Saturday 10 September 2016

Economic Structural Adjustment Programs (ESAP), Paper 5

Zimbabwe History Advanced level

Question. To what extent did the Economic Structural Programme (ESAP) achieved its objectives in Zimbabwe by the mid 1990s.

ESAP is a top-down economic strategy which is designed to resuscitate an economy using massive doses of foreign exchange (acquired mostly through loans) and hugely increased exports (David Coltart, 1992).

The idea being that the massive injection of foreign capital will enable domestic industry to re-gear itself and thereafter perpetuate economic recovery and growth by dramatically increasing export earnings, and therefore foreign earnings which in turn are used to repay the loans incurred to pay for the initial injection of capital and to build a healthy balance of payments situation for the future.

Due to economic failures, unemployment on the rise in the Zimbabwe government in especially in 1990s period efforts were made to make changes with the hope of bringing positive changes.
With the recommendations of the World Bank and the International Monetary Fund (IMF) in 1991 the government of Zimbabwe adopted ESAP which is a market led reform programme.

The candidates need understand  the objectives of ESAP in order to assess the extent to which the objectives were achieved by the mid 1990s.
These are the objectives of ESAP in the period 1991-1995;

•Ismi (2004) argues that the main aims of ESAP 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-regulation.

• Achieve annual Gross Domestic Product (GDP) growth of 5 percent
•Raise savings to 25 per cent of GDP
•Raise investments to 25 per cent of GDP
•Achieve export growth of 9 percent per annum
•Reduce the budget deficit from over 10 per cent of GDP  to 5 per cent by 1995
•Reduce inflation from 17.7 per cent to 10 per cent by 1995

▪ Achievements

• The mining industry benefitted partly with monetary reforms, trade liberalisation and removal of investment controls. The removal of import permits ensured that inputs such as chemicals, spares for equipment and machinery, explosives and replacement capital were acquired more easily.
• Savings and investment ratios partially improved

In as much as the government had set the above objectives it however failed dismally to achieve these goals.The failures can be understood within socio-economic and political. The following failures have to be considered;

•Economic growth declined with annual inflation rising to 26.6 per cent
•Employment growth declined to 0.12 per cent
•Manufacturing  sector’s share declined from an average 20.4 per cent to 16 per cent
•Many companies closed with retrenchments rampant.
•Levels of poverty increased and life expectancy declined due to cuts in social expenditure and implementation of cost-recovery programmes, especially the health sector. (Read Beyond the Enclave, 2012 on this topic)
•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. 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.
•Droughts of 1991/2 adversely affected the ESAP initiatives like power station in Gokwe under Rio Tinto Zimbabwe which could have assisted livelihoods. Gold panning also affected some programmes in the  mining sector

Question Demands

To a greater extent, ESAP was a failure.

More points can be added.

About the writer

Brian Maregedze is a Zimbabwean Christian Historian-Essayist and independent researcher. He can be contacted @ +263779210440 or the Facebook page Brian Maregedze

☆HISTORY IS CURRENT AFFAIRS☆- DR. V. G CHIVAURA (2015)

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