Politics and Economics under a Rent Seeking Regime

The Chief Executive of an organisation made an appointment to see the Vice President, Emmerson Mnangagwa this week. He was told to come to the office at 08.30hrs and was there on time. When he got into the office the person through whom he had made the appointment asked him if he had brought “the envelope”. The CEO said no and that he was not going to pay to see the Vice President. He waited two hours and a Secretary told him to go downstairs and see someone who would get him into the VP – he walked down and when he got there he decided that enough is enough and he just kept going.

I told him to tell the VP of this incident and that I was sure that he would be furious that someone was making money by “facilitating access”. I told him that was the right decision, but the problem is that this sort of “rent seeking” does not stop there.

Another friend, also a very senior executive said to me the other day that the major problem in Zimbabwe is the direct linkages that exist between business of all kinds and the ruling elite – nothing happens if it does not benefit key decision makers. Many accept this reality and simply accommodate the rent seekers and pay what is demanded. In doing so they demean both the beneficiary and the person making the payments.

I have just finished reading Fay Chung’s new book “The Second Chimurenga Revisited”. In this book she goes through a painful process of reliving the nightmare years in the Zanla Camps and the liberation war. For the first time I appreciated the background that has dominated the thinking of the men and women who came to power in 1980. The sense of entitlement and the need to hold onto power at all costs; the practice of eliminating those who contested them for power and control.

Besides being ill prepared for the responsibilities of government in 1980, they were a confused mixture of Marxist ideology, tribalism, traditional religion, military training and values and only the most scanty appreciation of what it took to manage a small, but sophisticated economy and a democratic system of government. Once they appreciated just what was involved in having control and access to State resources, they also fully appreciated that if they lost control at any time, the consequences would be serious for them and their extended families.

With their background training in East Germany, the Soviet Union and China they also came to power knowing that no aspect of national life could be allowed independence and self management and control. So once they had settled in a systematic attack was started on all institutions – the Trade Unions, business Associations, big business. All were deliberately infiltrated and it was made clear to business that if they wanted to get anywhere they had to have people who were “acceptable” in charge. Institutions that refused integration or subjugation were destabilized and eliminated. Every aspect of life was made to serve the State and the direct links between business and the political elite established.

If you were in the system you benefitted and loyalty was rewarded with patronage and wealth. Any attempt to break away from the system was met with savage retaliation so that when Amos Midzi found himself out of the inner circle and was suspended from the Zanu PF Party – he was instantly outside the golden triangle and could not pay even his children’s school fees. He committed suicide.

More than any other factor it is this link between politics and business that is now inhibiting the growth and development of the Zimbabwean economy. The fact that this process is then linked to rent seeking activity just exacerbates the situation. Rent seeking taking many forms from the incident involving getting an appointment with a Vice President to decision making and taking a cut out of every business deal.

It is clear here that the secret determination of salaries for senior executives in many spheres of activities (local authorities, pension funds, state controlled Boards) is directly linked to the need for control and influence over the individuals concerned and even sharing the proceeds. This is how the CEO of the Public Service Medical Aid Society came to get a salary of US$600 000 a month and the top four executives in the Broadcasting Board getting a package well over a million dollars a year despite the fact that the organisation could not pay staff.

At first the economy was able to carry this burden but as the demands for rentals rose and the management of the economy deteriorated, the combined effects simply became too much to bear and economic collapse and decline became endemic.

Big organisations that are State owned and controlled and have a significant cash flow (utilities) are an obvious target. So in South Africa you have ESKOM, a well managed and funded State owned company in 1994, able to supply cheap power to a growing economy. In the past 20 years Eskom has become a shadow of what it once was – aging infrastructure, inadequate maintenance, inept senior staff and massive rent seeking and corruption. Their latest project, a huge coal fired power station in the north west of the country, is 150% over budget, 5 years behind schedule and the Directors say they may not be able to get it operational. Mammoth failures on this scale are now crippling the South African economy – once the engine of African growth.

Rent seeking can take many forms – in Zimbabwe we have created a number of organisations that have been given the right to either tax residents for income or charge for their services. The list of such institutions that are essentially rent seekers and who are not creating any real value in return is long – the Environmental Management Agency, NOIC, Zinara, Zinwa, NSSA, the National Aids Council, Zimtrade are all absorbing revenue and delivering very little. Instead they become mainly concerned with making enough money to meet their inflated salaries and perks and enough surplus to respond to the political machine when called upon to pay their dues.

Then there is the situation where the Police are being allowed to raise money from their operations from fines other charges at road blocks. These are so routine, that they are accepted as the norm here even though such activities are unheard of elsewhere. The cost of such a system must be doubled or trebled to take account of corrupt activities.

This situation is now so serious that the regime can be described as a parasitic enterprise that is so demanding that it is paralyzing all forms of economic activity. Decisions are not being taken on key issues, demands for payments for all sorts of services are a daily occurrence. Can this system be reformed – I doubt it, it has to be destroyed to bring us freedom and progress.

Eddie Cross
Harare, 14th July 2015