Resilience and innovation in a post-Covid economy

THE Covid-19 pandemic has exposed serious structural challenges in the Zimbabwean economy and most importantly highlighted the need to make the economy more sustainable, resilient, diverse and innovative.

Prosper Chitambara
academic

The Covid-19 pandemic has also reignited interest in the role of a democratic developmental welfare state to build resilience for a post-Covid economic recovery. Crises (including disasters and pandemics) are bound occur with disastrous socio-economic implications.

A nation’s capacity to proactively and effectively respond to crises (for example Covid-19) is a function of its social protection and healthcare systems, as well as the state of its institutions and infrastructure.

Governments must build resilience and capacities for disaster preparedness and recovery, to empower economies and communities to better weather and recover from shocks.

Zimbabwe is particularly vulnerable to the Covid-19 pandemic owing to a weak public health system. The public health system has suffered from years of gross underfunding. The country also suffers from poor water and sanitation with a significant proportion of households not having access to improved sources of drinking water and sanitation facilities.

According to the 2019 Multiple Indicator Cluster Survey (MICS), the percentage of household members with a hand-washing facility where water and soap or detergent are present was 64,2; the percentage of household members using improved sanitation facilities 68,8; and the percentage of household members using improved sanitation facilities which are not shared was only 36,7.

Another important vulnerability relates to the limited social protection coverage. The country’s primary social protection programmes are the Basic Education Assistance Module (Beam) and the Harmonised Social Cash Transfer Programme (HSCT).

Beam only has a coverage of about

530 000 out of the about 1 300 000 million children in need, while the HSCT programme, which is implemented by government and supported by the United Nations, only covers about 55 509 very poor and labour-constrained households in 20 districts.

Another social protection programme, the public works programme provides employment to only 3% of the unemployed. According to the 2019 Labour Force and Child Labour Survey (LFCLS), about 249 000 persons, which is approximately 2% of the population, were receiving a monthly pension or any social security fund or both.
With respect to medical insurance, about 984 000 persons, representing about 7% of the population, indicated they were members of a medical aid scheme. For poor households, which already spend an average about 40% of their incomes on health care-related expenses, access to health care will become increasingly unaffordable in the wake of the Covid-19 pandemic, leading to an increase in the number of households falling deeper into extreme poverty.

The Zimbabwean economy is highly informalised, with about 76% of total employment in the country being informal. The informal workforce bears the highest vulnerability, owing to poor working health and safety conditions, and lack of social protection. According to the International Labour Organisation (ILO), income losses for informal economy workers are expected to be significant.

The first month of the crisis is estimated to result in a decline in earnings of informal workers of 60% globally. The projected declines in earnings are highest in Africa and Latin America, at 81%t. Without safety nets most informal economy workers have been driven deeper into poverty.

Since the current outbreak of Covid-19 emerged, many individuals and households especially in the developed world have been using opportunities offered by ICTs to minimise the disruption through for example using the internet to work from home, to order goods/products for home delivery (e-commerce), or to continue their children’s education and learning.

However, developing countries like Zimbabwe are less-equipped to use ICTs to minimise disruption caused by the Covid-19 pandemic. The percentage of Zimbabweans using the internet still remains low at about 28% in 2018 up from 22,7% in 2015. A major contributor to the low internet usage rates is the increasing cost of mobile data and connectivity fees. Over the past few months, there has been steep increases in mobile data costs across all mobile networks while user income level have been eroded by chronic high inflation forcing internet users to prioritise spending on other services besides the internet.

Optimising on the Covid-19 requires building resilience and innovation. This can be achieved by strengthening health systems and expanding social protection coverage. Comprehensive social protection systems and universal health coverage can help to lessen the fallout from crises such as the Covid-19 pandemic.
According to the ILO, building social protection floors as part of national social protection systems is key to crisis recovery and prevention, to ensure that everyone has effective access to at least essential health care and basic income security throughout their lives, as a first step to realise their right to social security.

An interesting statistic from the Zimbabwe Poverty Report of 2017 is that the poor spent 42,5% of their money on food while the non-poor spent 28,4% of their budget on food. Through social protection, this statistic can be corrected so the poor can save and invest more.

To ensure universal health coverage and guarantee access to quality health care there is need to mobilise additional public funds to boost budgets through implementing innovative and sustainable financing for health care delivery.

The current health financing model remains unsustainable as it heavily relies on external financing as well as out of pocket financing of thee health sector. In line with regional and global best practice, government must bear the greatest burden in terms of health financing.

To enhance public spending on health without undermining fiscal sustainability government must explore a number of options and strategies for innovative mobilisation of significant resources building on best practices in regional and global health financing.

The World Health Organisation (WHO) has been advocating for a sugar tax on sugar-sweetened beverages to fight the scourge of non-communicable diseases. The sugar tax apart from reducing consumption of sugary drinks also raises additional revenues for the Treasury.

On April 1, 2017, South Africa introduced a 20% sugar tax on sugary beverages. This is part of the South African Government’s strategic objective of preventing and controlling non-communicable diseases and obesity.

The Covid-19 pandemic has shown how important it is to keep resources in reserve for times of crises. For example, a number of countries have been drawing down on their sovereign wealth funds to sustainably finance their responses to the Covid-19 pandemic.

According to the 2020 revised budget draft, Norway will withdraw a record amount of cash amounting to 420 billion Norwegian kroner (US$41 billion) from its sovereign wealth fund, the largest in the world, to support its economy affected by the oil price crash owing to the Covid-19 pandemic.

The Gulf Cooperation Council (GCC) countries are also expected to draw down on their fiscal and sovereign wealth reserves to the tune of around US$140 billion in 2020 compared to only about US$10 billion in 2020.

Singapore has also announced that it will draw down on its reserves or savings to the tune of US$17 billion to save jobs and the economy amid the growing crisis sparked by the Covid-19 pandemic.

Notwithstanding the fact that Zimbabwe has come with a Sovereign Wealth Fund of Zimbabwe Act, 2014, the fund is still to be set up almost five years after the promulgation of the Act in November 2014.

Indeed, saving for a rainy day and for future generations through setting up a sovereign wealth fund is very critical for sustainable development.
As part of the post-Covid recovery there is need to progressively move to a low-carbon economy. In Zimbabwe, as in many other countries, the renewable energy sector has the potential to promote climate resilience and foster green economic recovery following the Covid-19 pandemic through attracting investments and creating green jobs.

Strengthening the resilience of smallholder communities is critical to guaranteeing their food and nutrition security in the present and future through climate smart agriculture and investing in rural infrastructure, for example, irrigation. Businesses must be incentivised and empowered to invest in low-carbon solutions that create new jobs.

Increasing research and development (R&D) expenditure to at least 1% of GDP in line with the 2017 African Union (AU) goal and commitment of at least 1% of GDP in R&D is also crucial.

Increasing R&D expenditure would go a long way in building the resilience of the country and fostering innovation. The country should also use the opportunity presented by Covid-19 crises to implement the Pharmaceutical Manufacturing Plan of Africa to progressively reduce over-reliance on external suppliers for drugs and medicines.

Chitambara is a scholar who is based in Harare.