Saturday, 3 November 2012

Why Zimbabwe's Economy Can Never Recover


Zimbabweans may be wondering why, no matter how hard they work, the country can never seem to progress. We have rightly earned a reputation for being among the most hard-working people in sub-Saharan Africa. Yet judging by the state of Zimbabwe's economy, our hard work counts for nothing.

The reason is that our politicians have been snoring on the job. They have also been taking us to the cleaners, robbing us dry. They have used the fruits of our hard labour (tax money) as a slush fund for their own luxury and self enrichment.

Perhaps the table and image below can help shed some light on why I conclude that our politicians are robbing us.

They clearly show that Zimbabwe has the tinniest budget (less than 1% of the Russian budget) yet has the highest number of ministers and deputies needing all sorts of perks and luxuries from that budget.

She also has the smallest tax base which means that there is virtually nowhere for a luxurious budget to come from. Zimbabwe's politicians are living completely out of the means of the country.

Country
Population (millions)
Budget (billions)
Ministerial    Positions
People per position (millions)
Budget per position (billions)
Unemployment
Tax Contributors per position
USA
312
3796
23
13.565
165.043
9.00%
6,172,200
UK
63
1096
22
2.864
49.818
8.10%
1,315,800
Zimbabwe
13
3.4
77
0.169
0.044
95.00%
4,200
China
1345
1970
35
38.429
56.286
6.50%
17,965,400
Russia
143
404
21
6.810
19.238
6.60%
3,180,000
Germany
83
409
16
5.188
25.563
6.00%
2,438,100

The size of Zimbabwe's executive relative to its population and budget is simply astronomical

For simplicity let us take the working age population to be exactly half a country's population. For the United States this means there are 6.783 million people of a working age per cabinet position (13.565 ÷ 2). Of these, 91% are employed (i.e. contributing tax to the national budget). Thus, on average, 6.172 million people are contributing tax towards the budget of each ministry.

In the case of Zimbabwe there are only 84.4 thousand people per ministry of a working age. Of these only 5% are officially employed. This means that 4200 people are contributing towards the budget of each ministry.

There are a number of things that are seriously structurally wrong with Zimbabwe based on the above data. First how can the country with smallest population have the largest number of ministerial posts. Well, we all know the answers – cronyism, political patronage and gravy train seat grabbing.

Secondly how can only 5% of the people be in a position to contribute towards the tax base of the country. I am not Einstein's brother but I can see that there is something seriously, seriously wrong with our tax collection system. Our tax net must have some very large holes that are allowing some really big fish through. This can be due to rampant corruption, simple incompetence by ZIMRA or an incorrectly structured taxation system.

If the 95% 'unemployed' people were truly without an income, there would be mass starvation evidenced by skeletal people all over the country. The truth is that the majority of them have an income which is simply not recorded by the tax system.

Judging the the perpetual traffic jams in Harare, which never used to happen six or so years ago, incomes are healthy enough for much more than 5% of the people to afford cars. If someone can afford a car surely they are gainfully employed and should be paying tax.

Thirdly there is strictly no room for patronage in Zimbabwe. The tax base is simply too small to support the number of political cronies that are being fitted in the cabinet. We are simply trying to run a super-link gonyet (30-wheeler truck) with a scooter engine.

It should therefore surprise nobody that all other services supposed to be funded by tax revenues are in various states of total collapse. The money that is supposed to provide these services, if managed very, very efficiently, is nearly all going towards supporting the political patronage system.

In the above table, Zimbabwe has by far the tiniest budget. Yet it has nearly 4 times as many ministers as the world's leading economies and twice as many ministers as China a country with 1.3 billion people. One of the hot topics in the current constitution making process is devolution, which means increasing the number of administrators for the tiny cash starved population of the country. To me, it simply doesn't make sense.

What this means is that ordinary Zimbabweans, you and I, will never be able to have reasonably comfortable lives unless the patronage system is heavily cut down. In the past I have advocated that Zimbabwe should have no more than 16 ministers. After looking at the above table I think that is still too much. I think we should have only ten or twelve.

The heavy, extravagant perks that are being handed to politicians for merely being politicians need to be eliminated. For the past year I have been trying to sing a 'one minister one car' tune whenever I can. In fact that should be one minister one car for the entire five year term.

The above table was compiled from data that is publicly available on Wikipedia and the CIA World Fact book. Currencies were converted to US dollars at ruling rate of the day in November 2012. If anyone feels that the data is not correct, please feel free to furnish us with your correct version of the data.

Zimbabwe's economy can only recover once our politicians understand that Zimbabwe is a small country with a small income and a tiny tax base, therefore it cannot afford to compete with leading economies in terms of providing perks and luxuries to political leaders.

There is no way that our political leaders can live like British monarchs, American moguls, Russian oligarchs or Saudi princes on the tax base and revenue stream that the country has. Yet that is exactly what they are all trying to do.

Merely changing the politicians from one set to another without fundamentally curtailing the patronage system will not change Zimbabwe's fortunes much.

Yes there might be a slight relief, due to better donor sympathy, but never a permanent improvement. We had a lot of donor sympathy is most of the 1980s but look where we ended up because of the patronage oriented system of governance we fostered.