SA can reap the harvest Zimbabwe squandered
March 4, 2004
By Reuters
As South Africa prepares to celebrate a decade of democracy, some investors nervously look north to Zimbabwe, which threw off white minority rule in 1980 and is today a smouldering ruin.
Analysts say the different economic paths the two countries took from day one of their revolutions mean they are unlikely to converge.
Zimbabwe embarked on a spending spree it could not afford while South Africa put its financial house in order.
"Zimbabwe went on an unsustainable level of social spending, education in particular," says Tony Hawkins, professor at the Graduate School of Management at the University of Zimbabwe.
Such expenditure may have been morally justified to redress the imbalances of the colonial past, and it paid off in many ways.
According to World Bank figures, Zimbabwe's literacy rate in 2000 was second in Africa only to Lesotho's, at over 80 percent.
But some analysts say fiscal recklessness sowed the seeds of the economy's destruction, as it could not be maintained in a country that failed to attract the capital needed for growth.
"Lots of donor aid came to Zimbabwe in the 1980s but almost no foreign investment," says Hawkins.
Some analysts have argued that after overspending in the 1980s, Zimbabwe - then inspired by the Soviet bloc - found itself in an uncomfortable embrace with the International Monetary Fund (IMF).
It then tried to swallow the tough medicine prescribed by the IMF, only to spit it out in disgust, depriving itself of much needed aid as poverty worsened.
In the 1990s, Robert Mugabe's government pursued one ruinous policy after another, culminating in the seizure of productive white-owned farms for redistribution to poor black people.
Zimbabwe now suffers from acute shortages of food, fuel and hard currency, rocketing unemployment and inflation of more than 600 percent, one of the highest rates in the world.
By contrast, a decade of austerity may now enable South Africa to direct more cash to its poor majority - without the constraints of an imposed IMF programme.
"South Africa has bent over backwards in ways Zimbabwe never did to show it would be responsible on the macroeconomic side," says Rashad Cassim, head of the economics department at the University of the Witwatersrand.
Between 1980 and 1989, Zimbabwe's budget deficits - as a percentage of gross domestic product (GDP) - averaged about 8 percent, according to African Development Bank data.
The difference with the first decade of rule by the ANC could hardly be starker. The ANC oversaw a budget deficit in 2002/03 of just 1.1 percent of GDP and its average since it took office has been just 2.9 percent.
Its budget deficit estimate for 2003/04 is 2.6 percent of GDP and this is seen widening to 3.1 percent next year - but analysts say the government can afford to loosen up now - and should, given the country's gut-wrenching poverty.
"They need to spend more given the social inequalities and high levels of poverty, especially since they can finance it ... but the need to do so is also a result of their inability to create jobs," says Noelani King-Conradie of NKC Economists.
"What is a good thing is the fact that much of the expenditure will be on infrastructure development, which can create jobs and provide longer-term opportunities."
The two countries have differed in other ways as well.
"In South Africa there was an attempt to maintain the infrastructure by hiving off activities to the private sector, through toll roads for example," says Cassim. "And the South African government began liberalising its trade regime. This is also a fundamental difference with Zimbabwe."
Critics of the ANC's macroeconomic policies, including its alliance partners, the SA Communist Party and Cosatu, maintain that its short-term pain for long-term gain strategy could also prove damaging.
Hundreds of thousands of jobs have been shed as the economy has liberalised and unemployment runs at well over 30 percent.
Zimbabwe in 1990 did not have South Africa's terrifying rates of violent crime nor its glaring income disparities, which some estimates put at second only to Brazil's.
South Africa may have the ability now to spend more on its pressing social troubles.
But if it's too little, too late, the consequences down the road could also be ugly.
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