What are the effects of ESAP in Zimbabwe?

of 12

[76%]

Bachelor Of Social Sciences Honours Degree In Development

Studies [Block Release 2.2]

Faculty : Humanities And Social Sciences

Department : Development Studies

Student ‘Name : Emmanuel R Marabuka

Student’ ID. Number : L0110064T

Module Name : Land Reform In Zimbabwe

Lecturer : Dr E. Munsaka

Due Date : 03 May 2013

Email Address : [email protected]

Question : What are the effects of ESAP in

zimbabwean context?

of 12

ESAP is a neo-liberal market-driven policy measure which was adopted as prescriptive

solutions to the economic crises of the 1980s Zhou and Zvoushe (2012). It was formerly

introduced in Zimbabwe in October 1990 but started in earnest March 1991 after a

meeting with aid agencies and the World Bank in Paris (Bijimarkers et al 1996).

Therefore, the ESAP framework contains the standard features of the World Bank and

IMF economic reform strategies. It entailed the reduction of government expenditure by

retrenching 25 percent of the civil service establishment, withdrawing subsidies,

commercializing and privatizing some state owned companies, introducing user fees in

the health and education sectors, among others (Zhou and Zvoushe 2012). ESAP in

Zimbabwe came as a result of the lame economy that the new government inherited and

the inappropriate economic policies adopted at independence (Makoni 2000). Linked to

the whole question of liquidity, Zimbabwe experienced acute shortages of foreign

currency. The shortage of foreign currency was largely a result of lack of investment.

However this essay seeks to explore the effects of ESAP in Zimbabwean context.

Zimbabwe's adjustment program contained the usual collection of Bank-inspired reforms

- trade and currency de-regulation, devaluation of the Zimbabwe dollar, movement

towards high real interest rates, the lifting of price controls, chopping of "social

spending" and removal of consumer subsidies. All were standard ingredients of

"liberalisation," as were the Bank's and IMF's increasing emphasis on reduction of the

government deficit, civil service reform and shedding of public enterprises. This

Economic Structural Adjustment Programme which in local parlance has been dubbed

"Economic Structural Acquired Poverty" was supposedly a home grown set of economic

measures designed to make the Zimbabwean economy more competitive.

The reform program was meant to herald a new era of modernized competitive and

export led industrialization, to bail the country out of its economic crisis and to create

economic efficiency. A general economic crisis was therefore looming and with no

alternative, government accepted market reforms that ensured inflows of foreign currency

and other support from IMF and World Bank. Mlambo (1997) asserts that Economic

Structural Adjustment Programs were formerly introduced in Zimbabwe in October 1990.

Its framework was spelled out in the January 1991 document (Zimbabwe; a framework

of 12

for Economic Recovery 1991 – 1995). The ESAP package as spelt out in this document

contains the standard features of the IMF/WB economic reform strategies including;

reduction of budget deficit through a combination of cuts in public enterprise deficits and

rationalization of public sector employment, trade liberalization, removal of subsidies,

devaluation of the local currency, privatization and enforcement of cost recovery in the

health and education sectors. These have proved to be disastrous and harmful causing

socio economic effects to the government and the mass population.

Although the neo liberalists favour the IMF and WB reform packages, the SAPs were to a

larger extent disastrous in the different sectors of the economy ranging from people‟s

lives, health, education, agriculture and the macro and micro economy in Zimbabwe.

According to Dhliwayo (2001), “the decision to want a major economic reform programs

in Zimbabwe dates back to the beginning of the 1980s, with the main aim of attracting

aid from international donors so that the country might close both the resource and trade

gaps in order to meet its economic targets.” The ESAP was sought to transform

Zimbabwe‟s tightly controlled economic system to a more open, market driven economy.

Soon after independence Zimbabwe hosted the Zimbabwe Conference on Reconstruction

and Development (ZIMCORD) in March 1981, the objectives of the conference was to

promote higher growth and to reduce poverty and unemployment by reducing fiscal and

parastatal deficits and instituting prudent monetary policy liberalizing trade policies and

the foreign exchange system.

Food and Agricultural Organization (1991) states that ESAP proved harmful for

Zimbabwe‟s educational and health sectors by the reduction of public expenditure. By

1995 Zimbabwe was undergoing what essentially amounted to a counter revolution as all

the impressive gains made in the first decade of independence in education and health

were eroded by ESAP. Leon (2002) states that during ESAP, government resources had

decreased so that real expenditure on health declined because of a combination of rising

costs, inflation, declining value of the Zimbabwean dollar, emerging diseases such as TB

and AIDS. In education, the picture emerging over the years of ESAP was equally

disturbing. The induced cost recovery measures hurt the poor as the combination of cuts

in expenditure on education, the removal of government education subsidies and the

of 12

introduction of school fees led not only to a deterioration in educational standard but also

to a situation were poor parents could no longer afford to send their children to school.

According to Makoni (2000) poorer communities and families end up receiving an

inferior education, while some children eventually drop out of school due to inability of

parents to pay user fees.

Chakaodza (1993) states that between 1990 and 1992 expenditure per pupil dropped from

Z$ 118 to Z$60 (U$ 12) per year for children accruing less than Z$ 400 (US$80) a

month, while secondary school fees rose by 150% in the year. The impact of cost

recovery measures in education was almost immediate as parents simply withdrew

children from school or postponed sending them to school. School fees problems, the cost

of uniforms and school building funds were raising the cost of attendance in secondary

school to about Z$300 per year, per child (averaging US$25 per month) per child.

Leon (2002) points that ESAP was ruining the countries education system, the

Confederation of Zimbabwe Industries (CZI) commented that this would raise the drop

rate and lower the quality of the future labour force. To make matters worse cost recovery

measures reinforced gender inequalities and disparities in education which the

Zimbabwean government had been trying to end since 1980. It was noted by the end of

1992 a greater proportion of girls than boys were dropping out of secondary schools

because families rural or urban were not able to afford school fees. The cost recovery

measures clearly disadvantaged girls, thus as school fees rose, the gender bias also

escalated. The participation rate of girls declined more from 1991 (when ESAP was

introduced). According to Makoni (2000) the total percentage decrease of girls'

enrolments between 1991 and 1992 was found to be three times more than that of boys.

Hence, if nothing is done to cushion such negative effects, the participation of girls will

continue to be severely affected. Oxfam (1999) notes that, between 1980 and 1989, while

there had been an 88% rise in the number of primary schools and a 161% increase in

female pupils in Zimbabwean schools. As a result of ESAP, 200 000 girls were

reportedly dropping out of secondary school in Zimbabwe at 1992. As in health, a steady

brain drain in the 1990s as teachers fed up with rising prices and deteriorating living and

working conditions either moved into other occupations or emigrated to South Africa and

Botswana, in search for greener pastures. At the University of Zimbabwe, the country‟s

of 12

oldest and highest institution of learning which had long enjoyed a reputation of being

first rate academic institution of learning, some lecturers were forced to become part time

mini-bus taxi operators in order to make ends meet. Also, resource supplies such as

books, chalk, the Ministry‟s own enhancing activities, monitoring, continuous upgrading

of teachers, school services including repair and maintenance, furniture and equipment

and grants to private schools fell drastically. This adversely affected the quality of

education.

The removal of subsidies and cost recovery in health resulted in people dying of curable

diseases in their homes and women giving birth at homes or in scotch carts on their way

to health centres. Participation in prenatal services declined, maternal death and mortality

rates of babies Born Before Arrivals (BBAs) have increased. Dhliwayo (2001) noted that,

user fees in health services were introduced. In 1991, the government began to

systematically enforce the system of user fees for health services. It is evident that some

of the increase were dramatic exceeding 1000% and had serious impact on the utilization

of health services in both rural and urban areas.

According to Chakaodza (1993), “public expenditure on health declined by 39% in 1994.

This decrease implied diminished spending on drugs, extension and preventative health

services, specialist facilities and treatment and other components of quality health care

delivery. Other commentators also emphasized the decline in health facilities as a result

of ESAP, with the Minister of Mines Edison Zvobgo pointing out that the parlous state of

Zimbabwe‟s health systems necessitated a change in the government‟s widely publicized

slogan of „Health for All by the year 2000‟ to „Death for All by the Year 2000‟. In 1992

doctors and nurses began referring to "ESAP deaths," described as deaths caused by the

inability of patients to pay for the minimal length of time in the hospital, or for

prescription medicine. The Minister of Health, Dr, Timothy Stamps has acknowledged

that only one in ten Zimbabweans can afford to pay for their own health care. Yet fees

remained in place, largely at the insistence of ESAP policy makers (Saunders 1996).

Therefore, professional morale and service delivery within the public health system has

wilted and to make matters worse, ESAP accelerated Zimbabwe‟s brain drain as qualified

health staff left for greener pastures unable to make ends meet in ESAP strapped

of 12

Zimbabwe. The combination of devaluation and inflation which ate into real incomes and

diminishing job satisfaction as fewer patients presented themselves for treatment and

drugs were increasingly in short supply led to a brain drain which saw doctors, nurses

among other professionals joining the steady outward migration to neighbouring

countries which offered better employment prospects. The Zimbabwean Ministry of

Health noted in 1993, that the country had a total of 1 427 doctors giving a ratio of

patients to doctors of 7 700:1 but because almost a third of the doctors on the register had

joined the brain drain, the effective ratio is closer to 11 600:1 among the worst in the

world. Scholars argue that the scenario of the health sector after 1990 can aptly be

described as that, „not only do these hospitals face a critical drug shortage, equipment and

staff shortages, they are becoming extremely expensive for ordinary workers who are

battling to make ends meet due to the high cost of basic commodities. In 1990, the

consultation and administration fees were pegged at Z$ 169 for adults and Z$ 84 for

children and are now demanded upfront. Therefore it is not surprising that the acronym

ESAP means „Elimination of Social Assistance of the People‟

Privatisation is one of the IMF/WB conditionnalités which affected the mass population‟s

lives. Scott (2001) defines privatization as the term used to refer to the sale of

government owned equity in nationalized industry, parastatal or other commercial

enterprises, to private investors with or without the loss of government‟s control of the

organizations. Privatisation is associated with higher levels of unemployment with its

attendant social ills. Chakaodza (1993) states that while privatization may improve

efficiency it will do so at the socio-economic and political cost of unemployment as well

as depletion of needed foreign currency reserves. Whilst the prime goal of privatization is

to unload enterprises the haemorrhage public money, it is no panacea for sustainable

growth in the economy of African countries. Dashwood (1993) also states that

privatization also allows private owners to discharge staff, alter wage payment systems

and discontinue parts of enterprises „operation by bringing a number of economic and

political problems. A notable success of privatization increases the desire for innovation

and expansion, as employee wages are no longer at a fixed rate, regardless of their actual

productivity. Privatisation led to income shortages to the government because of reduced

sources of income. Moreover, its consequences were increased unemployment rate.

of 12

Devaluation is also another harmful condition that is common in all SAPs. It makes the

exports of the borrowing country more competitive and attractive in the international

markets. In the case of Zimbabwe it was reported that although an annual increase of

exports 9% was projected, exports in fact fell in both 1991-2 and may not have reached

1990 levels in 1994. The deteriorating in terms of trade for primary exports meant that

developing nations find themselves exporting more and more of their commodities to

earn less and less from them. Poku (2005) asserts that devaluation increases the cost of

importing finished products and productive inputs necessary for economic development.

This is because as the prices of the country‟s exports continue to fall the cost of acquiring

manufactured inputs from the industrialized continue to rise. For instance in 1980,

Zimbabwe could buy a tractor from abroad for approximately 100 bales of cotton by

1983 however, the same tractor cost 130 bales of cotton. Furthermore devaluation

increases the local cost of production to an extent which may be beyond the means of

small businesses which have no direct access to foreign currency through export

earnings. Dhliwayo (2001) notes that although devaluation has some notable

consequences its success is that it enables imports of quality international goods and

technological goods (such as cell phones) have dramatically increased.

Trade liberalization led to a progressive denationalization of the borrowing country‟s

economy through destroying locally owned enterprises and promoting multinational

businesses. This is liberalization results in the flooding of the local markets by cheaper

imported goods which ultimately destroy businesses whose prosperity depends on the

availability of protected markets. Richard (1996) notes that trade liberalization provides

free access to capital goods and imported raw materials, it also opens the domestic

market to competition from imported goods which place severe strains on local

companies were feeling a negative impact of liberalization. It was reported that the

number of textile companies had fallen from 280 to 193 by that year, while some of the

major companies like Cone textiles with a local employee force of 6 000 were forced to

close. According to Mlambo (1997), “trade liberalization did not ease the problem of

shortage of consumer goods in the market.” This led to the Zimbabwean government in a

1996 government working paper, to hail trade liberalization as one of the reform

programs “major success stories” particularly since under its influence „the long and

of 12

unpopular queues which had been a notorious feature before the program, suddenly

vanished and no imported commodity was in short supply in the market anymore. Also,

scholars say trade liberalisation generated numerous opportunities for agriculture in

Zimbabwe, because the removal of price controls has resulted in producer prices going up

has benefited agricultural communities who have access to markets and the with the

ability to shift into alternative cash crops according to shifts in relative prices.

ESAP caused high unemployment rate because of its economic reforms. According to

Sounders (2000) about 22,000 public service employees have been retrenched, alongside

large cutbacks in real recurrent expenditure on services. In addition, the working

conditions of the public sector was declining, Sounders (2000) added that, declining

conditions of work and uncompetitive pay have chased many better-skilled public

servants out of government, feeding a growing popular perception that government's

main economic policy is being driven by "foreign experts." Among those who feel most

threatened and disenfranchised by the new anti-social planning regime, and who are most

critical of it, are trade unions and civic organizations.

Although ESAP is blamed for economic reforms there are few positive changes which

were brought by ESAP even though they short lived and minor. Hence conditions

brought by ESAP for instance trade liberalisation and deregulation have generated

numerous opportunities and gains for agriculture in Zimbabwe other than the increase in

prices of imported agricultural inputs to volatility in foreign exchange (Tekere 2001).

Therefore, according to Tekere (2001) the removal of price controls which has resulted in

producer prices going up has benefited agricultural communities who have access to

markets and with the ability to shift into alternative cash crops according to the shifts in

relative prices. In addition, the emergency of seasonal price differential have also

benefited those farmers with access to irrigation facilities or on farm storage and who can

to wait to sell after harvest once prices have increased e.g. tobacco and maize. There has

been a significant growth in export crops such as cotton, floriculture, tobacco, sugar and

others that has led to the creation of employment on commercial farms for rural workers

who are to great extent women. Moreover, deregulation and trade liberalisation have also

resulted in the emergence of small private operators particularly as middlemen and

of 12

processors. According to Tekere (2001), USAID-funded 1995-1995 Zimbabwe National

Hammer Status Study estimated that there has been an increase of 3500 hammer mills

since liberation especially in rural areas accounting for about 80% of the total market. By

providing quality and cheaper maize meals products and being located close to customers

in the poor communities of the country where they do not to incur transport costs, small

operators have not only been successful but they have enhanced food security in areas

they operate. Small scale hammer mills employed 7 512 permanent workers plus

additional 3 000 causal workers. Moreover liberalisation has also opened opportunities

for small-scale producers to diversify into cash crops and an outstanding example is

cotton production. Following the deregulation of cotton Company of Zimbabwe Ltd, new

players entered the market increasing competition much to the benefit of cotton farmers.

In conclusion, one can argue that ESAP was a failure because of many negative effects it

brought to the Zimbabwean economy. More so instead of reducing poverty it increased

poverty levels also the poor people become poorer. Therefore living standards of the

Zimbabweans fell as the consequences of ESAP. Only few people benefited from ESAP

in a shortly but at the end suffered long consequences. However in Zimbabwe finally one

can say ESAP was a failure because of its economic reforms which caused economic

down turn.

of 12

References

Chakaodza A M (1993), Structural Adjustment in Zambia and Zimbabwe. Third

World Publications. Harare, Zimbabwe.

Dashwood (1993), Structural Adjustment Policies In Zimbabwe, UK Curfew

Publishing.

De Beer F. (2002), Introduction to Development, New York, Earthscan Publications.

Dhliwayo R. (2001), The Impact of Public Expenditure Management Under ESAP

On Basic Social Services, Health and Education, Harare, UZ publications.

FAO (1991), Structural Adjustment and Household Welfare In Rural Areas. India,

University of Delhi,

Leon A (2002), Health and Urban Sector, Zimbabwe Research Report, 107, Nordiska

Institute

MAKONI, R, D. (2000). EFFECTS OF THE ECONOMIC STRUCTURAL

ADJUSTMENT PROGRAMME (1991-1993) ON THE PARTICIPATION OF

SECONDARY SCHOOL GIRLS IN ZIMBABWE Department of Educational

Administration, University of Zimbabwe. Online Available at:

http://archive.lib.msu.edu/DMC/African%20Journals/pdfs/Journal%20of%20the%20Uni

versity%20of%20Zimbabwe/vol27n2/juz027002006.pdf [Accessed 28/03/2013]

Mlambo A. (1997), The Economic Structural Adjustment Programme The case of

Zimbabwe. Harare, UZ Publications.

Oxfam (1999), Economic Crisis in Zimbabwe, UK, Blackwell Publishing.

Poku A K (2005), Aids In Africa, How Poor People are Dying, UK, Universe Press.

Richard S (1996), Southern Africa Report Archive Africa Files, Economic Structural

Adjustment Programme, ESAP Fables

Saunders, R. (1996) Economic Structural Adjustment Programme (ESAP)'s Fables

II Zimbabwe

Scott B (2001), Industry and Urban Sector in Zimbabwe’s Political Economy,

African Studies

Sithole, G. (1996) Analysis of Policy Reform and Structural Adjustment Programs in

Zimbabwe With Emphasis on Agriculture and Trade. Zimbabwe Office of

Sustainable Development Bureau for Africa.

http://pdf.usaid.gov/pdf_docs/PNABZ698.pdf

a

http://archive.lib.msu.edu/DMC/African%20Journals/pdfs/Journal%20of%20the%20University%20of%20Zimbabwe/vol27n2/juz027002006.pdf

http://archive.lib.msu.edu/DMC/African%20Journals/pdfs/Journal%20of%20the%20University%20of%20Zimbabwe/vol27n2/juz027002006.pdf

http://pdf.usaid.gov/pdf_docs/PNABZ698.pdf

of 12

Tekere, M (2001) TRADE LIBERALISATION UNDER STRUCTURAL

ECONOMIC ADJUSTMENT-IMPACT ON SOCIAL WELFARE IN ZIMBABWE

Harare University Of Zimbabwe, Department Of Economics.

Timba, J. THE IMPACT OF STRUCTURAL ADJUSTMENT ON PEOPLE-

CENTRED DEVELOPMENT: THE EXPERIENCE OF THE

COLLECTIVE/WORKER COOPERATIVE MOVEMENT AND COLLECTIVE SELF

FINANCE SCHEME IN ZIMBABWE.

http://www.phuhlisani.com/oid%5Cdownloads%5CCh1.pdf

Todaro M.P (2009), Economic Development. USA, Pearson Education Limited.

Zhou, G. and Zvoushe, H. (2012) Public Policy Making in Zimbabwe: A Three

Decade Perspective. Harare, Zimbabwe, University Of Zimbabwe Department of

Political and Administrative Studies

http://www.phuhlisani.com/oid%5Cdownloads%5CCh1.pdf

What are the effects of ESAP in Zimbabwe?

Documents

Transcript of What are the effects of ESAP in Zimbabwe?