Lies, Damn Lies and Statistics

I had just left Parliament after the presentation of the 2011 budget and turned on my car radio to listen to the ZBC. I was shocked by what I heard. The commentator was asking a young man what he thought of the budget and the first thing he said was that Biti had done nothing to address the problem of sanctions. It was the 'illegal sanctions against Zimbabwe' that were holding back economic recovery and inhibiting Zimbabwe’s industrial and agricultural sectors. His next comment was just as ludicrous - the much-vaunted support from the international community had once again failed to materialize, even though Biti was their 'bright eyed boy'.

I attended a meeting at the Party Headquarters and said that we should demand a decent and informed debate on the budget on both ZBC and ZTV. What I had heard was complete nonsense and did nothing to enhance the broadcaster’s already tarnished reputation. The others at the meeting agreed with me but said that the two State controlled mass media institutions would never allow such a debate.

I will not dwell on the budget, as that will be the subject of a great deal of debate and analysis in the next few weeks as it goes through the House. But I do think that a couple of features and the role of the international community and the Diaspora need a mention.

The first is the issue of just how are we doing when it comes to economic recovery? From 1997 to 2008, ten years, the national estimate of economic output in real terms (constant dollars) declined from US$8,7 billion in 1997 to US$4,2 billion in 2008 (source: the IMF). The decline in the productive sector was even more precipitate - agriculture by over 70 per cent, industry by 80 per cent, tourism by 80 per cent and mining by about a quarter. This led in turn to a 40 per cent decline in employment - almost all the losses in the above sectors of the economy.

In the financial sector the collapse was total, the combined value of all the cash in circulation falling to a miserable US$6 million in 2008. Inflation simply consumed the savings of the whole country and of all previous generations, millions were plunged into penury. All banks and financial institutions without exception were bankrupted in legal terms. The economy was left like a City after a neutron bomb had been exploded above it - buildings standing but all life extinguished.

Zanu PF knew what they had done and they knew how to fix it. When it became apparent, even to them, that this was the end of the road economically, the acting Minister of Finance (Chinamasa) stood up in Parliament and abandoned the Zimbabwe dollar and cut the economy adrift from the Reserve Bank which had been the main means of plundering the national economy. I went up to him after that speech and said that I thought it had been a courageous and timely statement. He looked somewhat bemused as we seldom had anything good to say about them.

In the subsequent month we collected US$5 million in revenue from the whole country. Now, 21 months later, how do stand?

Well firstly, the overall economy has recovered quite significantly with the latest IMF report saying that their estimate of GDP is now US$8 billion for 2011. That is a huge jump from US$4,2 billion in 2008 (90 per cent in three years). This is partly because the Fund has changed the basis on which they calculate the GDP but it also reflects the recovery in the economy and the formalisation of many economic activities that were previously unrecorded because they were in the informal sector.

Industrial capacity utilisation is now just over 40 per cent compared to 10 per cent in 2008 and the mining industry has expanded significantly - mainly gold and platinum, although diamonds must now be generating a significant turnover if we can ever get it under control and out in the open. The financial sector has recovered with deposits now standing at US$2,4 billion and rising by about $80 million a month. The latest estimates also point to improved agricultural output but I think the figures are questionable.

What is not questionable is the massive increase in tax revenues now running at about $200 million a month and still rising. In fact the total budget for 2009 was only $1 billion, in 2010 it will turn out at about double that figure and Biti is estimating $2,7 billion in 2011.

As far as foreign aid is concerned the Minister really confused people this year by including an estimate of $500 million in the budget as a 'Vote of Credit' and this simply failed to materialize. In the new budget he has dropped the pretense and not put in any estimate for foreign aid. This was a much more sensible thing to do as it reflects the political realities of the day and the reluctance of the international donor community to put their funds under Ministry of Finance control at present.

Zanu PF and their lackeys in the service of the State media interpret this as the failure of the international community to support the country and continually interpret this as being 'sanctions'. In fact, the international community has been and continues to be incredibly generous to the country despite our misbehavior and continued failure to put our house in order. In the past three years, foreign aid to Zimbabwe has hovered about $800 million a year - 20 per cent of GDP in 2008 when they provided food aid for over half the population and 10 per cent of GDP in the current year.

Total foreign aid to Zimbabwe since 2000 (all of it in the form of grant aid) has in fact exceeded the total combined foreign aid received by Zimbabwe from independence in 1980 to the year 2000. In 2010 foreign aid has exceeded $800 million - half of it being disbursed on humanitarian assistance in one form or another, in addition they have started to fund the provision of social services very substantially - $200 million to health, over $100 million to education and $50 million to water and sanitation. Nearly 90 per cent of this has come from a group of States that call themselves the 'Friends of Zimbabwe'.

This group was called into existence in 2007 at the G8 summit chaired by Tony Blair and now comprises 17 countries. (China, Russia, India and Japan are not part of this grouping. Their combined aid programs are miniscule by comparison with the G8 grouping.) Within the Friends group, the leading States are the USA with over one third of all aid, the UK with 14 per cent, Germany and Norway with about 7 per cent each. The UN Agencies are quite significant but the bulk of their efforts are funded by the bilaterals - of which the Friends constitute the majority of contributors.

When combined with the budget at 30 per cent of GDP, the aid flows raise the total of State sponsored expenditure to 40 per cent of GDP. Not as high in many other third world States but still very significant and making a huge contribution to national economic welfare. Add to this the total for remittances from the Diaspora of about US$1,2 billion and these three elements constitute over half our economy and explain why we can continue to live beyond our means even though the Zanu PF government have destroyed our productive economy.

Eddie Cross
Bulawayo, 26th November 2010