eBusiness Weekly
Clive Mphambela
The Zimbabwean middle class has virtually been wiped off the economy over the last few decades. Signs of decline in the middle class population have been all around us for a while now: anaemic economic growth, rising poverty and income inequality, chronic structural unemployment, severe underemployment and, not so coincidentally, the steady and deliberate erosion of workers fundamental freedoms to strengthen their unions and be able to bargain for better wages and benefits. The result has been the rapid rise in low wage jobs of very poor quality.
At the same time, Zimbabwean businesses have been shutting down in the face of rising costs of doing business, while household incomes have receded in value and living costs have far outpaced stagnant wages.
The obvious result is that millions of Zimbabweans are stuck in informal sector jobs, and micro enterprises that can hardly support a standard family, while a select small elite enjoy the benefits of abundant inequality.
Incomes for the majority of the people have stagnated if not receded. The costs of living basics like health-care, housing, and primary and higher education have skyrocketed.
Household debt has risen sharply in recent years and income inequality has widened with the rich, especially the very rich, having pulled far away from everyone else.
However, this can all change now in the face of the new economic dispensation that is pushing an agenda to lure business and capital back to Zimbabwe. This strategy, if sustained, means that we can and should seize the opportunity to rebuild the Zimbabwean middle class, which for all intents and purposes no longer exists.
Recovering economic fundamentals.
A fourth quarter trading update issued by the country’s largest beverage company, Delta Corporation last week, was quite revealing.
A massive surge in demand for basically what economists would classify as non-consumer staple class of goods seems to signify that indeed the economy is now very quickly on the mend.
Delta Corporation announced an 18 percent revenue growth in the FY to March 2018 which it attributed to a significant growth in volumes across its larger, sparkling beverages and sorghum beer product lines.
The strong performance in the first three months of the year, which represent the fourth quarter in the company’s financial year, was a continuation of the positive trend of strong demand which was witnessed in the previous quarter. What makes this shift increasingly significant is that the third trading quarter for Delta overlaps the festive season, and should generally be the company’s best three months in terms of sales. Why is this observation important?
It is one thing to improve profitability, cash flows and other indicators on the back of price increases, but it is entirely a different matter for a company in Delta’s mould to report improvements in its financial performance on the back of rising demand and volume sales. In fact, Delta confesses that the company is unable to meet rising demand.
The company said lager beer volumes rose 51 percent over the prior quarter and 27 percent for the full year, while sparkling beverages volumes increased by a 49 percent margin over the prior year for the quarter and 15 percent for the 12 months period. Sorghum beer volumes also went up 8 percent from the prior year for the quarter and 2 percent for the full year. Strong indicators indeed.
It is the Middle Class that powers Consumption, Investment and Growth in the economy.
As we open a new economic era in Zimbabwe, we must address the structural dislocations in the economy that have resulted in a skewed concentration of wealth and opportunities coupled with a deluge of poor quality low-wage jobs across the economy. Our elected representatives should come together quickly to enact solutions to address the structurally imbalanced economy.
In particular, the Government must be able to advance strategies that create quality middle-class jobs, while easing the cost of doing business in the country. How can this be achieved?
Rebuilding Infrastructure is a key opportunity.
We must move beyond rhetoric, mantras and speeches about the need to create jobs and rebuild the middle class and start advancing programs based on off the shelf solutions that have worked for economies elsewhere. Rebuilding the country’s infrastructure and empowering the workforce to bargain for fair living wages is the only sure way of rebuilding the middle class.
Only then we will be witness to an era of Zimbabwean economic renewal and expansion defined by an inclusive economy where spending power rises for everyone and families and communities can thrive. Entrepreneurship and opportunity will knock on everyone’s doorstep.
The link between infrastructure and quality jobs is simple. A strong unionised labour force is the one that will do the work needed to rebuild, operate and maintain our country’s roads, rail, urban transit, and aviation systems, rehabilitate drinking water systems, and man our schools hospitals and universities. A strong well remunerated labour force is a key and direct pathway to the creation of a strong middle class.
Infrastructure is also about creating sustainable and high quality jobs. Rebuilding the country’s infrastructure, especially if we commit to very strict, local supply chain requirements, will produce millions of high-quality jobs along the entire supply chain. Infrastructure projects are also known for connecting more workers in disadvantaged communities to opportunities.
For example a major highway can pass through a previously disadvantaged community, changing lives in the process.
In conclusion, stagnant incomes, rising debt, and record levels of income inequality all impact economic growth in a bad way and therefore cannot be ignored.
High levels of household debt have the effect of reducing consumer demand; whilst the lack of assets among the middle class (the little that has remained of it) hinders entrepreneurship as people cannot access collateral based finance to start businesses.
Meanwhile, in that mix, the rise of a super-rich class, whose wealth is far above everyone else contributes to weakened social relations and a more polarized society. Government must lead in correcting the issues that have undermined trust. It is therefore good economic policy and good politics for the ED Government to continue to focus its energies on making the economy work for everyone.
I round off by saying “Cape Diem”-Seize the Day. Can Zimbabwe remain Open for Business?
The writer is an economist. The views expressed in this article are his personal opinions and should in no way be interpreted to represent the views of any organizations that the writer is associated with.
