freedom fighters. However, by the 1990s, Zanu PF had become dominated by businessmen, who did not support socialism in any form, but believed the right path to economic growth was capitalism.

At the Zanu PF congress in 1992, which decided to abandon socialism as the party ideology, only former first lady Sally Mugabe and the Women’s League did not support the change. The popular consensus was that capitalism was the right and only path.

Just as there are different forms of socialism, there are also different forms of capitalism. For most freedom fighters of the 1970s, socialism meant Africans would be able to enjoy the same rights and privileges as Europeans, with the removal of the Colour Bar. There was no general or detailed appreciation of a more overall socialist transformation of the society, although the Zimbabwe People’s Army (Zipa) propagated a more decidedly left wing form of socialism.

They were defeated by the alliance of the external political leadership known as the Dare Rechimurenga led by Henry Hamadziripi and Rugare Gumbo; the Zanla military High Command led by Josiah Tongogara; and the traditional Zanu leaders led by Robert Mugabe. Zipa commanders and key personnel were imprisoned or detained from 1977 up to Independence.

What is known as Esap in Zimbabwe is generally known as the neo-liberal capitalist ideology worldwide. Zimbabwe was strongly urged by both the International Monetary Fund (IMF) and the World Bank (WB), two of the most powerful financial institutions in the world, that this was the best ideology to adopt and would lead to speedy economic development.

Neo-liberalism has its foundations in the weakening of profits in highly industrialised countries in the 1960s.

This was caused by two factors: over-production of manufactured goods through the competition among these countries and through the introduction of new technologies which improved both the quantity and quality of goods; and secondly, the move towards financial investments and profits as compared to emphasis on real productivity. By the 1970s, Western banks were so powerful that they could influence their governments to accept neo-liberalism as a better version of capitalism.

Neo-liberalism was accepted by most Western governments, and entailed opening up markets for Western manufactured goods in developing countries. Developing countries as a whole did not have strong manufacturing industries, and would provide a huge and profitable market for Western manufacturing industries.

Another important influence was the World Bank report by Elliot Berg in 1979 entitled Accelerated Development in Sub-Saharan Africa: A Plan of Action. This was welcomed by many African heads of State, and led to the Lagos Plan of Action in 1980. Attractive incentives were offered by the IMF and WB to increase loans and grants to countries which adopted economic liberalisation.

This happened to Zimbabwe, which received US$400 million a year for two years, instead of the US$250 million it had been accustomed to receiving in the 1980s and most of the 1990s. However, all international loans and grants stopped as a result of ZDERA in 2001.

Esap reforms include suitable trade and exchange rates; reform of the public sector; and the improvement of agriculture. In particular it pointed out that African exchange rates were highly overvalued and needed to be corrected. It recommended lower protection of industries, reduction of direct control, and a review of parastatals and government expenditure. It recommended government should hand over more of its functions to the private sector. In the area of agriculture it proposed export of cash crops.

The Berg Report recommendations, together with the rise of neo-iberalism in highly industrialised Western countries, heavily affected Esap programmes in Africa. This devaluation has affected food supplies very drastically.

However, it has improved the export earnings for minerals, with Zimbabwe almost reaching export parity with import expenditures towards the end of 2019. This drastic devaluation was useful for mineral exports, but it may have severe political consequences. This was also so in the first Esap in 1998, which witnessed the rise of a powerful opposition party, the Movement for Democratic Change (MDC). No opposition party had been able to challenge Zanu PF hegemony before Esap.

Carrying out such an extreme devaluation in such a short period of time, in particular using the street market as one of its main operators or tools, has meant that the government lost control of the process whilst the street gained. It is also apparent that the government failed to have sufficient technical knowhow and skills to carry out such a delicate and complicated operation successfully.

Reform of the public sector also recommended by the Berg Report has been done clumsily, with deleterious effects on social welfare as well as on economic growth. This has been done with the cutting down of financial commitment for social welfare, such as for education, health and a potable waterply. These social welfare areas have deteriorated.

Lower wages for government employees such as the civil service and the security services has a direct impact on economic growth and sales, leading directly to a shrinking of the economy: government employees comprise the majority of customers for the formal economy, and their wage cuts impact adversely on the economy. Doubling the number of State employees since Independence also meant that government was no longer able to pay them the average salary of US$500 a month that was in place at Independence. Government employees now get less than half of this.

Berg recommended lower support for industrialisation. This has been done very ambitiously, with the result that 300 factories have closed down each year. (Source: Robert Alexander Lee, Structural Adjustment in Zimbabwe, thesis submitted to Wesleyan University Dept of Honours in Economics, 2000.)

Industries are now utilising less than a third of their capacity. Whereas manufacturing industries comprised more than 30% of the GDP in the 1980s, it shrank from 32% of GDP in 1992 to 8,184%in 2018 (Sources: CZI, The Zimbabwe Manufacturing Sector, 1994 and World Bank, 2018). The result was stagflation and deterioration of the manufacturing industries.

The World Bank was so powerful that most Western countries followed this prioritisation. By advocating “policy action and foreign assistance that are mutually reinforcing”, the report reinforces its own recommendations by ensuring that loan and aid money would only be available to those countries which embraced a neo-liberal economic strategy.

An important outcome of the Berg Report was to blame African countries for their lack of development: while African countries should accept some responsibility, external factors may also affect development adversely. In the area of agriculture, the Berg Report proposes promoting export of cash crops by reducing taxes and other unfavorable terms of trade, as well as making domestic food markets more efficient by deregulating food prices.

One result of these recommendations is that export tobacco has become the main crop for more than a hundred thousand small scale farmers, whilst maize, the main food crop, now has to be imported. Zimbabwe used to be food self-sufficient in the 1980s, and even used to export maize to neighbouring countries. The removal of support for small-scale farmers in 1996 ended both food security and maize as an export crop.

Zimbabwe accepted these new regulations under Esap, removing the economic controls over the economy that had been in place for more than four decades, before and after Independence. Besides the well-known political fallout through the popular establishment of the MDC, Esap brought with it a shrinking economy; food shortages; the deterioration of the existing manufacturing industries, which had focused on the needs of the national economy and the replacement of imported goods; imported goods, including basic food; higher school and medical fees.

The destruction of the manufacturing industries was very drastic, with the result that today the main exports are tobacco and minerals: Zimbabwe which had had manufacturing industries second only to South Africa previously, was reduced to a primary production economy.

Twenty years of Esap has also brought about a weakening of the government and of the civil service. One of the main aspects of Esap, that governments should not interfere with the private sector which should be in charge of the economy. Esap has witnessed a rise in corruption, particularly through the politicisation of appointments in the cabinet, parliament, the civil service, the parastatals and the state universities.

Zimbabwe’s reactions to the de-industrialisation and reliance on expensive food imports did not include technically and professionally sound solutions to the economic downturn. One immediate response was the utilisation of the printing press in response to the removal of Western donor funds. Printing started in 1998 with the use of the printing press to solve the war veterans’ rebellion, coinciding with the heightening of Esap effects and the establishment of the MDC. It led to the total collapse of the Zimbabwean dollar by 2008.

It is essential to examine each and every aspect of Esap before deciding how each one can be handled more effectively. Some aspects may need to be rejected, but others may need to be carefully analysed and adapted. In many cases, politicians and bureaucrats have looked at the recommendations in shallow and emotional ways, ignoring technical and professional realities. Budget cuts for example have sometimes been done in such a way as to destroy the capacity of an institution to succeed in its professional work. A large number of examples can be shown, such as the elimination of medication and equipment in the health sector, whilst retaining the salaries of doctors and nurses. Doctors, however, excellent and dedicated, could not do their jobs properly. In education, the removal of funding for textbooks meant that for many years there were no textbooks in schools. Without textbooks both teachers and students are hamstrung.

Fay Chung was a secondary school teacher in the townships (1963-1968); lecturer in polytechnics and university (1968-1975); teacher trainer in the liberation struggle (1976-1979); civil servant (1980-1987); former minister of education (1988-1993); UN civil servant (1994-2003). These weekly New Perspectives articles are coordinated by Lovemore Kadenge, immediate past president of the Zimbabwe Economics Society (ZES) . email kadenge.zes@gmail.com and Cell +263 772 382 852