Labour Think-Tank Criticizes Finance Minister Austerity Programme

Godfrey Kanyenze, director at the Labour and Economic Development Research
Institute of Zimbabwe (LEDRIZ), has sharply criticised finance minister Mthuli Ncube for
advising the government to embrace austerity measures to cure the country’s economic
difficulties, describing fiscal tightening policies in the country as “heartless” and
misplaced.

Speaking at the two-day Zimbabwe Congress of Trade Unions (ZCTU) Labour
Symposium that ended yesterday, Kanyenze said the rush to impose austerity for
prosperity programme plans by government was a “spiralling catastrophe,” and was
threatening to drag the country in the 1990s ESAP era – “a case of history repeating
itself”.

The internationally respected labour economist said the country’s leaders were
mistaking the need for greater financial prudence, responsibility and accountability in
governmental expenditure for more radical, short-term measures that could worsen the
current downturn.

But Kanyenze warned that large-scale, indiscriminate cutting of government expenditure
has been “decimating” lives and nipping potential economic recoveries in the bud
leading to worsening poverty levels.
“Poverty,” he said, “household poverty is now defining people’s lives.”

The country seems to be doing its best to go straight into policy pronouncements
without researching on the impact on citizens, he said, warning: “This lack of policy
consistency is dangerous.” the mouth of a fairly hefty snake,” he warned.
“To move from that frying pan of corruption and mismanagement to the fire of austerity
and indiscriminate cuts to satisfy the IMF-inspired neo-liberal reforms and to placate the
rating agencies has not been helping the economy and the poor to move into a
responsible forward-looking recovery programme,” he said.

Inflation has been increasing since October 2018, driven by monetization of sizable
fiscal deficits of the past, price distortions, and local currency depreciation. Annual
inflation reached 230% in July 2019 (compared to 5.4% in September 2018), with food
prices rising by 319% in July 2019 while non-food inflation increased by 194%.

“The monthly minimum wage cannot even purchase a loaf of bread to last the month,”
he added.
Kanyenze singled out the issue of pensioners, describing minister Mthuli’s belt-
tightening measures as “ill-advised” and “certainly mistimed”.

Real gross domestic product (GDP) is expected to contract by 7.5% in 2019. Shortages
of foreign currency, fuel, electricity, severe drought and Cyclone Idai dampened
economic activity, especially in mining and agriculture, which experienced double-digit
declines.

Production of major minerals like gold, diamond and coal fell by more than 27% while
production of maize, the main staple food, was less than half of its level in 2018,
resulting in wide-spread food insecurity.
He took great exception with the issue of pensioners whose previous US$80 monthly
pay-outs were converted to the local surrogate currency at a value of 1: 1 and are now
worth a miserly US$2!

Many economists have warned that the austerity measures have raised the risks of
economic contraction and a double-dip recession.
Domestic demand weakened significantly as job losses and rapidly increasing inflation
eroded disposable incomes of households while fiscal austerity kept government
spending low.

Kanyenze implored policymakers to study the years after the 1990 ESAP, when de-
industrialisation set in and unemployment grew to alarming levels and.
Economists predict that the economic debt crisis and austerity measures could reverse
the already modest third-quarter economic growth.

According to the World Bank, extreme poverty is estimated to have risen from 29% in
2018 to 34% in 2019, an increase from 4.7 to 5.7 million people. The increase is driven
by economic contraction and the sharp rise in prices of food and basic commodities.
Contraction of agricultural production following an El Nino-induced drought worsened
the situation in rural areas. One tenth of the rural households currently indicate they are
going without food for a whole day, about double the proportion of urban households.

Other speakers during the symposium concurred that the sovereign debt crisis was at
“the heart” of a global economic downturn and was weighing down the economies of
former colonies that are still umbilically tied to their erstwhile colonial masters.
Peter Mutasa, president at the labour body said: “The stakes are high and as workers
we face a most uncertain future in the face of imposed economic programmes thjat
have captured governments across the region.”And the rEmerging economies need to
have disaster plans in case advanced economies go into depression.”

With nearly 94 percent of the population is below the poverty line, ZCC which
represents most religious bodies across the country under its umbrella, to plan new anti-
poverty projects at home.

“We cannot shut our eyes to what is happening in our own back yard. We must
respond,” said Admire Mutizwa from the Zimbabwe Council of Churches (ZCC.)
The ZCC was formed in 1964 with the aims of bringing together churches and Christian
organisations for joint action, witness and coordination, particularly to adopt a united
and common response to the political and socio-economic challenges.
“We want development that raises people’s living standards so they are able to access
basics, have self-value, self- dignity,” Mutizwa said.

Interestingly, Kanyenze and minister Mthuli Ncube were freshmen at the University of
Zimbabwe in the same economics class in their first year in 1983. Both were bright
students but while Kanyenze took a turn to the left and went the way of labour, his
classmate went right, entering the banking and financial world before being appointed
minister of finance in the new political dispensation in 2018.

And now the former economics class bright lights under another former finance minister
Tichafa Masaya, are apparently on different sides of the fence and looking at the
economic Zimbabwe situation with different lenses.