The ESAP experiment in Zimbabwe is widely seen as an almost unmitigated failure and the cause of the economic crisis of the late s. An Introduction to ESAP: Zimbabwe By David Coltart. 31st January Danish Volunteer Service Development Workers Meeting. ESAP’S FABLES II. BY RICHARD SAUNDERS. Richard Saunders is SAR’s Zimbabwe correspondent. Zimbabwe’s Economic Structural Adjustment Programme.
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Alex Sep 30, Teddy Brett and Simon Winter argue that Zimbabwe’s ills cannot be blamed solely on economic structural adjustment programmes. Zimbabwe is experiencing a cumulative breakdown.
How did this happen, and what can be done to prevent it from recurring? Zimbabwe has tried two contradictory policies since Initially, it continued the protectionist policies of UDI, but later exchanged them for the market-friendly Economic Structural Adjustment Programme. The expected dividends of ESAP did not materialise, and thus many critics blame it for the subsequent breakdown. Others, however, believe that drought and failure to implement ESAP reforms effectively were responsible.
Which view is correct? After the Zanu government allowed white farming, industry and mining to continue, while using the state to improve services and invest heavily in health and education. It retained Smith-era controls that guaranteed cheap credit and protected domestic industry from foreign competition.
The result was modest but positive growth. Why, then, was ESAP adopted? There were four problems. Firstly, restrictions on investment and on the right of foreign firms to remit profits curtailed investment. This intensified the foreign exchange shortage, which made it difficult for firms to upgrade obsolete capital equipment and also limited job creation.
Secondly, subsidised prices and credit allowed businesses to survive without addressing inefficiencies. Thirdly, increases in civil service employment and spending on social services led to high taxes and a serious budget deficit, which was financed by public borrowing. Fourthly, minimum wages and a system that required ministerial permission to retrench workers reduced employment. Thus ESAP was introduced to encourage growth and employment, reduce state interference in the economy, improve access to foreign exchange, and reduce the deficit.
Yet ESAP is widely seen as an almost unmitigated failure. Growth was poor, employment contracted, many firms closed, and social services deteriorated.
Circumstances were unfavourable when ESAP was introduced. Also, South Africa cancelled its trade agreement with Zimbabwe. This caused a sharp rise in interest rates just as local firms faced greater foreign competition. Liberalisation was implemented too quickly and not sequenced properly. However, the results were not as bad as many people believe.
What are the effects of ESAP in the Zimbabwean context | Emmanuel R Marabuka –
zimbqbwe There was a robust recovery in andwith significant increases in investment, exports and growth. In the army entered the Congo and the breakdown began in earnest. Living standards, life expectancy, and production have plummeted, while political oppression has risen in Zimbabwe over the past five years.
What began in the s as an economic crisis has now turned into a cumulative breakdown, as the regime resorts to increasingly desperate measures to retain control, and, in doing so, compounds the problems it is supposedly trying to overcome.
It has been expropriating assets and foreign exchange in order to buy support and pay its bills, and thus destroying viable firms, driving away skilled ezap, fuelling inflation, and cutting the food production zimbaabwe to feed its people and the exports to pay for its imports.
This decline will continue until a new regime emerges that is fully committed to creating a very different political and policy environment.
We will not speculate about when and how this might occur. Jn we will do is highlight the key challenges that will confront any regime that emerges to take up this challenge. Any serious reform programme will not only need to avoid past mistakes, but also recapture and build on earlier successes. Here we address two straightforward questions.
First, how and why did the breakdown happen? Second, what should be done to stop it from happening again if and when reconstruction does begin? Credible answers demand a rigorous re-examination of the policy programmes that led up to the onset of the crisis in the late s. Izmbabwe credibility of these policies is difficult to judge and heavily disputed. Two contradictory policy regimes wsap been tried since The Zanu regime came to power talking a socialist language, but rejected the wholesale nationalisations zimbwbwe by Tanzania and Mozambique before it.
Instead, in the s it perpetuated the highly controlled and protectionist capitalist strategy of UDI, then exchanged it for a liberal and market-friendly Economic Structural Adjustment Programme Eesap based on liberalisation, devaluation, privatisation, and tight fiscal discipline. This was supposed to lead to a rapid expansion in growth, employment and exports. Orthodox economists and business leaders, on the other hand, attribute the difficulties of the early s to exogenous factors like drought, and a failure to implement the reforms effectively.
‘ESAP was never ideal for Zim’ | Celebrating Being Zimbabwean
This article evaluates these competing views in order to generate an informed assessment of the strengths and weaknesses of the policy regimes of the esao and the s and concludes with an assessment of their impact and of what they suggest for the future.
It was not forced to adopt ESAP as a result of a fiscal and eap of payments crisis like most African countries, but had achieved positive, albeit modest, economic growth during most of the s, and enjoyed significant ziimbabwe in social service provision. The last years of the decade had seen rising levels of investment and exports and declining debts. All this suggests that rapid liberalisation was a serious mistake, and that what should have happened was gradual reforms combined with strong state controls.
If this is so we must first ask why ESAP was adopted at all. The state-led regime of the s, in our view, had been increasingly well managed, but contained contradictory elements that inhibited investment and employment and constricted credit and foreign exchange. By the late s unemployment was growing rapidly and firms were finding it increasingly difficult to restructure, so the leading private sector associations and technocrats in government believed that reform was essential esxp growth was to be sustained and accelerated.
This suggests that restoring the old controls would not be enough to overcome the current breakdown. To substantiate this claim we must first summarise the key features of the state-led policy regime. Ih Zimbabwe acquired a new black and rhetorically socialist zimabbwe that was immediately dependent on a white capitalist class that had previously blocked the emergence of a black entrepreneurial class and denied civic and economic rights to black peasants and workers.
Not wishing to repeat the failures of Tanzania and Mozambique, and wanting to entrench control over the black majority, the new regime allowed politically marginal large-scale white farming, industry and mining to continue their economic dominance. However, it also used state power to improve services, decrease inequality, and ensure that existing firms accept their nationalist priorities by reinvesting their profits in the local economy. This strategy was implemented by maintaining the controls that the Smith regime had used to promote esxp industrialisation and overcome sanctions during UDI.
The controls guaranteed commercial farmers cheap credit and cost-plus prices, protected domestic industry from foreign competition, kept interest rates and the costs of imported inputs low, and allowed wages to grow more slowly than inflation. The new regime also introduced redistributive policies to reduce inequalities, including land redistribution in the early s, and big investments in health and education zimbwbwe the poor.
In fact per-capita growth was low but positive over the decade, despite two droughts. However, the tension between the actions ij an interventionist regime that distrusted capitalists, no matter whether white, black esaap foreign, and the needs of existing and, more especially, potential new entrants into the market, was very strong.
The result was policies that sustained existing firms, but seriously limited their incentives to invest and innovate. ESAP was designed to address the resulting structural crisis of the late s, so we can only evaluate its rationality by looking closely at the problems that it was designed to overcome.
These controls and allocations supported existing firms producing for the domestic market, and favoured workers with formal sector jobs. However it discouraged new investment, exports and especially new job creation. As a result less than a third of the new job seekers found jobs over the decade. The ESAP programme that began in was expected to do this. It was supported by most of the business sector, technocrats in the ministry of finance and the IFIs, and introduced before the economic problems had reached crisis proportions.
Hence the prognosis should have been good. Unfortunately the results were much less than satisfactory. Growth was poor, employment contracted, many industrial firms, notably in textiles and footwear closed, and conditions in the communal areas deteriorated as did social services for the poor. The resulting increases in inequality, exclusion and disaffection in urban and rural areas intensified opposition to Zanu-PF and probably led to the disastrous populist measures that were adopted after Thus, no one believes that ESAP achieved its stated objectives.
However, while the wsap did not produce the right results, we cannot necessarily infer zimabbwe policies themselves were responsible for the failures. Policy failures can izmbabwe induced by three distinct factors — exogenous forces that throw the programme off course, a failure to implement the policies as planned, and basic flaws in the policies zmibabwe.
Examining each of zimbawe possibilities allows us to come up with a nuanced interpretation of what actually happened in the early s. These factors all combined to produce the disappointing results identified earlier. However, it is also important to note that they were not nearly zumbabwe poor as many people believe. Industrial output fell overall, but many internationally linked enterprises managed to adjust to the new conditions reasonably well. Esaap recovery in and from drought and the inevitable stresses induced by adjustment was rapid and robust, with significant increases in investment and growth.
‘ESAP was never ideal for Zim’
At that point exports were growing rapidly, the balance of payments was positive and foreign exchange freely available. It seemed that a second ESAP programme that corrected some of the mistakes of the first, would lead to sustained growth. However, this would only have been possible if the government had been willing to give business more appropriate support to overcome structural constraints, bring its deficit under control and begin to address the land problem in a sustainable way.
In the event, there was a lack of political transformation to accompany the economic reforms of the s. The Zanu-PF government remained unwilling to foster the emergence of independent black capitalist and working classes.
Ebbing support in the elections of led to increasingly destructive policies to reward allies of the ruling party, which meant a continuing failure to control the budget deficit. All of this suggests that we cannot simply blame ESAP and the IFIs for the crisis of the late s, nor argue that all reforms that were zimbabww should be set aside.
What is clear from this account is that no progress will be possible in Zimbabwe until a new regime emerges that is willing to honour its commitments and adopt policies designed to benefit the whole of Zimbabwean society, rather than its own supporters. It would take too long to spell out the full implications of this analysis. All we can do in conclusion is identify some of the key insights that emerge out of a dispassionate look at the event of the last 20 years.
What should be done? Many committed and courageous people in various social and political movements are struggling to achieve a progressive political transition in Zimbabwe. We do not offer them any advice about how to achieve power, but we do hope to offer some lessons from their past. First, old-style interventionism is not a viable way out of the present impasse.
It had reached its limits by the end of the s. However, it is also clear that a strong and capable government must be fostered that can anticipate, communicate with and respond to the real needs of producers who can generate the growth, employment and taxes on which it depends.
Second, the ESAP reforms were badly sequenced, and unevenly applied.