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Zimbabwe Country Economic Memorandum: Achieving Shared Growth

Zimbabwe FY95 PA

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Poverty Profile

Zimbabwe has a lower poverty rate and better social indicators than most African countries. In an effort to increase equity rapidly following independence in 1980, Zimbabwe gave priority to human resource investments and support for smallholder agriculture. Smallholder agriculture expanded rapidly during the first half of the 1980s owing to improved technologies, increased land availability, and better government services and prices. Social indicators improved quickly. By 1990, Zimbabwe had a lower infant mortality rate, higher adult literacy, and higher school enrollment rate than the developing country average.

However, this success in improving social indicators was not matched by economic growth (which has failed to keep pace with population growth), and hence expectations for rising living standards have only partially been fulfilled. Employment growth has not been adequate to absorb the number of new entrants to the workforce. Moreover, the earlier gains in smallholder agriculture have not been sustained. The overwhelming majority of Zimbabwe's poor live in semi-arid communal and resettlement areas, but there has been very little economic growth in these areas since the mid-1980s. Even existing levels of production are now threatened by the environmental fragility of the natural resource base and the unsustainability of existing farming practices. Meanwhile, population growth has continued at about 3 percent per annum, in spite of widespread use of family planning. The lack of growth in small-scale agriculture and the slow growth in employment suggest that the improvement in social indicators has not been matched by a commensurate increase in the incomes of the poor.

In recent years, the social sector achievements of the independence period are being threatened by drought, the decline in public resources, and the AIDS pandemic. The box below provides a portrait of the incidence and characteristics of poverty in 1990/91, when the only complete income and consumption survey was carried out.

Box: Key facts about Poverty in Zimbabwe.

  • Twenty-five percent of the people in Zimbabwe were poor in 1990/91 (in other words, had insufficient purchasing power to buy a basic consumption basket of food, clothing, shelter, education, health services and transport), while 7 percent were very poor (in other words, had insufficient purchasing power to buy an adequate basic food basket). The average rate of poverty for Sub-Saharan Africa as a whole is 47 percent.
  • Poverty is more common in rural areas (31 percent) than in urban areas (10 percent), and the overwhelming majority of Zimbabwe's poor (88 percent) live in rural areas. Communal farming areas have 76 percent of the poor and 82 percent of the very poor in Zimbabwe.
  • Poverty is most common and deepest in the low rainfall areas of Matabeleland South, Masvingo, and Matabeleland North provinces. Current communal farming practices in these areas are environmentally unsustainable. Moreover, drought and low asset holdings by the poor in these regions make them particularly susceptible to food insecurity.
  • The severe drought of 1992 greatly increased the vulnerability of the poor in communal areas by depriving them of the majority of their cattle.
  • The poor typically have limited access to good land, are heavily dependent on farming for their income (as they receive little off-farm income and small remittances), are less educated, live in larger households, and, if they are in urban areas, are unemployed.
  • Preliminary analysis indicates that the direct impact of adjustment reforms on the real incomes of the poor is small overall. However, poverty appears to have increased during the 1990s, principally because of the lack of economic growth.

Incentives and Regulatory Framework

A number of factors have held back growth and increased economic participation by the poor. Before 1991, market incentives were dulled by extensive government interventions and administered resource allocations. In agriculture, the inherited array of commodity market control mechanisms was extended to include fixed or floor prices for most crops, compulsory delivery of controlled crops to marketing boards, controlled consumer prices for food staples, and restrictions on imports and exports. The sale, lease, or sub-division of agricultural land was heavily regulated, while the land resettlement program was ineffective.

Indigenous participation in the formal economy increased slowly during the 1980s and remains low. However, the number of new indigenous enterprises in the formal sector has increased in recent years, as larger numbers of potential entrepreneurs have acquired both educational qualifications and managerial experience.

Public Expenditures

Zimbabwe's achievements in human capital put it near the top of developing countries in terms of its absolute achievements and its pace of attainment. Enrollment in primary schools has doubled since independence, with rapid growth in rural schools, and there is almost no gender bias in primary schooling today. Growth in secondary education has been greater, with enrollments going from 75,000 in 1980 to over 650,000 today.

To achieve these gains, education's share of the total budget increased between independence and 1990/1. However, this trend was reversed, and public expenditure on education as a share of GDP has declined steadily over the last four years. Nonetheless, Zimbabwe still invests a relatively large share of both GDP and public resources in education, and the challenge is to enhance efficiency.

Public sector education expenditures are allocated disproportionately to higher levels of education, and are directed more toward academic than technical/vocational/agricultural training and general skills upgrading. The vast majority of students leave the school system without learning significant skills relevant to the labor market.

Likewise, the country invested significant shares of its resources in health care for the poor during the 1980s, increasing sector expenditure from 2 percent of GDP in 1980 to 3 percent by 1990. Over the last four years, however, expenditures have fallen back to 2.5 percent of GDP, primarily because of the impact of the drought on government revenue and the general compression of government expenditures. Preventive care declined from 16 percent of the health budget in the late 1980s to 13 percent by 1994. The decline in resources is creating strains and threatening the sustainability of health sector achievements. Some key health indicators have deteriorated in recent years.

Safety Net

To ensure continued human development and poverty reduction, Zimbabwe needs to return to the key principles that shaped its early successes—providing adequate resources and targeting on activities most in need of public support—and to devise burden-sharing mechanisms that will ensure that the poor have access to basic social services. For the many Zimbabweans who do not have the opportunity to take part in a growing economy, a social safety net is critical to ensure that basic needs can be fulfilled. It should emphasize: (i) nutrition/food security and (ii) access to water, health, education, and shelter.

The government's drought relief and child supplementary feeding programs have been large and effective at delivering supplies. Yet the direct targeting of public resources to the poor is often not effective; thus, self-targeting mechanisms coupled with widespread availability need to form the mainstay of a successful safety net.

The existence of communal land management, whereby households are given access to land where they can build a shelter and produce some of their food, is probably the most important part of the social safety net in Zimbabwe. The second important strand is free or virtually free access to primary education and basic health care.

Additional rural area programs include food-for-work in food-deficient areas. With urbanization and increasing urban poverty, the household food insecurity found in urban areas needs to be addressed. Subsidized whole-grain yellow maize, sold through retail outlets in high-density areas at 60-70 percent the price of white maize, might largely solve this problem.

Poverty Reduction Strategy

Reducing poverty will require growth in employment and increased productivity in smallholder agriculture. These in turn will be dependent on economic growth, continued investment in human capital, and an increase in the assets owned or controlled by the poor, including land. Achieving higher sustained growth depends on integrating Zimbabwe in the world economy, making fuller use of the nation's abundant labor resources, and using relatively scarce land, capital, and managerial skills more efficiently. To build effectively on past investments and policy reforms, the Bank has suggested actions in three key areas:

  1. Reforms to generate a more supportive macroeconomic management; 
  2. Improvements in the incentive environment, with particular reference to land use and the competitiveness of exporters; and
  3. Focusing public expenditure on human resource investments and other initiatives to support sustained poverty reduction and provide the infrastructure needed for growth.

The present dualistic agrarian structure and distribution of land is inefficient, environmentally unsustainable, and a barrier to the achievement of both rapid agricultural growth and the reduction of rural poverty. There is over-utilization of natural resources in communal areas and under-utilization within commercial farming areas in Zimbabwe's rural economy. These practices have led to declining soil fertility and crop yields in many communal areas. To address the co-existing problems of natural resource over- and under-utilization, what is needed are institutions that can: (i) bring about an efficient transfer of land between those with surplus land to those who can make productive and sustainable use of it and (ii) can facilitate better natural resource management at the farm and community levels in areas with population pressures.

The issues of land distribution and natural resource management must address problems of land use efficiency and the equity of present land ownership. Increasing utilization of high-to-medium quality agricultural land offers one of the greatest potential sources of further agricultural growth and poverty reduction. At the same time, achieving more efficient and sustainable use of land and other natural resources within the densely populated communal areas has significant implications both for poverty reduction in rural areas and the growth potential of smallholder agriculture.

While sound macro management and an improved incentive framework will help to put the economy on a stronger growth path, public expenditure will need to enhance participation, provide supportive infrastructure, and protect those whom the benefits of growth do not reach. To be effective in promoting equity, these expenditures must be selective, well-targeted, and designed primarily to empower the poor by giving them access to wider opportunities. This translates into three complementary forms of investment: 

  1. Investing in human capital (health, education, and training);
  2. Increasing the return to assets, especially those held by the poor: and
  3. A social safety net.

It is important to deliver services as cost-effectively as possible. One option is to make service provision more demand-driven and accountable through a combination of decentralization and community involvement. The private sector should be invited to compete in areas where market conditions do not require public sector involvement. In addition to increasing poor households' stock of productive human and physical assets, steps need to be taken to increase the returns that those assets can generate. This is best accomplished by providing physical and institutional support in the form of infrastructure and services. Continued public support for water, rural transport, and marketing infrastructure is justified because of their importance to increasing equity and reducing poverty.

Statistical System

Zimbabwe has a number of activities to monitor poverty, although there is no comprehensive monitoring system. The government is involved in several large-scale data collection activities: a five-yearly Income, Consumption and Expenditure Survey (the 1990/91 survey was the main source of data for the poverty assessment), Demographic and Health Surveys, the Population Census, and food security surveys. Sentinel Surveillance Surveys monitor the impact of structural adjustment and drought and cover 4,000 households approximately biannually. A 15,000 household Poverty Assessment Survey is underway.

The potential for using these data has not been fully realized because of legal restrictions in access to the data and because coordination has been complicated because the surveys are conducted by several different ministries. Several NGOs also conduct research and monitoring activities.

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