ZIMBABWE OPENING NATIONAL SAPRI FORUM
2-3 September 1999
Civil Society Perspectives on Structural Adjustment Policies
Zimbabwe held its First National SAPRI Forum on 2-3 September in Harare. The Forum was organized by a broad-based national steering committee of the civil-society network, SAPRIN, which is coordinated by the lead agency, the Poverty Reduction Forum, and chaired by the Zimbabwe Congress of Trade Unions. More than 250 people from all districts of the country and representing farmers, small and medium-sized businesses and industries, women's organizations, trade unions, students, youth, environmental organizations, churches, disabled peoples' organizations, micro-finance workers, human-rights activists, academics and street children met for two days to present their views on structural adjustment.
Several officials of government ministries, as well as World Bank representatives, also participated. The Forum followed two years of extensive outreach and organizing around the country, which enabled the establishment of six regional and 45 district committees. Workshops were held in each of these regions and districts to gather local experiences with structural adjustment and feed information into the National Forum. A total of 2,000 people participated in the district-level fora. More than 100 organizations are formally affiliated with SAPRIN in Zimbabwe.
The Forum opened with presentations from civil society, the World Bank and the international SAPRIN coordinator. Participants then joined in a discussion on structural adjustment and its impact on Zimbabwe, contributing their own experiences. They raised concerns that the Economic Structural Adjustment Program (ESAP) and its successor, the Zimbabwe Program for Economic and Social Transformation (ZIMPREST), have failed to meet the majority of their targets (e.g., raising GDP, reducing unemployment, or reducing inflation) and yet are still being vigorously pursued by the government, the World Bank and the International Monetary Fund (IMF). Many also noted the negative social consequences of ESAP, which the Bank still contends is intended to benefit the poor and marginalized.
The World Bank acknowledged that structural adjustment has failed to achieve macroeconomic stability in Zimbabwe and has resulted in a falling standard of living for many, particularly members of urban households. The percentage of those households classified as poor rose from 40 percent in 1991 to 60 percent in 1995, and average consumption levels dropped by 25 percent. Cutbacks in public expenditures have also negated achievements in health and education made during the first decade of independence (before the implementation of structural adjustment), according to the Bank.
Following presentations on four thematic issues -- labor-market deregulation and the liberalization of trade and the financial and agricultural sectors -- participants divided into working groups to discuss the impact of these policies on various sectors of Zimbabwean society and to begin discussing alternative ways forward. The groups then reconvened in a final plenary to share their observations.
I. The Impact of Labor-Market Reform on Employment, Wages and Working Conditions
Forum participants noted that the Zimbabwean government, upon signing its first stabilization agreement with the IMF in 1983, abandoned the relatively high minimum wage that it established, along with laws supporting collective bargaining, shortly after independence three years earlier. By the end of the decade and the institution of ESAP, the government had begun to look at the labor market as any other market in need of deregulation. Wage "flexibility" was introduced, some restrictions on worker lay-offs were abolished, and competition in the area of labor organizing was promoted. These reforms, participants said, have benefitted employers, but they have negatively impacted workers and society as a whole, as economic polarization has increased across the country.
The average rate of employment growth during the ESAP period is one half the growth rate of the labor force, meaning that new jobs are not being created fast enough to absorb new entrants into the labor market. Trade union participants observed that, by focusing exclusively on the formal sector as the engine of growth, ESAP has neglected the sectors with the greatest potential for job creation - - the informal and small and medium-sized enterprises. Furthermore, with the reduction or elimination of subsidies under structural adjustment, private companies have been forced to reduce costs in order to remain competitive. Deregulation has allowed them to make increased use of temporary, part-time contract workers who do not receive benefits and have no job security.
These changes have increased unemployment and decreased real wages, according to participants. Those workers who do find full-time jobs are no longer guaranteed a living wage, and the effects of this reduced income have been made even more potent by rising prices. (Inflation rose from 15.5 percent in 1990, when the first ESAP was implemented, to 42.1 percent in 1992; by August 1999 it had reached 68.8 percent.) The collapse of wages has meant that many workers live far below the poverty line. This has created a recessionary spiral, with falling purchasing power resulting in depressed demand. Meanwhile, profits as a share of gross domestic income rose from 46 percent in 1987 to 61 percent in 1997, while the share of wages and salaries declined from 54 to 39 percent. With the burden of adjustment thus falling largely on workers and peasants, Zimbabwe has experienced growing inequality.
Due to the removal of labor regulations and the increase in part-time employment, working conditions have also declined. There is no longer a functional grievance system for workers' complaints. Women experiencing sexual harassment are far less likely to report an incident for fear of retrenchment, as employers now can easily fire people. The decline in the power and effectiveness of trade unions, also attributed to the labor-market reform policy by Forum participants, has exacerbated the problems faced by working people. While unions have been forced to democratize as the result of the elimination under adjustment of the government policy of "one industry, one union", employers have also taken advantage of the situation. Shop-floor negotiations with local workers' committees on codes of conduct have weakened industry-wide unions, and the rise of two competing agricultural unions has caused significant problems in that sector, participants argued. As a result of ESAP, the relationship between the Zimbabwe Congress of Trade Unions and the government has deteriorated.
II. The Impact of Trade Liberalization on Local Businesses
Trade liberalization, through the removal of tariffs and quotas, was an integral part of the structural adjustment package introduced in 1991. It was designed to open the country to foreign goods, introduce its products to the international market, and increase output, earnings and employment in both the industrial and agricultural sectors. Prices would fall, it was projected, as local businesses were forced to become more competitive.
According to Forum participants, however, Zimbabwean businesses were ill prepared for the global marketplace and, hence, the nation's products have failed to find significant external markets and bring in the anticipated foreign currency. The failure to modernize technologically also devastated local industries hit by a flood of cheap imports, as well as by the loss of government subsidies, high interest rates and the increased cost of raw materials. As a result, the Zimbabwean retail market has become dominated by imported goods. Small and medium-sized industries have been forced to reduce production, go out of business or switch from manufacturing to importing, leading to a large drop in manufacturing output. With companies forced to lay off workers, employment dropped sharply between 1991 and 1998, accompanied by a significant erosion of wages.
The textile industry has been particularly hard hit. Imported second-hand clothing flooded the local market at a time when wages were falling and consumers were forced to seek the cheapest products available. Locally manufactured textiles were pushed out of the market, and the promise of external markets never materialized. As textile firms cut back production or closed their doors, 12,000 jobs were lost in the sector. Electronics manufacturers suffered similar losses.
Forum participants argued that there should have been a serious assessment of the ability of Zimbabwean industry to compete internationally before trade barriers were dropped. Local industries were experienced in supplying a protected market but they were unaccustomed to the culture of exporting. It was pointed out, however, that even those firms that did prepare themselves for the economic opening by investing in new equipment were crippled by the need to borrow heavily and by the high interest rates that constituted another part of the adjustment package.
III. The Impact of Financial-Market Deregulation on Domestic Economic Activity
Financial-sector reforms in Zimbabwe were designed to reduce government involvement in the financial market and to increase the competitiveness of banks and banking services. Among the policy goals in this area were an improvement in the position of the Zimbabwe dollar and the lowering of interest rates in order to encourage entrepreneurship. The financial sector has, in fact, expanded throughout most of the 1990s. There has been significant growth, for example, in savings recorded at commercial banks and in the offering of various services and products (e.g., computerization and ATM machines) by new financial institutions.
Forum participants argued, however, that achievements in this sector have been very limited, while the problems that the reforms have caused for the majority of the population have been significant. The removal of interest-rate restrictions on banks has led to rates rising five-fold to nearly the 50-percent level since ESAP was launched almost a decade ago. While even larger businesses cannot afford these rates, said participants, they can at least retain and use earnings from previous years. It is smaller businesses and those in the growing informal sector, which desperately need start-up loans, that are most affected.
Participants said there is no evidence that the World Bank and the government considered the needs of common people when instituting financial-market reforms. The high-interest-rate environment created by adjustment has led people, as well as the unregulated banks, to invest in speculative money markets rather than in productive, employment-generating endeavors. Forum participants argued that, for the reforms to work, training in business skills and credit management, as well as other attendant programs and policies, were necessary, yet none have been provided. They pushed above all for government-supported lending institutions that could provide subsidized loans to small businesses, farmers, the poor and other marginalized members of Zimbabwean society.
IV. The Impact of the Liberalization of Agriculture Markets on the Rural Majority
Agriculture is the mainstay of the Zimbabwean economy, providing a livelihood for 70 percent of the nation's population, as well as 40 percent of export earnings and many of the raw materials used by its industries. After independence in 1980, the government recognized the need to ensure the production and availability of adequate food and essential commodities for the general population. Toward this end, it controlled prices and supply through a network of marketing boards. It also regulated the production of large-scale farms, requiring certain production quotas and assuring a surplus of staple foods. The country met all of its domestic food needs and still had enough maize and wheat to export to other countries in the region.
With the advent of structural adjustment, these policies changed. Trade barriers, price controls, subsidies and production quotas were removed. Farmers were no longer required to produce food for local consumption. Fixed prices were abolished for all crops except maize and wheat. The government privatized the marketing boards so that millers could buy directly from producers. Deregulation freed producers and middlemen to mark up prices at every step of the marketing process, according to Forum participants.
In the mid-1990s, the government still anticipated that its reform program would transform the nation's small-scale, subsistence agriculture into widespread commercial farming and generate annual agricultural growth greater than the rate of population growth. Part of the plan, according to participants, was to develop fully the necessary physical and social infrastructure in rural areas, but little of this has happened. With budget allocations for rural infrastructure and other capital projects down, farmers lack the roads and adequate transport systems, as well as the processing, storage and distribution systems, they require in order to be competitive. Other key problems faced by farmers under ESAP and identified at the Forum include the continued lack of access to land, difficulties with the availability and price of farm inputs, the loss of important and timely information previously provided by the marketing boards, high interest rates, and insufficient technical services due to inadequate budgetary financing.
So, while new producers have entered the market and the freeing of prices has helped some farmers (though high inflation has eroded many gains), the majority of rural Zimbabweans have not benefitted from the liberalization of the agricultural sector, according to participants. Overall food production during the 1990s has not kept up with population growth, further adding to a food shortage. The land-reform program has progressed very slowly, so most rural people still do not have access to land on which to grow commodities to feed themselves and to sell. Furthermore, with the opening of import-export trade and the push of Zimbabwe into the global market, large-scale farmers quickly converted their operations away from food crops to high-revenue-generating export crops, such as paprika and cotton; this has shifted land away from the cultivation of maize, particularly hurting small woman farmers, creating shortages of basic staple foods and further raising consumer prices. Today, the country is forced to import food from Mozambique, South Africa and Kenya, adding to the national debt.
Forum participants concluded that Zimbabwe, through ESAP, had jumped feet first into the international agricultural market, a system it did not understand and in which it did not have the capacity to operate. They argued that the country should have eased more gradually into this global market. They also urged the adoption of a comprehensive national agricultural plan, one that would provide farmers with adequate land, affordable interest rates, stable prices, basic infrastructure and the other support required to enable more Zimbabweans to engage in commercial farming.
Consistent across all the Forum's working groups was participants' concern with the growing social problems that have accompanied structural adjustment in Zimbabwe. Since the launching of ESAP in 1991, incidents of crime, destitution, prostitution, family disintegration and homelessness have increased. Despite the fact that adjustment was intended by the government to benefit poor and marginalized groups, the rich have continued to get richer and the poor poorer. The government's Poverty Assessment Study Survey finds that 61 percent of households live in poverty and 45 percent in extreme poverty. The most vulnerable segments of the population, including women, youth and the disabled, have suffered the most.
The Zimbabwean economy is in crisis. Economic growth remains erratic and below targets. The balance-of-payments problems that have plagued the economy since the last quarter of 1997 persist. The failure of ESAP to redress the inequalities inherent in the Zimbabwean economy means the majority of the people cannot take advantage of the opportunities that are offered. This is a major impediment to the success of reforms. Forum participants said that the highly dualistic nature of Zimbabwe's economy (in which the white minority dominates formal-sector economic activity and owns two-thirds of high-potential land and the black majority is concentrated in rural, communal areas and urban informal sectors) was never adequately addressed when planning economic reform. By focusing exclusively on the formal sector for economic growth, ESAP neglected the sectors with the greatest potential for employment creation: the informal, small and medium-sized enterprises.
Most notably, however, participants consistently commented on the lack of public participation and involvement in the creation of economic policies that impact them. They stressed the difference between "consultancy", in which policymakers might ask for civil society's opinions and still act as they like, and true participation, in which community members are involved in the decisionmaking process from the beginning. If Zimbabwe is ever to move to a more productive, balanced economy, they argued, local communities must be involved in a meaningful way in this process.
Photos from the Opening National SAPRI Forum