QUESTION: The existing bad institutions are the ones currently stifling the much needed

turn-around of the Zimbabwe economy. Discuss using concrete examples to support your
argument.

Introduction
Economists have made use of both theory and empirical research to clarify thebasis of
economic growth and development. Scholars such as Solow, Swan, and Romer gave
theoreticalstructures on which later works were centred. The focus of reforms in the
developing world has moved from getting prices right to getting institutions right, [Rodrik,
2008]. Thus, the role of institutions has become one of the most popular research areas in
development economics and has received substantialconsideration from researchers and
policy makers, [Jtting, 2003].
North, [1990] defines Institutions as, constraints that human beings impose on themselves.
In his view, institutions prohibit, permit or require specific type of action, i.e. political,
economic or social, that is important for reducing transaction costs or for improving
information flows and for defining and enforcing property rights, [Jtting, 2003].
According to Williamson [2000],in addition to the above, somescholars extend the definition
of institutions to include, organisational entities, procedural devices, and regulatory
frameworks. Furthermore, Hoff and Stiglitz [2001] further highlighted that modern
economists no longer view capital accumulation as a source of development, rather
importance is now focused on institutions [ particularly basic governance institutions].
Institutions therefore comprise formal rules, informal constraints and their
enforcementcharacteristics. Formal rules are rules put into place; they are laws, constitutions,
regulations, whatever, that have the character of being specific and being defined precisely,
[North, 2003]. Informal norms of behaviour provide us with more problems because informal
constraints do not show up in formal terms. They are ways of doing things and are terribly
important.

The Zimbabwean economy has been deteriorating over the years and sound economic
turnaround strategies are desperately needed to improve the countrys performance. While a
lot of strategies such as the land reform, Indigenisation, Zimasset among many others, have
been adopted and implemented, these have not managed to give the desired turnaround of the
Zimbabwean economy. The fact that the Zimbabwean economy continue to worsen despite
all efforts made to rejuvenate it, points out to the fact that to some extent, bad institutions
could be stifling the turnaround strategies. These institutions and how they are drawing back
economic progress and development are discussed in this paper.

Economic Institutions
These are subdivided into formal and informal institutions. Formal economic institutionsare
the centralinstitutions in market economies as they define and protect property rights,
determine the simplicity or difficulty and length of timeit takes to start a business, facilitate
exchange and promote and regulate organizedcoordination and competition (Wiggins and
Davis, 2006).On the other hand, informal economic institutions comprise conventions, norms
and traditions whichmight govern access to opportunities (or credit) as between genders or
social groups,or which embody the rules which enable cooperation between some groups
whileexcluding others. They are often almost indistinguishable from social institutions
andalso have political implications.

It is also important to note that economic institutions encompass property rights and legally
binding contracts. In Zimbabwe some sectors of the economy have proved to have less
defined property rights and this has adversely affected economic performance and
development of such sectors. There are three categories of land in Zimbabwe; communal,
freehold and state land,where in the agricultural sector land ownership has mainlyremained
with the state. The land reform programme in itself has proved that farmers have no property
rights to the land they are farming on. This has led to a huge deterioration in the development
of the countrys agricultural sector and thus its output.
According to an article written by Professor Hawkins [2013], in the year 2000 [the period in
which the Fast Track Land Reform took off], Zimbabwe farms produced 3.7 million tonnes of
output (excluding estate-grown sugar). In 2012, the Ministry of Finance estimated output to

be 1.7 million tonnes which represented a 50% decline. In addition, food and livestock
production (excluding beef) collapsed from three million tonnes in 2000 to 1.3 million tonnes
12 years later, with cereal output down 55 percent at 1.1 million tonnes. This led the country
to now start importing rather than being the usual exporter so as to supplement its own
production.
The sharp decline in agricultural output has been attributed mainly to lack of adequate
property rights which leave farmers fearing that they will be evicted any time. This can
further be supported by the recent incident of a United Kingdom based black Zimbabwean
doctor who is currently claiming ownership of a farm presently being farmed by a white
farmer.The lack of title deeds also hinders farmers from accessing funding using their land as
collateral. This has left them with challenges in rehabilitating the farms and purchasing inputs
and equipment so as to improve their production.
Furthermore, to support the fact that there are poor property rights and poor legally binding
contracts, we can make use of the nationalisation of private companies and the Indigenisation
policy which was recently introduced. The policies robbed investors ownership of their assets
and investments as well as control of their companies.Control of entities such as Mashava
mine was taken over by the government but as we speak today they arewhite elephants. Such
policies consequently lead to very low local investment as well as foreign direct investment
as investors fear expropriation of their investments.
While the issue of property rights has contributed to the deterioration of the Zimbabwe
economy and its development, it is also vital to note that the lack of such rights has also
fuelled corruption in the country. An example is the power that the top government officials
had when it came to possession of land. Because there no adequate property rights some
newly allocated farm owners lost the land to greedy politicians and government officials who
acquired numerous farms that they could not even manage. This also contributed to the
erosion of the economy as vast lands remained idle. According to a report by the Zimbabwe
Commercial Farmers Union, a senator from Chegutu who already owned 4 farms was trying
to invade another farm owned by a white farmer,[The Zimbabwe Times].

Political institutions.
Several researchers have studied how democracy and better political institutions can impact
growth. Acemoglu et al. (2003) contend that primary institutional problems are the main
cause of poor economic performance and development. They argue that bad political
institutions lead to distortionary policies, which eventually reduce growth and development
and increase volatility. Furthermore, Rodrik (1999) highlights domestic social conflicts
(which are typically exacerbated during crises) as pertinent to understanding poor growth
performance in many countries. According to Beck et al, [2002], studies of political
institutions usually employ variables that provide details about elections, electoral rules, type
of political system, party composition of the opposition and the government, measures of
checks and balances and political stability
Rodrik (2000), argues that democracy yields better policy outcomes as it enables
intertemporal cooperation between agents through deliberation, rules that prevent excessive
redistribution of income, and procedural rules that facilitate policy compromises. Therefore,
although democratic political regimes might not produce the most immediate policy
responses, the empirical evidence shows that on average they deliver better reforms during
crises and tend to increase long-run growth.
According to Gwenhamo et al the current, persistent growth problem in Zimbabwe is often
attributed to poor economic and political institutional frameworks characterized by insecure
property rights and an unreliable rule of law.In addition, the World Economic Forum 2013
report also highlights the major problematic factors of doing business in Zimbabwe as
political citing policy inconsistencies and political instability,[Zimbabwe Democracy
Institute, 2015 ].
Studies point out that good political institutions pave way for deliberations amongst different
political parties and agents. Hence good institutions allow for freedom of speech and
expression. In Zimbabwe this has not been the case for a very long time now. Taking for
instance the Dzamara case where the journalist would be apprehended by police and
assaulted for protesting against issues he did not agree with. Apart from this, political parties
hardly deliberate issues together. They seem to always contradict each other just for the mere
reason that an issue was raised by a member of a different political party. This was evidenced
during the countrys administration under the Government of National Unity. Some policies

were abandoned not because they were not good but because they came from opposition
members. This has further pulled down the economy as the country was deprived of
otherwise superior policies.
Corruption
Researchers have also pointed out the issue of corruption to be a major hindrance to the
development and economic growth of poor countries, Zimbabwe not being spared. The
country has been ranked as one of the leading corrupt countries in the continent. According to
local media a public housing fund was looted and was used to finance the VIP housing
scheme for top politicians. The government sponsored War Veterans Compensation Fund
was also reportedly looted as top war veterans claimed ridiculously high disability rates
ranging even up to 99% .It was also vast corruption in the country which saw the downfall of
many companies such as

the Mazda motor Industry and under performance of Grain

Marketing Board and many other parastatals.

In addition a lot of corruption is witnessed in other public offices such as the police and
Zimra. In the past two weeks the local newspapers and websites reported numerous cases of
corruption at Zimra where in one incident an official was reported to have received a bribe of
$100 000 and in a different case an official received a bribe of $70 000,[Newsdze
Zimbabwe].
However, most of the above corrupt activities went unpunished due to lack of a clear
regulatory and institutional framework for addressing transparency and governance issues at
both the political and corporate levels. This has consequently led to the deterioration of
companies and thus the economic performance of the country as a whole.

Conflict Management

Proper conflict management has been cited to be an enabler of economic progress and
development. The Zimbabwes formal channel of conflict management is as follows; District
courts, Provincial courts, High court and then lastly the Supreme Court. It is important to
know that the president of Zimbabwe is the one who appoints judges and this influences their

judgements. There is generally no autonomy of the judiciary. For example the local
newspaper Newsday of 15 March 2015 reported that the President was threatening judges
who were to attend to the queries raised by Zanu Pf former secretary Didymus Mutasa.
In addition, the president also appointed the police commissioner general. This also has an
impact on autonomy of the police force and thus leaves some individuals immune to the rule
of law. Furthermore, an example of where bad conflict management in Zimbabwe is evident
is the way houses are demolished in the presence of all authorities leaving the general public
at the losing end. The so called land barons sell undesignated land to unsuspecting land
seekers in the presence of the City council. Instead of protecting the rights of the public, the
city council simply watches as residence build structures. The authorities only wait up until
structures have been built and they demolish them .An example is the numerous Chitungwiza
houses as well as the Warren Park houses which were demolished. The unfortunate thing is
that the real perpetrators are not brought to book while the interests of the general public are
not represented.

Institutions for macroeconomic development

In Zimbabwe macroeconomic development is influenced by the Reserve Bank and the

Ministry of Finance. The Ministry of Finance is responsible for regulation of the total
government expenditure which is currently in a huge deficit which stood at USD 1.8billion
dollars, and is about 80% of the total government revenue, [as reported by the herald of 20
July 2015].This situation was highlighted as unhealthy for the economy by the International
Monetary fund which in turn suggested that the government reduce its expenditure. Although
the government has made effort in trying to reduce the government expenditure by
identifying ghost workers in the various Ministries, it keeps contradicting its policies. To
begin with, the government keeps recruiting more and more uniformed forces yet this
increases its expenditure. Furthermore, the president recently announced that government will
offer civil servants bonus in contradiction to the minister of finance who had earlier
announced that there were no bonuses. These inconsistencies and contradictions negatively
impact on the performance of the country.

On the other hand, the central bank also plays a part in the economic growth and
development of the country. The Reserve bank of Zimbabwe seems to lack autonomy. The
International Monetary Fund highlighted in the Standard newspaper that there was need for
the Reserve bank of Zimbabwe to be independent. The fact that in 2009 the Reserve bank was
forced to be the governments banker shows that it was not independent. In addition the
government also forced the Reserve Bank to engage in various quasi-fiscal activities which
conflicted with those of a central bank. These quasi-fiscal activities included farm
mechanisation, Bacossi, purchase of vehicles for politicians amongst others. In addition, the
central bank was also forced to seignorage without prerequisite supportive reserves. This in
turn fuelled inflation and thus negatively impacted on the economys growth and
development.
The fact that the Reserve bank was pre occupied with unnecessary duties while it neglected
its core mandate, led to the collapse of the banking sector .This saw the closure of many
banks such as Trust Bank, Time bank, ZABG and many more. The business fraternity and the
general public lost confidence in the banking sector and this worsened the economy even
further.
Social Institutions
Generally the most vulnerable individuals in the society are the poor and these require
assistance in the provision of social services, In Zimbabwe although the government purport
that most poor people have access to social facilities such as healthcare, education, housing
and road infrastructure this is not as correct on the ground.
Provision of health services to all is questionable especially in rural areas. Medical facilities
tend to be very sparsely populated yet the transport network on the rural areas is also bad.
This leaves the poor people more vulnerable. In addition even if they are able to access the
medical facilities, at times qualified medical personnel might not be there to assist them
hence they are transferred to bigger cities. This may also be true in the urban areas especially
in government hospitals where medical practitioners may not be available to attend to them.

Furthermore, provisions of educational facilities are also highly vital for economic
development. Although since independence there has been a notable increase in construction
of educational facilities and the education for all policy launched, there are some areas that
remain with poor educational infrastructures and children in these areas are less privileged in
this regard.
Apart from this, social insurance is also an important institution to any economy. NSSA is the
responsible body for the provision of social insurance in Zimbabwe. The body is however
faced with challenges in providing services to its clients. It is reported that some pensioners
fail to access their social welfare funds as their names are not found in the database. Those
who are found and able to access it, are given meagre pay outs of as low as USD50. This has
betrayed the essence of the able bodied investing for their future through social insurance as
they hardly benefit from it despite them contributing to the fund.

Conclusion

REFERENCES

What Determines the Quality of Institutions?

Roumeen Islam, World Bank
Claudio E. Montenegro, World Bank
Background Paper for the World Development Report 2002: Building Institutions for
Markets
Keywords:
JEL classification: O10, O17.
January 2002
It is by now widely accepted that factor accumulation and technological change alone cannot
explain differences in growth performance across countries and that institutions matter for
growth.
There are several studies that associate institutional quality with growth and even some that
associate
institutional quality with poverty and inequality. These studies include both cross country
analysis, and
historical case studies. The cross country studies generally focus on indicators reflecting overall
perceptions of how well governments protect property rights, bureaucratic quality, the power of
the rule
of law, and the level of corruption (Knack and Keefer, 1995, Mauro, 1995, Hall and Jones, 1999,
Rodrik, 1999, Acemoglu et al (2000), Aaron (2000), Dollar and Kraay (2000), Chong and
Calderon

(2000). There are other studies with a less macro approach which examine the relationship
between
measures of property rights (for example the existence of land titles) and output or investment,
for
example, Besley (1995), Johnson et al (1999). Studies with a more historical bent reflect on how
differences in institutions over time have affected economic development (Engerman and
Sokoloff
(2000), North (1993, 1994) Jones (1981), Greif (1989).
Some of these and other studies also examine what determines different aspects of institutional
quality itself. The struggles of many poor countrie s around the world and the experiences of the
former Soviet Union countries illustrates how much time institution building takes, and the
interdependencies of political, geographic, social and economic factors. The studies recognize the
importance of history and initial conditions in affecting subsequent development. They illustrate
the
interdependence of various factors in affecting institutional quality. Engerman and Sokoloff
(2000) for
example, examine the implications of endowments and inequalities for the differential
development of
institutions favouring growth in North and South America. Acemoglu et al (2000) consider the
effects
of climate and related factors on settlements in various regions of the world to explain the quality
of
3
institutions in these lands and subsequent growth. Studies also control for the years a country has
been
independent as a measure of the time it takes to build strong institutions of the state. Many
developing
countries became nation states only in the mid 1900s- giving them 50-60 years of independence.
In
institution building terms this is by no means a long time.
The development history of nations might also have been affected by colonial

Although there are variations in both philosophical and legal spheres of what constitutes
propertyrights, we follow the lead of Waldron (1988) who used Honores denition of full liberal
ownership.Honore (1961) sets out eleven standard incidents or common features of ownership which
comprise:

The right to the possess.

The right to use.

The right to manage.

The right to the income.

The right to the capital value.


The right to security against expropriation.

The power to transmit.

The lack of any term on the possession of these rights.

A duty to refrain from harmful use.

Certain judgments against the owner may be executed on the object.

Incident of residuarity

6.5 A Rise in Corruption

One disturbing outcome of the policy reforms in Zimbabwe was the systematic rise in cases of
corruption that were reported by the media. First to hit the headlines was the raiding of a public
housing fund, which was diverted to the financing of the VIP housing scheme for top politicians, civil
servants and their friends and relatives. This was to be followed by the looting of the government
sponsored War Veterans Compensation Fund and deals at the National Oil Company of Zimbabwe
and Grain Marketing Board, amongst the many other public enterprises, where millions if not billions
of Zimbabwean dollars ended up in the pockets of a corrupt few. There were also many other cases of
corruption, which featured prominently during this period and were committed by public officials at
high levels of government. These included the reported interference with the tender process by
government ministers in respect of cellular telephone services, which resulted in a lawsuit by one of
the tenderers and the side stepping of similar processes in a transaction involving the Zimbabwe
Electricity Supply Authority (ZESA) and a Malaysian company called YTL as well as the awarding of
a lucrative contract to build the new Harare International Airport where political pressure was exerted
to award the contract to politically well connected individuals.
Unfortunately, most of the above corrupt activities went unpunished due to lack of a clear regulatory
and institutional framework for addressing transparency and governance issues at both the political
and corporate levels during the policy reform period. As a result, the policy reforms in Zimbabwe,
instead of enhancing transparency and accountability in carrying out the day-to-day business of
government, they opened a window of opportunity for both new and old rent seekers who captured the
state and went on a mission to further amass wealth on a grand scale, of course at the expense of the
welfare of the poor and other disadvantaged groups. 51 This happened due to inadequate legal
safeguards and regulatory frameworks to check the influence of powerful elites and interest groups or
that would ensure the entry and effective participation of institutions more geared to servicing the
poor and other disadvantaged or vulnerable groups. 52 Dixit (2001) also