Zimbabwe Renewal – the Facilitative State

When the people of the United States revolted against English domination it was over a small tax on tea. In India it was Gandhi’s objections to a tax on salt that gave rise to his long walk through India to the coast where he symbolically made some salt from sea water, a simple act that became the turning point in the Indian struggle for Independence.

Today it is impossible to think of a country without a huge State infrastructure that commands much of our daily lives, for better or worse. In Zimbabwe we have a State that collects about 25 per cent of our national income in taxes but that does not fully describe the role of the State in our daily lives. If you are in employment you pay about 25 to 30 per cent of your salary in direct taxes. You pay another 20 per cent in levies and social service charges to government sponsored institutions like the National Social Security Authority, the Standards Association, the Aids Council and your National Employment Council and perhaps a Trade Union. You also contribute to an Education Fund that is supposed to fund post school institutions.

In addition you will pay 15 per cent Value Added Tax, import duties on most of what you consume, levies and taxes on liquid fuels and taxes on tobacco and alcohol drinks, tolls on roads and bridges and then license fees to all sorts of State controlled organisations as well as fines to fund things like the Environmental Agency. The list is endless and when it is all tallied up we are paying the great majority of whatever we earn to the State in one form or another.

Nothing wrong with this and even in the bible we are urged to pay our taxes and in the days of the Patriarchs the Temple collected a modest 10 per cent of all incomes and from this was expected to meet the social security needs of the Community.

On the other side of the coin, the size of the State in a modern economy is everywhere a key element in economic activity of all kinds. If you add all the revenue flowing towards State controlled institutions, it is not difficult to come up with numbers that suggest that half the GDP is directed and controlled by the State. Add to that all the State controlled institutions in the business sector (railways, airlines, ports, power utilities etc) then the numbers become even more significant.

What everyone has to understand however, is that all this money is the product of a small sector of the economy known as the “productive sector”. That is not to suggest that all State controlled institutions are “unproductive” but the reality is that almost all State controlled activity could probably be carried out at lower cost and more effectively by a privately controlled system where initiative and competition forced performance and minimized costs.

Since it was formed 24 years ago, the National Social Security Authority (NSSA) has collected about $4 000 000 000 from a million people in Zimbabwe. In 2012 only $700 million of this remained or just over 17 per cent. This means that 83 per cent of what has been contributed by working people to NSSA had been lost or squandered. In 2012 only 17 per cent of the total revenue of the Authority was spent on pension benefits.

The general public gets little or nothing back from this vast State network and when you add to the cost of such “overheads” the cost of State corruption which up to 2009 amounted to a third of our GDP; you get some idea of how massive this burden is for any country. It’s like being a porter climbing a mountain and carrying twice your weight in your back pack.

On another tack, there is the role of the State as a facilitator rather than a player who must be paid for what they do. In this case we have to ask ourselves how does the State turn “red tape into a red carpet”, as the new President of India stated during the recent Indian elections. The crucial test of the State in this role is whether or not we view the role of the State in our daily lives as being of assistance or an obstacle to our individual progress? In Zimbabwe I think we fail on all counts.

Most business persons would say that the State made their lives much more difficult and were a major impediment to business and development. They get very little back for their tax dollars. Virtually every Zimbabwean would make the same judgment – we get very little back for our tax dollars. Even the absolute poor can argue that they get very little from the State in terms of any real benefits, a few dollars for education assistance, some help from the Police perhaps, a small subsidy on very poor quality health services.

If we are to make progress we have got to review the role of the State in our society and economy. If we do so we can turn what is perhaps our biggest liability into a real asset of which we can all be proud. Until then, the State is just another burden we have to lug around in our daily lives unless we can operate in the economic underworld that is the informal sector. Most Zimbabweans survive by doing just that.

Eddie Cross
Bulawayo, 12th June 2014