Evaluate_impact_of_ESAP_in_the_Zimbabwea

Faculty: Humanities & Social Sciences

Department: Development Studies

Programme: BSC (Honours) Degree in Development Studies - Part 2.2

Module: Theories of Economic Development (HSDS 2214)

Name: Welcome Mudyiradima

Student Number: L011 0097E

Lecturer: Dr. E. Munsaka

Due Date: 03/05/2013

Question:

Evaluate the impact of ESAP in the Zimbabwean context (25)

Zimbabwe implemented the Britton Woods (World Bank and International Monetary Fund)
inspired Economic Structural Adjustment Programme (ESAP) from 1990 to 1995. Zimbabwe
Ministry of Finance, Economic Planning and Development (ZMFEP) (1991) reports that ESAP
was implemented by the government of Zimbabwe with the intention of redressing the economic
ills that the country faced in the 10 year period from 1980 to 1990. The period was coupled with
the wholesome control of the economy by the government regulations in the form of trade policy
restrictions on foreign trade, foreign currency earnings and usage, imports and exports, control
on domestic prices of major consumer products and wage control. The ills of the pre - ESAP era
(1980 to 1990) included low economic growth (at 3.2% against a population growth rate of
2.9%), high levels of unemployment, increased poverty, low investment level, fall of Soviet
Union in 1989 (loss of confidence in socialism), disappointing export growth and unstable macro
environment. The period was also coupled with demand on goods and services which often
outstripped supply leading to artificially high product prices. Tight foreign currency exchange
controls and general market protection strategies made it difficult for companies to import key
raw materials, machinery, spare parts and finished consumer and industrial goods. Thus these led
to the general economic stagnation which triggered the need to structurally adjust the economy.
Despite the negatives, the infant mortality rate fell from 100 per 1,000 births to 50 per 1000
births between 1980 and 1988 and life expectancy increased from 56 to 64 years in the same
period (Ismi 2004). ESAP was therefore adopted with the aim of seeking to radically adjust the
economy that had been in place since 1965‟s Unilateral Declaration of Independence. ESAP
aimed at making Zimbabwean economy more market oriented by removing government controls
and interference, reducing government budget deficit, emphasizing investment in production
sectors of agriculture, mining, manufacturing as well as improving infrastructure in transport,
power and communication (ZMFEP 1991). The main components of ESAP as propounded by
Ismi (2004) were privatization of public institutions, reducing trade tariffs and import duties
(trade liberalization), eliminating foreign currency controls, removing protection for
manufacturing sectors, de-regulating labour markets, lowering the minimum wage, ending
employment security, cutting the fiscal deficit, reducing tax rate, and de-regulating financial

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markets. These were summarized by ZMFEP (1991) as policy reform in public finance, trade
liberalization, privatization of public institutions, economic regulation, investment promotion,
monetary policy and sector reforms, and addressing social problems brought about by the
economic structural changes. However the implementation of the programme led to positive and
negative political and socio – economic impact to the populace of Zimbabwe and these are
evaluated below. According to Ismi (2004), economically these measures led to massive closing
down of companies and increased poverty and unemployment. This paper seeks to explore the
effects of ESAP. In doing so the conditions of ESAP and their effects to the economy and the
citizens are considered.

Socially ESAP, through the reduction of government expenditure and removal of government
subsidy, had a negative impact on education with special attention to enrolment of boys and girls
at both primary and secondary level of education (Makoni 2000). Upon the attainment of
independence the government committed itself to provide universal free primary education and a
massive expansion of secondary education. This saw secondary school enrolment level rising by
950.5% while the number of secondary schools increased by 838% from 177 secondary schools
in 1979 to 1484 in 1989, ten years after independence (Nhundu 1992). Teacher pupil ratio also
increased from 1:36 before independence to 1:45 after independence. However during this period
the proportion of girls decreased by 1.51% from 43.31% to 41.80% in 1988, Nhundu (1992).
Such an increase in enrolment and increased number of schools led to a subsequent increase in
government expenditure on education which rose by 414% between 1980 and 1990 (Makoni
2000). This was not sustainable given the unfavourable economic growth which was projected at
5.1% for the period 1986 to 1990 but fell to 3.2%, subsequently resulting to a fall in Gross
Domestic Product (GDP) in 1992 to 8%, under ESAP. This prompted the government in January
1992 under ESAP, to introduce primary school fees and an increase in secondary school fees in
urban areas. Kanji (1995) indicates that primary school fees was pegged at Z$20 per term in
high-density areas and Z$70 in low-density areas, with rural schools remaining free while,
secondary school fees was raised by 40 per cent to Z$70 a term in high-density areas and by 200
per cent to Z$150 in low-density areas. In rural areas secondary schools continued to charge
Z$50. Although the government, through ESAP, meant to reduce government expenditure,
however this was not forthcoming as parents earning under Z$400 per month were considered
for school fees assistance through the Department for Social Welfare. Kanji (1995) further
asserts that earnings under Z$400 per month were way below the Poverty Datum Line (PDL)
which was pegged at Z$762 for a family of five in July 1992. On tertiary education there were
massive demonstrations and boycott of classes by University of Zimbabwe students in 1992
demanding an increase in grants to offset difficulties resulting from devaluation and inflation.
The government responded by granting 25% increase in grants but this was subsequently
followed by a 25% increase in university fees thus effectively cancelling an earlier increase in
grants. Furthermore a report by the Student Solidarity Trust (2009) suggested that there was
diminishing financial support for students, during and after ESAP, as government scaled down
its financial obligations to students from a 50% subsistence grant and 50% loan at independence
to a 25% grant and 75% loan (1995); 20% grant and 80% loan (1998); and 100% loan (2005).
This led to poor welfare support in terms of accommodation, transport, food and books at various
tertiary institutions. It can be noted that while the government was trying to push the
implementation of ESAP, this had a ripple effect to the citizens who had to bear the brunt of

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economic hardships. In addition some disparities were created between the school fees charged
in low density areas and high density areas as if there were no children attending low density
schools and vice versa.

ESAP had also a negative impact on slowing down the pace of the land reform programme that
was being implemented by the government. This was on the issue of diverting attention to
concentrate on the economic down turn yet at the same time the retrenched workers found their
way to the rural areas as they could not cope with the escalating cost of living in urban centres as
propounded by Tekere (2001). This created more pressure and increased the demand for land as
people recognised land as the only available asset that could be utilised for a living as indicated
by Makoni (2000). The other effect of ESAP on land reform was that the target beneficiaries
changed from poor landless to those with the capability to make the land productive. These were
on paper referred to the pro-poor yet in reality they were members of the elite. This has also been
used by the donor world as a hiding stone of not supporting the land reform through fulfillment
of their financial pledges.

ESAP, as indicated by Ismi (2004) perpetrated a decrease in manufacturing. It can be noted from
the statistics provided by Ismi (2004) that in the period 1970 to 1990 manufacturing was pegged
at 25%, however the rate was reduced to only 16% during the 1990s at the peak of ESAP for the
first time since 1960s. It is further reported that manufacturing output declined by more than
20% between 1991 and 2000 due to high interest rates and cost of foreign currency (components
of ESAP). Ismi (2004) further indicated that the period 1990 to 1997 was wholly characterized
by a lack of industrial development. This subsequently led to GDP falling by 5.85% during the
same period while private investment fell by 9% in the same period. A reduction in
manufacturing led to fall in employment growth and creation from 3% during the 1985 to 1990
to -3% in the 1999 to 2000. As if that is over, real wages declined by 20% between 1991 and
1996 to the extent that those with full time jobs were no longer guaranteed their wages (Ismi
2004). It was no longer secure to work as any eventuality could happen thus denting planning
ahead. However the adoption of ESAP, which was anticipated to jump start the economic
development in the country, did not brought about the required outcome other than further
plunging the country into the economic quagmire.

Economically high interest rates that had been necessitated by ESAP through the removal of
subsidies on agricultural inputs and reduction in government spending during the ESAP period
had a negative impact on farmers. This is because the price of inputs went astronomically up
beyond the reach of the small scale and communal farmers. For example Ismi (2004) indicates
that the price of fertilizers went up by 300% in the period 1990 to 1995 leading to reduction in
acreage under production. On the other hand liberalization of trade also led to a reduction in the
production of maize. It can be noted that the higher producer prices due to ESAP have clear
benefits for the large scale commercial sector, however they never benefited the rural communal
farmers, who heavily relied on government subsidies for their farm inputs, Riphenburg (1996).
Therefore only the minority commercial farmers benefited from the increased producer prices.
On the other hand a reduction in real wages negatively affected income of agricultural workers
on large scale farmers thus their livelihoods was affected as a result of increased consumer prices
and decreased incomes despite the lucrative producer prices enjoyed by their employers, the

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large scale farmers. These producer prices were not cascaded down to the employees who did
most of the work due to introduced collective bargaining during ESAP. On the other hand,
although ESAP led to the disbandment of the Agricultural Finance Cooperation (AFC) which
was extending loans to small scale farmers to boost their productivity, it led to the formation of a
fully flagged commercial bank, Agribank in 2000, to extend financial services to all members of
the public as indicated by Tekere (2001). However the small scale farmers were meant to benefit
from the newly formed financially insecure Agricultural Development Assurance Fund (ADAF)
to fill the gap created by the discontinuing of the AFC. This came as a result of ESAP.

There was a great increase in cost of living during ESAP which was beyond the reach of many
ordinary Zimbabweans. Prices of basic commodities escalated and this was fueled by the
removal of subsidies as a result of a cut in government expenditure and the decontrol of prices,
as asserted by Kanji (1995). This resulted in huge increase in cost of living. The devaluation of
the Zimbabwean dollar, another component of ESAP, meant an escalating cost of imported
inputs for manufactured products. Kanji (1995) indicated that cost of living for lower-income
urban families rose by 45 per cent between mid-1991 and mid-1992 whilst that for higher
income groups rose by 36 per cent, Central Statistical Office (CSO) (1992). The increased prices
of basic foods in this period were a direct result of the lifting of food subsidies and not the
importation of food as a result of drought, Kanji (1992). Central Statistics Office (1998) revealed
that the proportion of households below the Food Poverty Line (very poor) increased from 20%
in 1995 to 48% in 2003, an increase of 148%. The proportion of households below the Total
Consumption Poverty Line (extremely poor) increased from 42% in 1995 to 63% in 2003, an
increase of 51%. The poverty gap more than doubled between 1995 and 2003, increasing from
0.6 to 0.34, showing that the poor have become poorer as the poverty lines became increasingly
out of reach, CSO (1998). Electricity charges in November 1991 rose by 15.5% having already
been increased by 20% in 1991, while urban bus fares were increased in November 1991 from
55 cents to 80 cents (Kanji 1992). These created a united front of competing services‟ demands
against low incomes. Mlambo (1997) reveals that there were violent bread riots in Zimbabwe‟s
high density areas. This was triggered by the government‟s decision to decontrol flour and bread
prices, as a condition of ESAP, thus leading to astounding 73.5% increase of bread over night,
Mlambo (1997). It can be noted that before the implementation of ESAP the government
controlled prices. Therefore a sudden shift, although it encouraged laissez faire among the
players on the market, it led to the cumbersome increase in prices which the consumers could not
bear. Above all this was not proportional to their income.

Generally, because of the increased cost of living and a depleted income base ESAP perpetrated
poverty among the citizens of Zimbabwe. Moyo (2005) reported that since 1990 Zimbabwe was
among the 16 Sub-Saharan countries that were experiencing reversals in human development,
meaning that poverty was now increasing. Zimbabwe Human Development Report (ZHDR)
(1999) reported that 60% of the population was earning less than US$1 a day (although this is
debatable), 80% live in rural areas while 25% were unable to meet basic needs as a result of
ESAP. It can be noted also that the rural poverty, which stood at 75% between 1991 and 1996
according to PASS 1 (Government of Zimbabwe, 1995) was exacerbated by reduced remittances
to the rural areas from urban relatives due to retrenchment of urban workers. A CSO (1998)
study revealed that poverty in Zimbabwe increased from 40.4% in 1991 to 63.3% in 1996 while

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the incidence of extreme poverty (households that cannot meet basic food requirements)
increased from 16.7% to 35.7% during the same period. CSO (1998) also revealed that there was
an inequality on the impact of poverty between men and women. Poverty was found to be higher,
72%, in female headed households than in male-headed households with a 58%.It is further
revealed by PASS II (Government of Zimbabwe 2003) that poverty increased considerably
between 1995 and 2003 after the end of ESAP.

The introduction of ESAP brought about massive employment instability. Many Zimbabweans
were retrenched in agriculture, textile, clothing, leather and construction industries, as indicated
by Kanji (1992). At the end of 1993, the Zimbabwe Congress of Trade Unions (ZCTU), in
Mlambo (1997), estimated that 60,000 workers were retrenched in all sectors of the economy as
ESAP took its toll. The programme also led to a reduction of 25 per cent in civil service staff by
1995 thus leading to loss of income for people who were once secure. During ESAP the
government also introduced the system of collective bargaining for wages and conditions
replacing government intervention in wage-setting except for farm workers and domestic
workers. This severely exposed the workers from employment and terminal benefits injustices
thus contributing to an increase in poverty. As supported by Riphenburg (1996) ESAP reverse
the gains made during the 1980s and led to a general decline in real wages, employment
opportunities and job security affecting both male and female workers. Riphenburg (1996)
further revealed that average monthly income dropped from Z$355.42 in 1991 to Z$155.09 in
1993 while inflation rose from 16.1% in 1990 to 23.3% in 1991 to 42.1% in 1992 and
contributed to the erosion in real wages. This further plunged the citizens into the pool of
poverty. The collective bargaining system, introduced by the government to promote economic
labour so as to maximize profitability of firms, placed the employer at an advantage and at the
same time reduced the cost of labour in production. Employers therefore could offer the workers
low wages without arbitration in a salary dispute.

According to Mlambo (1997) liberalisation of trade, one of the prerequisites of ESAP leads to a
progressive denationalisation of the borrowing country‟s economy. This is done through the
destruction of locally owned enterprises and the promotion of multinational businesses.
Liberalisation usually results in flooding of the local market with cheaper imported goods which
consequently destroys the local business whose prosperity wholly depends on the availability of
protected market. Thus liberalisation opened the local market to competition from imported
finished goods which therefore impose massive strain on local companies. More so, with
reference to exports, local companies found it very difficult to increase their exports to
international markets especially those companies that were previously not involved in exports,
Mlambo (1997). Because of liberalisation, by 1994 Zimbabwean textile manufacturing
companies had fallen from 280 to 193 (Mlambo 1997). This was attributed to the closure of
Cone Textiles with a workforce of 6 000 workers, citing rapid increase in cotton lint prices as a
result of removal of government subsidies for lint in December 1994 (Mlambo 1997). Thus the
company could not compete with foreign companies for example from South Africa whose
textile goods exporters were still enjoying government subsidy unlike their counterparts in
Zimbabwe, Mlambo (1997). Whenever the local companies collapsed their share of the local
market was quickly taken over by the multinational companies which flooded the domestic
market with their products. However it can be noted that liberalisation provided a relief for

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shortages of some consumer goods. Zimbabwe Programme for Economic and Social
Transformation (ZIMPREST) (1996) revealed that long and unpopular queues which had been a
notorious feature disappeared under ESAP and no imported commodity was in short supply on
the market. In June 1994 government‟s decision to de-regularise urban transport ended ZUPCO
monopoly and allowed competition by licensing other operators thereby ensuring faster and
efficient transport system than before, Mlambo (1997).

ESAP‟s trade liberalisation led to an upsurge of informal cross border trade Tekere (2001), as it
was viewed as the only viable activity to generate income under the economic down turn as a
result of the adjustment. However as revealed by Tekere (2001) cross border trading included
merchandise that crossed the border without being officially recorded while under-invoicing and
under declarations were rife, thus undermining revenue for the government and promotion of
smuggling. Some traders also used unofficial routes leading to their numbers not captured in the
national statistics. The liberalisation of exchange controls also perpetrated informal cross border
trade.

On the social front cross border trade as a result of liberalisation of trade brought some effects on
family setup. Because of the economic down turn (inflation and other determinants) there was
pressure to earn extra money and this was especially felt by women who are responsible for
family essentials, Riphenburg, (1996). Thus women took up new roles such as cross border
trading especially urban women who felt the heinous impact of ESAP. A study carried out by
Mupedziswa and Gumbo (2001) revealed that out of 17 women traders in the sample, eight were
married and had children. The married women had numerous worries than their counterparts who
are non-cross border traders and sleep at their respective homes while they spend more time
away from their families. This is summed up by a quote from Mupedziswa and Gumbo
(2001:103) in which one trader said:

“You worry that anything can happen to your children while you are away. Child abuse
is rampant. Children can develop delinquent tendencies. Even if you leave them with
another adult (husband or relatives) it is not the same. Husbands usually come back
home at the night when the children have already gone to bed. They can be very
promiscuous in our absence and they also have some worries about us. We worry about
them particularly HIV/AIDS.”
Thus from the quote these are some of the social challenges that the families faced and they have
a detriment towards the development of children although families would be pursuing all
endeavours to adopt strategies to cope with the challenges of the economic down turn as a result
of economic adjustment. Family disintegrations were imminent as some families opted to send
their children to rural areas another move that hinders the development of children. Mupedziswa
and Gumbo mentions that among the 17 interviewed there were fears of separation among them,
however the traders could not stop their activities as a result of the hardships faced. Although
Mupedziswa and Gumbo (2001) asserts that during the early phase of ESAP cross border trade
was a brisk business for the women, they were however vulnerable to robbers especially in South
Africa.

Socially ESAP brought about discrimination against women despite the background of women
empowerment. This is revealed by the stringent measures at the borders especially in 1998, were

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discriminating against single mothers was rife. At the border with South Africa single mothers
were compelled to produce a bank statement with at least Z$6 000 and a residential address in
South Africa for them to cross over to South Africa where they intended to sell their wares
especially crotchet items and purchase high quality goods, as compared to Botswana and
Zambia. However because of the hardships back home the women were left with no option but to
be in conflict with law through bribing Customs Excise officials, hiding goods on their persons
and entering other countries illegally. In doing so they risked their goods being confiscated and
or pay a fine thus reducing their profits. Mupedziswa and Gumbo (2001) noted that one cross
border trader had to stop her trading after her goods were impounded by customs officials at the
Zambian border and could not raise the required funds. All these came as a result of the impact
of ESAP at home.

ESAP was also rocked with poor advice from the Breton Woods Institutions. Their one size fits
all approach did not produce the intended results as the needs and priorities of developing
countries were unique. This can be noted in Zimbabwe were their advice led to catastrophic food
shortages in 1992. Mlambo (1997) indicates that in 1991 the World Bank and the IMF insisted
that Zimbabwe sell its maize, a buffer stock which has been maintained since independence. The
country, since independence, has been producing enough grain for its citizens and other countries
in the Southern African Development Community (SADC) and at the same time maintain
surplus stock for its citizens in times of need. This earned the country to be referred to as the
„Bread Basket‟ of the region, according to Mlambo (1997). Mlambo (1997) further postulates
that in the 1980s the farm war between the USA and European community led to food dumping
in Zimbabwe, and this led to declining maize prices in the country and thus led to the Grain
Marketing Board (GMB) incurring huge financial deficit. The World Bank and IMF decided that
the deficit was a result of the country carrying large uneconomic stocks of maize. They therefore
advised the country to sell its maize reserves at a loss arguing that it would be more economical
for the country to purchase maize as and when it is required. However this was risky for the
country which experienced crop failure in 1991/1992 farming season resulting in 1992 drought,
(Mlambo 1997). The drought led to the country‟s agricultural sector contracting by 24.4% in
1992 (Mlambo 1997). The country was therefore forced to import yellow maize from USA,
which dominates the Breton Woods Institutions, at an extraordinarily higher price which left the
country with a deficit of Z$2 billion (Mlambo 1997). This demonstrates the heinous conditions
of the Structural Adjustment Programme recommended by the Breton Woods Institutions whose
compliance triggers the release of funds to developing nations who are in dire need of funds to
finance development in their respective nations. Considering local input would also enable the
participation of implementing developing nations and assist in crafting dependable programme
for their development not further exposing them to harm. This case really demonstrates how
USA and the Western Europe endeavour to impose neo–colonialism among the newly liberated
countries. This case can be clearly revealed by a Shona proverb in Tekere (2001:4), “Kakara
kununa hudya kamwe (a predator thrives on preying on other animals)”.

In conclusion it can be noted that although the government of Zimbabwe implemented ESAP
with the objective to radically structure the economy, this was however not realised as the
programme was marred by more negatives than the anticipated positive impact. On the positives
it enabled the citizen to be more creative as they seek ways to adapt to the harsh economic

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environment, higher producer prices, increased competition leading to provision of quality
services, and reduced shortages. The programme resulted in the massive suffering of the citizens
due to loss of employment, high cost of living versus low income, increased poverty, corruption,
inflation, competition of indigenous companies with well established foreign companies,
disintegration of families, discrimination against women, denationalisation of the indigenous
economy, high cost of agricultural inputs due to removal of government subsidy and impact on
education. According to Riphenburg (1996) a drop in monthly income from Z$355.42 in 1991 to
Z$155.09 in 1993 and an astronomical increase in inflation from 16.1% in 1990 to 23.3% in
1991 to 42.1% in 1992, meant that the economy was no longer a conducive environment for
investment. It can also be noted that some of the effects of ESAP are still being felt even today,
18 years after the lapse of the programme. Therefore because of the bad brought by the
programme, ESAP was popularly referred to as the “Extended Suffering of the African People”,
as mentioned in Mlambo (1997).

Reference
Central Statistical Office (CSO) (1992). Consumer Price Index for Lower-Income Urban
Families. Harare: CSO.
Central Statistical Office (1998). Poverty in Zimbabwe. Harare: Central Statistical Office.
Government of Zimbabwe (1995). Poverty Assessment Survey Study I. Harare: Government
Printers.
Government of Zimbabwe (2003). Poverty Assessment Study II. Harare: Government Printers.

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Ismi, A (2004). Impoverishing a Continent: the World Bank and IMF in Africa. Montreal:
Halifax Initiative Coalition
Kanji, N (1995). „Gender, poverty and economic adjustment in Harare, Zimbabwe‟ Environment
and Urbanization, Vol. 7, No. 1. Available online at http://eau.sagepub.com/content/7/1/37
accessed on 13 April 2013.
Makoni, D. (2000). Effects of the economic structural adjustment programme (1991 – 1993) on
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Riphenburg, C. J (1996). The Gender-Differentiated Impact of Structural Adjustment on Political
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Tekere, M. (2001). Trade Liberalisation Under Structural Economic Adjustment – Impact on
Social Welfare in Zimbabwe (unpublished).
Zimbabwe Human Development Report (ZHDR) (1999). Zimbabwe Human Development Report
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