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Wanted: a government with a jobs strategy

Posted By Lance Mambondiani On November 19, 2012 @ 14:26 In Budget,Companies,Politics | Comments Disabled

IF STATISTICS are to be believed, eight in 10 Zimbabweans are unemployed. As at 2010, only 0,9 million people were recorded as being in formal employment. To put it in perspective (using a rather dramatic example), the total number of people employed in the entire country constitutes about half the population of Harare (which is approximately 1,6 million). The level of unemployment such as we have dooms the country to slow economic growth and the majority into poverty.

To its credit, the coalition government has stabilised the economy and registered decent recovery. Early exuberance has been replaced by stagnation as the economy succumbs to pre-existing structural weaknesses. With such high unemployment figures, it is a shocking abdication that the economic agenda has not previously addressed or focused on how to create new jobs or formalise the informal sector (‘second economy’) in which a significant proportion of economic activity appears to be taking place.

The shrunk private sector has remained small and there has been no strategy to advance fiscal activity into the informal sector. The poor fiscal performance projected in the 2013 budget reflects this reality.

Okun’s Law

In theory, it is near impossible to sustain long term growth without directly addressing the unemployment problem. At an estimated 80 percent, Zimbabwe’s unemployment rate is the highest in the SADC region where average unemployment was 24.9% in 2011. Unemployment and a nation’s Gross Domestic Product (GDP) are some of the strongest indicators of how well the economy of a country is performing. The idea is based on an empirical relationship referred to as Okun’s law, which essentially associates the growth rate on real GDP to changes in the unemployment rate observed around the same time.

As a consequence, the pace or lack thereof, of improvements in the labour market (as measured by the unemployment) is, to a large extent, positively associated with the pace of the recovery in GDP. Addressing the unemployment crisis is therefore absolutely critical to achieving sustainable long term growth.

Although faced with these challenges, policy makers have been preoccupied with indigenisation as a dominant narrative to address the economic challenges. However, the limitation of the 51 percent indigenisation policy is its inability to directly address the unemployment problem. By focusing on equity at the expense of new jobs, the indigenisation law suffers from the ‘cut the baby in half syndrome’ – the lesson leant from the wisdom of King Solomon is that cutting the baby in half is not always the best solution to achieve equity or address a previous wrong.

According to a recent survey by Afrobarometer and co-ordinated by the Mass Public Opinion Institute (MPOI), 78 percent of Zimbabweans surveyed in a 2,400 sample preferred jobs as a form of empowerment as opposed to taking over of shares in foreign-owned companies. Whilst the robustness and representativeness of the results of any survey (particularly in Zimbabwe) is often the cause of contestation, the survey gives an insight into people’s preference on the jobs or indigenisation debate.

There are several obvious reasons why the majority would prefer jobs to shares. When in poverty, jobs can immediately provide economic relief. Job creation also has significant trickle down benefits. People in the formal sector learn skills. Many of them will use these skills to start their own businesses. Most of the leading entrepreneurs who started indigenous banks following the liberalisation of the financial sector were previously employed in the banking sector. It is easier for a person to start a separate telecoms business having worked for Econet or Telecel because they acquire adaptable skills than if they are unemployed.

The same rules apply even at the lower end of the spectrum. A cook can start a catering business; cleaner a cleaning business and a driver can start a taxi business which in turn can employ others contributing significantly to increased economic activity. For people in these circumstances, a low paying job is infinitely better than permanent unemployment because a low paying job is a stepping stone to a better job and/or self employment.

Reducing poverty and inequality

Zimbabwe, like many other African countries, is faced with the problem of high inequality. To a large extent, this was a result of colonialism and a dualised economy which concentrated economic activity in urban areas and more particularly in Harare. The deterioration of businesses in most cities outside the capital is shocking. A colleague who recently drove from Bulawayo to Harare remarked how former bustling places like Bulawayo, Chegutu, Kadoma and many others have fallen on hard times due to business closures. The results has been deepening poverty and an increased gap between the ‘Haves’ and the ‘Have Not’s.

However, more than 32 years after independence, blaming the past without introspection on failures of the present is the real threat to development. Whilst it is true that a significant portion of the means of production is in foreign hands, there is no perceivable reason to conclude that foreign ownership is the primary cause of high unemployment.

Zimbabwe’s high unemployment is the main contributor to the country’s very high inequality. Any increase in employment and/or in income from zero to any positive number will benefit the poor and reduce the income gap (measured by the gini co-efficient). It is highly implausible if not impossible to achieve empowerment or reduce inequality through share ownership without a strategy for creating new jobs. With the economy still recovering from a decade long crisis, our top priority has to be jobs and sustainable growth.

Dr Lance Mambondiani is an Investment Executive at Coronation Financial and a researcher in Development Economics. He can be contacted on lancem@btinternet.com [1]. The view expressed in this articles are personal and do not necessarily reflect the position of Coronation Financial


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