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January 2014
ABSTRACT
This paper aims to explore and analyse factors that hinder policy success in Zimbabwe. The
paper discusses the nature of policy formulation, policy support and usefulness of joint policy
scheduled to transform Zimbabwe for 2013 to 2018 is also discussed. The study also analyses the
various economic policies adopted by Zimbabwe since 1990s, their success and failure factors.
The study emphasize the business community to support government policies so as to reap the
desired results. Politics have been found to disturb the effect of policies through sabotage.
1
Bonga wellington Garikai is a PhD Economics student with Atlantic International University, based in Zimbabwe.
He poses various research skills in areas of Development, Taxation and Finance.
Economic policy reform in Zimbabwe has not resulted in improved socio-economic welfare for
the populace. Consequently, economic decline has resulted in widespread political discontent
and disaffection with the present regime. A country’s economic or social development depend
heavily on the various policies being adopted in the economy. Hence a good policy should entail
better development pace. Well, the question now becomes what is a good policy? There is a
common name that defines good policies that do not work, or that end up not working, the term
is “blue print.” A well drafted economic policy, should be easily adopted, well-funded, and
accurately implemented through proper communication between sectors of the economy and
economic players. An economic policy is a course of action that is intended to influence or
control the behavior of the economy. Economic policies are typically implemented and
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Positive economics attempts to describe how the economy and economic policies work without
resorting to value judgments about which results are best. The distinguishing feature of positive
economic hypotheses is that they can be tested and either confirmed or rejected. Normative
economics involves the use of value judgments to assess the performance of the economy and
economic policies. Most of the disagreements among economists concern normative economic
hypotheses, because there is no benchmark for what can be said a higher level of inflation or
lower tax ratio. The goals of economic policy consist of value judgments about what economic
policy should strive to achieve and therefore fall under the heading of normative economics.
While there is much disagreement about the appropriate goals of economic policy, several appear
to have wide, although not universal, acceptance. These widely accepted goals include:
economic growth, full employment and price stability.
Government and central banks are limited in the number of goals they can achieve in the short
term. For instance, there may be pressure on the government to reduce inflation, reduce
unemployment, and reduce interest rates while maintaining currency stability. If all of these are
selected as goals for the short term, then policy is likely to be incoherent, because a normal
consequence of reducing inflation and maintaining currency stability is increasing
unemployment and increasing interest rates. To achieve policy goals, governments use policy
tools which are under the control of the government.3
2
Examples of economic policies include decisions made about government spending and taxation, about the
redistribution of income from rich to poor, and about the supply of money.
3
Policy tools includeinterest rate and money supply, tax and government spending, tariffs, exchange rates, labor
market regulations, and other aspects of government.
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Therefore, it is in every country’s interest to ensure that the formulation and implementation of
economic policy is as good as it can be. Governments must recognize the importance of the right
institutional and political framework for policymaking and work constantly toward improving it,
so as to limit the scope for potentially damaging policy mistakes. Countries are increasingly
cooperating as equal partners, working together and learning from each other to strengthen their
economic performance, so too should the state nurture the partnership with its citizens,
cooperating with them in setting out the objectives of policy, and involving them as directly as
possible in the process of their action.
Currently, the Zimbabwean Government has to adopt the policy document, namely Zimbabwe
Agenda for Sustainable Socio-Economic Transformation (ZIMASSET). The ZIMASSET will
run from October 2013 to December 2018, and was formulated by senior government officials
through consultations from the various ministries, business community and private sector. The
document recognizes the continued existence of the illegal sanctions, subversive activities and
interference in the country’s internal affairs by some hostile countries. Therefore there is need to
come up with sanctions busting strategies and to put emphasis on reliance on local funding for
the plan. The blueprint projects that the economy will grow by an average of 7.3%, improve by
3.4% in 2013, 6.1% in 2014 and continue on an upward growth trajectory to 9.9% by 2018.
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2.0 Economic Indicators for the Zimbabwean Economy
The current account balance for the Zimbabwean economy has since 2000 been negative.
This shows that the effect of trade is not being balance. Moreover, the current account
balance has grown negatively, showing that, the government is failing to control through
trade policies in place. Below is a table that shows the magnitude of the current account
balance.
Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Current -0.02 -0.08 -0.241 -0.375 -0.492 -0.625 -0.463 -0.374 -0.953 -1.376 - -3.249 -2.36 -2.52
Account
Balance
Such unfavourable magnitudes need to be addressed, the government should have a strong
policy to improve its trade competitiveness. Policies that add value to exports are
recommended, as major exports are from mining and agriculture.
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Human Development Index Trends
.44
.42
.4
HDI
.38
.36
From the graph, it can be seen that the is now a change from 1990 where the HDI was at
peak. This entails that there is need to have attention towards human development. The
current policy has managed to cover this aspect, however the prioritization of the well needed
sectors is questionable.
Gross Domestic product is a major economic indicator which is very sensitive to policy
analysis and policy formulation.
The graph shows a significant downfall of the economy for the last decade. The GDP started
to grow during 2009 under Government of National Unit, using the STERP policy. The
economy is showing signs of recovery, which needs to be well supported to reach desired
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levels. The Zim Asset policy has to be well funded and supported to enable an upward trend
of GDP.
Countries have been adopting, what can be termed new policies that runs for a specified period
with set targets and desired achievements. Economic policies are usually in line with politics
period, that is, they are linked to the political term. Economic policy debate revolves around
issues like transparency, accountability, governance, consensus and participation. Long ago,
these concepts were not at the center of the reflections, but they have always applied. Countries
that have developed successfully over sustained periods of time are those that have achieved
transparency, accountability, governance, consensus and participation, or at the least, have
prevented shortcomings in these areas from gaining the upper hand.
The study will have a look at various policies that have received great attention in the
Zimbabwean economy, paying particular attention to success levels and factors that has
constrained the achievement of desired goals.
The policy has been adopted for 1990-1995 period. When the new government came to power
after independence in 1980, there was need to reduce Zimbabwe's deep socioeconomic
disparities. Hence the government invested heavily in health and education. Such action led to an
increase in public expenditures, which for most of the 1980s made up 45 percent of the
GDP.4Social indicators improved, particularly in health and education, but per capita income
stagnated because large government spending crowded out private investment and fueled
4
2012 The World Bank Group, Independent Evaluation Group (IEG).
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inflation, while shortages of imported goods constrained investment and growth. Population
grew faster than job creation, widening the disparities in income levels. In 1991, the government
proposed a policy agenda that formed the basis for the Economic and Structural Adjustment
Program.5
The ESAP sought to transform Zimbabwe's tightly controlled economic system to a more open,
market-driven economy. The restructuring sought to promote higher growth and to reduce
poverty and unemployment by (1) reducing fiscal and parastatal deficits and instituting prudent
monetary policy; (2) liberalizing trade policies and the foreign exchange system; (3) carrying out
domestic deregulation; and (4) establishing social safety net and training programs for vulnerable
groups. The focus was on the formal sector as the engine of growth.
Although there were some changes in the economy, the objectives of ESAP were not met. The
underlying factors being the drought in 1992 which diverted funds to food shortages, too many
reforms were done on a short period of time, corruption by officials, policy uncertainty and lack
of policy support by business community, payment made to war veterans and continued loss by
parastatals.
ESAP was succeeded by the reform programme, popularly known as Zimbabwe Programme for
Economic and Social Transformation (ZIMPREST) whose main objective was the creation of a
stable macro-economic environment which allows increased savings and investment in order to
achieve higher growth and improvement in the standard of living for all Zimbabwe. The policy
5
The World Bank supported the ESAP with a $125 million structural adjustment loan (SAL) and a $50 million
structural adjustment credit (SAC), both approved in 1992 and closed in 1993.
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was scheduled for the period 1996-2000. The main aim of ZIMPREST was to correct the
mistakes of ESAP, which it later failed to do.
During the first three years of the ZIMPREST, the highest growth was achieved at 7% in 1997,
while lower growth rates were achieved at 2 % in 1997 and an estimated 1.6% in 1998, and
equally low levels in 1999 and 2000. The major factors behind the weak performance during the
last two years were
• a sharp depreciation of the Zimbabwe dollar in 1998, which was mainly due to low prices
of Zimbabwe’s major minerals on the international market as well as low international
prices of tobacco which reduced foreign exchange earnings;
• the slowdown in global economic performance in 1998 which reduced demand for
exports.
• a sporadic rainfall pattern during the 1997/98 season which reduced agricultural output;
and
• an unstable macro-economic environment, characterized by high inflation rates, high
interest rates and a weak currency which negatively affected performance in most sectors
of the economy particularly the manufacturing sector.
However, one outstanding achievement during the first 3 years of ZIMPREST was the marked
improvement in Zimbabwe’s fiscal performance. Zimbabwe managed to reduce its budget deficit
as percentage of GDP from 12.9% in fiscal year 1994/95, to 9.7% in 1995/96, 6.7% in 1996/997
and 6.4% in 1997/8. This improvement in fiscal performance was due to improved revenue
collection and enhanced expenditure management which was the major focus of the ZIMPREST.
The strong fiscal position laid the groundwork for a stable macro-economic environment which
was achievable once the balance of payments position improved.
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In August 2001, the Millennium Economic Recovery Programme (MERP) was launched to
address the continuing decline in economic performance through price stabilization, exchange
rate stabilization and protection of the vulnerable groups. After the Millennium Economic
Recovery Programme has been implemented, there was no upturn in the economic indicators, the
main reason being loss of macroeconomic balance due to the size of the budget.
NERP was launched in February 2003 to provide, inter alia, humanitarian support in the face of a
long term drought. A centerpiece of the economic and social programme is the land reform and
redistribution programme which aims to redress the skewed distribution of land and provide
farms for landless peasants. The success of this policy is debatable, since there is no significant
STERP was an emergency short term stabilisation programme, whose key goals were to stabilise
the macro and micro-economy, recover the levels of savings, investment and growth, and lay the
basis of a more transformative mid-term to long term economic programme that was supposed to
turn Zimbabwe into a progressive developmental State. STERP was part of implementation of
the Global Political Agreement and seeks to address the key issues of economic stabilisation and
national healing, whilst at the same time laying the foundation of a more comprehensive and
developmentalist economic framework to succeed the same.
The key priority areas of STERP were; Political and Governance Issues (constitution and the
constitution making processes, media and media reforms, legislations reforms) intended at
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strengthening governance and accountability, promoting governance and rule of law and
promoting equality and fairness, including gender equality.
Social Protection was also a priority encompassing; Food and Humanitarian Assistance,
Education, Health and Strategically targeted vulnerable sectors. Stabilisation was also a priority
for STERP, to involve implementation of a growth oriented recovery programme, restoring the
value of the local currency and guaranteeing its stability, and increasing capacity utilisation in
all sectors of the economy and, hence, creation of jobs. The other emphasis of STERP was to
ensure adequate availability of essential commodities such as food, fuel and electricity,
rehabilitation of collapsed social, health and education sectors and ensuring adequate water
supply.
In crafting STERP, consultations have been made with various sectors in particular labour and
business. This has been done in order to nurture the basis of a people driven development
agenda. More importantly in crafting STERP there was the conscious need to adopt an
alternative people centred, people driven and inward looking rehabilitation strategy, within the
context of a very constrained structure outlined above.
By the time of this analysis the implementation of the document is still in debate, however as the
only policy in place for 2013-2018, there is hope that its modification will exist to guide
economic activity for the said period. The Republic president has said in a speech:
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The agenda is built around four strategic clusters that will enable Zimbabwe to achieve economic
growth and reposition itself as one of the strongest economies in the region and Africa.
The strategic clusters include Food Security and Nutrition, Social Services and Poverty
Eradication, Infrastructure and Utilities, and Value Addition and Beneficiation.
This approach will enable government to prioritise its programmes for implementation with a
view to realising broad results that seek to address the country’s socio-economic challenges.
Given the resources constraints the government will come up with robust and prudent fiscal and
monetary policy measures to buttress and boost the implementation of ZIMASSET.
For the success of the policy, there is need for collaboration of economic agents and various
economic sectors. Government ministries and agencies are called upon to work together in
championing the implementation process. The Office of the President and Cabinet will play a
leading and coordinating role as overseer of the implementation process to ensure attainment of
set targets of the plan. The new policy document, if implemented well will stimulate growth.
The policy document says the government will mobilise local resources to liquidate US$6,1
billion in external debts, a local businessman. However there is need for the private sector to
intervene and play a part by helping the government in monitoring the implementation process.
For the policy document to be a success, total commitment and desire to meet people’s
expectations is important in consolidating current macro-economic gains. The policy is also
aimed at developing infrastructure, increasing productivity for small to medium enterprises,
facilitating commodity beneficiation and maintaining the multiple currency regime.
The Zanu PF-led government should focus on implementing strategies and policies outlined in
its new economic blueprint. The new economic road map to guide Zimbabwe for the next five
years is ideal for the country, however lack of commitment and minimal implementation could
be the stumbling block. This fact is well driven from the previous happenings.
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Brains Muchemwa, an independent economist said (which this author has seen worth the view);
“Government should implement the policy in its entirety. The document (blueprint) is
wonderful. It was well-crafted on paper. It looks good, but the challenge now is it
needs to be implemented so that the country benefits from such brilliant ideas.
Economic issues must go beyond politics. The government also needs to come up with
long-term policies which can supersede electoral timelines.”
Zimbabwe has adopted numerous economic policies since 1980 and to achieve the growth
projected in ZIMASSET, there is need to make fundamental decisions and “more importantly
major paradigm policy shifts on the part of the government. The new economic blueprint comes
as a successor to the Medium-Term Plan (MTP) that was consummated during the tenure of the
inclusive government and was expected to run until 2015. The MTP which required
approximately $9,3 billion for full implementation lacked donor support on which the blueprint
was premised on, failed to meet most of its target between 2011 and 2012.Among other things
the MTP aimed to grow the economy by an average of seven percent between 2011 and 2015,
increase Foreign Direct Investment (FDI) levels to 25 percent of Gross Domestic Product by
2016 and maintain a single digit inflation rate.
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4 The Necessary Framework For Policy Formulation And Implementation
As it has been noted from the various adopted policies in Zimbabwe, there is need for the
necessary institutional framework for successful policy making. This means that everyone
engaged in the conduct of public policy know that a government must have some scope for
flexibility, in order to respond to exceptional circumstances, or to deal with challenges not
anticipated in advance.6 A rules-based approach is the best guarantee of the impartiality,
consistency, and predictability of government action.
Institutions of government must have clearly defined responsibilities and competencies, as well
as the necessary human and financial resources to carry them out. Where the rules and
regulations are clear, and where institutions apply them predictably and impartially, economic
security will flourish, and social justice becomes possible. Some of these institutions include;
Creating all these institutions is a major challenge, however a start can be made on as basic a
level as the government budget. The national budget should be programmed following
established rules and open transparent procedures, it should be submitted for discussion and
approval by the parliament; it should be carried out as approved, with no recourse to extra
6
However such discretion must be exceptional indeed, and strictly limited in its scope.
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budgetary spending or unapproved taxation, under continuous internal supervision and control;
and its execution should be subject to ex-post verification and supervision.
The success of Zim Asset policy depends on the stability of its assumptions, of which these
assumptions are in economic sense variable implying they can change either side. They do need
a lot of commitment and consistency/effectiveness on every economic activity transacted. The
assumptions are as follows;
• Improved liquidity and access to credit by key sectors of the economy such as
agriculture; - this is only possible if we increase exports and value addition to our
products.
• Establishment of a Sovereign Wealth Fund; - no turn back is required in this case
• Improved revenue collection from key sectors of the economy such as mining;
• Increased investment in infrastructure such as energy and power development, roads, rail,
aviation, telecommunication, water and sanitation, through acceleration in the
implementation of Public Private Partnerships (PPPs) and other private sector driven
initiatives;
• Increased Foreign Direct Investment (FDI) into Zimbabwe;
• Establishment of Special Economic Zones;
• Continued use of the multi-currency system;
• Effective implementation of Value Addition policies and strategies;
• Improved electricity and water supply.
Therefore, a lot has to be done to manage such standards of economic level. It becomes
questionable if this is not only a blueprint. A high level of commitment is needed, from the
government, business and populace in general to achieve the desired targets. Hence the policy
need to be well communicated, and political disparities addressed as a matter of urgency.
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Every economic agent should be supportive to the policy as it is one that has emphasized equal
development, it’s a socialist policy where everyone in the country is considered to benefit from
the policy. It is therefore broad based. The policy also acknowledges its broadness and
highlighted that wherever possible it will implement initiatives that can yield rapid results
(Quick-wins). Since institutions are weak, it aims to strengthen institutions capacity, capitalize
on the strong human base in the economy. The document acknowledges the shrinking tax base
against recurrent expenditures, hence appropriate care will be done to utilize the little we have.
The abundance of mineral deposits in the country have been identified, and hence the mining
sector is aimed to grow and provide the much needed revenue.
• Total commitment and the strong desire to meet the people’s development expectations;
of requisite Skills;
• Creation of special funding vehicles such as, acceleration of the implementation of PPPs;
• Institutionalization of RBM across the public sector (civil service, parastatals, state
• Value addition and beneficiation in productive sectors such as mining, agriculture and
manufacturing;
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• Rehabilitation, upgrading and development of key infrastructure and utilities comprising
such as agriculture, mining, manufacturing and tourism in order to quickly grow the
economy;
Looking at the key factors that the Zim Asset is basing for its success, there is a lot of homework
to the government. The factors are not rigid and certain, they themselves rest on the ability of the
government to set them. The Zimbabwe policy makers should not use wishes to draft a policy
but should base on actual facts and attributes of the economy. Otherwise every policy will
remain a blueprint, while justification for its failure is being sort and presented to the people.
Issues of education and health have been identified to receive attention, which is quite good to
Quasi policies are never encouraged in developing world like Zimbabwe. While the idea might
be right, and funds are not enough some policies are not to be adopted due to the nature of
damage they will bring. Zimbabwean government adopted a policy known as Basic Commodity
Supply Side intervention (BACOSSI), which have seen some companies receiving aid, while
others failed to get such. The economic impact was that the level of competitiveness among
companies changed, while those that have received aid prospered and the remainder has to
suffer. The economic lesson is that government should correctly calculate the fund requirements
of each policy, then make sure that it is well communicated to all players and wherever possible
distribution should be even. Otherwise some companies will fail to compete and hence
shutdown, which will later have linkages of harmful factors in the economy.
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7 Conclusion
The Zimbabwean Government has a daunting task of delivering value and transformation to an
ailing economy which is burdened with a plethora of challenges and ever-growing expenditure.
Treasury needs to be financed with urgency. In the absence of strategic direction and a
commitment to the strategic priorities economic turnaround will remain a paralysed venture.
Historically, the national budget serves to balance and try to resource each sector of the
economy. This now is very difficult for the Zimbabwean economy as there is no stable source of
funds, hence there is need for effective prioritization to crucial sectors that have strong linkages
to other sectors. The ZIMASSET policy document will suffer from too many aspects to be
covered over a short period of time. Hence there is need for government to prioritise. The
Government must adopt a cost containment strategy, done by conducting a candid assessment of
government’s highest cost drivers and identifying areas that may be cut down without
compromising on quality or strategic intents.
Government must establish a set of mutually agreed, fair ground rules for private activity and
enforce them equitably and consistently; it must provide internal and external security for its
citizens; and it must focus its limited resources on fostering the development of human capital
(health and education spending) and basic infrastructure. If the state limits itself to these
objectives and combines them with a credible and predictable policymaking environment, it will
have made the best possible contribution to the development of the economy. Finally, the closure
and under-performance of companies means loss of corporate tax and Pay as you Earn (PAYE)
which all used to be significant contributions to the Treasury. Closed companies must not just be
resuscitated in the absence of feasibility analysis, otherwise there may be re-collapsing of the
same companies.
References
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1. African Development Bank (ADB) http://www.afdb.org/
2. African Institute for Economic Development and Planning (IDEP) http://www.unidep.org/
3. African Union (AU) http://www.africa-union.org/
4. Brian Igoe, “Three Droughts and ESAP.”
5. Independent Evaluation Group (IEG), World Bank Group (2012), “Structural Adjustment and Zimbabwe's
Poor.”
6. Monetary Policy Statement, Reserve Bank Of Zimbabwe, Turning Our Difficulties Into Opportunities.
“Exports, Forex, Exports" January 2009.
7. National Trade Policy (2012–2016), Ministry Of Industry And Commerce, Zimbabwe
8. New Partnership for Africa's Development (NEPAD) http://www.nepad.org/
9. United Nations Development Programme (UNDP) http://www.undp.org.zm/
10. USAID http://www.usaid.gov/locations/zimbabwe/
11. World Bank (WB) http://www.worldbank.org/zw
12. ZIMASSET Policy Document.
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