Speech by David Coltart: What the Businessman Can Do Towards the Success of the Structural Adjustment Programme

What the Businessman Can Do Towards the Success of the Structural Adjustment Programme

By David Coltart

Institute of Chartered Secretaries and Administrators in Zimbabwe

2^nd July 1991

I have been asked to give a short talk this afternoon on what the businessman can do towards the success of the Structural Adjustment Programme. Lawyers, as you probably know, love the sound of their own voices and asking one of us to give a short talk is a bit like asking an undertaker to be more lively. I will do my best, however, and will focus on the Structural Adjustment Programme essentially from a human rights perspective. There are all sorts of factors which will contribute to the success or failure of the Structural Adjustment Programme and most of the tips on how to succeed are best left to people like yourselves and economists.

One thing we are all no doubt agreed upon is that it is critical that the structural adjustment programme works. I heard recently that some 38 developing countries have in the past few years attempted Structural Adjustment Programmes and I was distressed to hear that the failure rate was extremely high. In fact I was told that some 36 of these countries were as badly off as ever. The only success story is Mauritius and the only other country is Zimbabwe which has yet to fully implement the programme.

Before we look at some of the reasons for success and failure, the fundamental question that needs to be asked is “what exactly is structural adjustment?” No one to my knowledge in Government has given a precise definition of structural adjustment. As far as I can tell it is simply a euphemism; it is a convenient phrase to describe the “U” turn Government is doing from socialism to capitalism and a free market economy. In spite of all the rhetoric we have heard recently about the fact that the majority of ZANU PF still believe in Marxist-Leninism the fact remains that, in my view at least, structural adjustment is just a convenient phrase. It would be far too embarrassing for Government to admit that it was formally abandoning socialism to embrace capitalism.

What can we learn from other developing countries which have embraced a free-market economy? I was recently reading an article in one of the December 1989 issues of the British magazine The Spectator entitled “Of Marx, Mice and Men”. The article provided a reminder that China was the first communist country in modern times to tread the capitalist road. As far back as the late 1970s Deng Xiaoping visited Japan and assured his hosts that China was open for business. China, in short, tried to do a Japan. When challenged about the incompatibility of communism and the strategy of progress-by-exporting, he said: “it doesn’t matter whether a cat is black or white, as long it catches mice”. Japanese businessmen studied Deng’s proposals and Japan was soon in the grip of a China boom. By 1988 it looked like a thundering success. For the first six months of 1988 the growth in the Chinese gross national product hit 17% – equal to the best results ever achieved in the days of Japan’s and South Korea’s explosive growth. The rest is history. The opening up of Chinese society was simply a facade which was uncovered in June 1989 with the violent suppression of legitimate student protest. By the third quarter of 1989 China’s economic growth was down to 0.8%, well under the population increase. The Chinese experience simply shows that it is extremely difficult to introduce primitive capitalism into any society which is used to fierce Government control and suppression. I would not for a moment compare Zimbabwean society to Chinese society, we are undoubtedly far more democratic and Government could never be described as communistic. However, it is important to learn from the Chinese experience. The strategy of progress-by-export will not work in a restricted environment.

I have looked at a negative example of what not to do. It is important also to consider the positive, and in this regard I believe that Clem Sunter’s book “The World and South Africa in the 1990s” should be prescribed reading for every proponent of trade liberalisation and structural adjustment. Although Sunter concentrates on South Africa, the book is equally applicable to Zimbabwe’s economic future. In one section Sunter points out that opening up the economy will only work if one can create an environment in which people are willing to work hard. He believes that there are four conditions for people to be willing to work hard, which are:

1. Small Government;
2. Sound family system;
3. Low taxation; and
4. Lack of corruption.

As I am neither a tax expert not a sociologist, I do not propose to look at what would be sound family system or a low taxation system in Zimbabwe. However, I do believe that it is within my expertise to consider small Government and lack of corruption.

Small Government

Sunter spoke to the Japanese Ministry of International Trade and Industry and questioned what their role vis-a-vis industry was. They said, “We act like a football team coach. We offer tactics, provide the right environment and make sure that the pitch is in excellent condition. We don’t own the stadium but we keep it in good shape and those guys out there – they win the matches. They are the champions. We don’t command them, we help them.” Their deeds match their words: Japan has fewer state employees than any other member of the top economies in the world, less than half the number in the United States, West Germany and Britain. Furthermore, the Government acts in a support role. Who of you knows the name of the Japanese President? They are the servants of the people, not the other way round, and that is key.

Lack of Corruption

The reasons why lack of corruption to a successful work ethic is essential are obvious. Sunter simply makes the point that only an open system minimises corruption in a country. Wherever there are controls almost inevitably corruption will flourish. Whenever Government has its hand in everything almost inevitably corruption will prosper. Wherever there is control of the media corruption will flourish as control of the media inhibits investigative reporting which is necessary to expose corruption.

If I could summarise what I have said above it would be that there are three pointers to the success or failure of structural adjustment, which are:

1. That the transition to capitalism and a free market economy must not be half-baked or half-hearted. Unless the transition is accompanied by fundamental political change the future is bleak.
2. One of the keys to success is that there must be small Government.
3. And finally, another key to success is lack of corruption.

Looking at Zimbabwe in the light of these three pointers I would make the following comments.

Half-Baked Transition

In a recent paper which I delivered to a seminar organised by Peat Marwick I argued that I believed that it was Government’s intention to introduce economic liberalisation and structural adjustment in a vacuum. Evidence of this is given in the clamping down of fundamental human rights, academic freedom and opposition political parties. Furthermore, Government, or should I say the Party, only seems to have a head commitment to structural adjustment, not a heart commitment. This is evidenced in recent statements hankering back to Marxist-Leninism, and the fact that Government continues to hold onto icons of socialism. We are all still called Comrades when that went out of date with the fall of the Berlin Wall. Government still justifies a Ministry of Political Affairs which is devoted to one political party in a “multi-party democracy”. Until Government abandons these icons and wholeheartedly shows its commitment to structural adjustment I fear that structural adjustment will fail.

Small Government

Government has spoken much about reducing the number of its civil service employees. Whilst this is obviously welcome it will not in itself ensure that structural adjustment works. What is more important is that Government changes its attitude about itself. Government needs to realise that it has to be the servant of the people not the people’s master. The statement of Minister Mahachi as reported in the Sunday News is an example of a Government which is not committed to changing its attitude. Until Government realises that small government does not just mean trimming its size but also relinquishing much of its power, the success of structural adjustment will be inhibited.

Lack of Corruption

I believe that corruption is rampant in society and has given rise to considerable disillusionment amongst the workers and common people in Zimbabwe. The degree of control that Government exercises in Zimbabwean society fuels corruption. The fact that Government effectively controls the ZBC, The Herald and The Chronicle and, if Geoff Nyarota is to be believed, is trying to control the Financial Gazette, means that corruption can never be fully exposed in our society. Furthermore, all the controls in the economy, especially as regards the distribution of foreign exchange, exacerbate the problem. Where people have absolute control and no fear of being exposed for exercising that control improperly, corruption inevitably flourishes. It is thus fundamental to the success of the Structural Adjustment Programme that Government should relinquish its control over the media.

What can the Business Community Do?

If businessmen want to contribute towards the success of the Structural Adjustment Programme, the first thing they have to do is to change their attitude. My criticism of the business community generally is that it has an ostrich mentality. It strikes me that business generally sticks its head in the sand and hopes that trade liberalisation and structural adjustment will work without them doing much about it. Worse still is the fact that the business community still panders blindly to Government primarily out of the fear of losing business. Whilst I understand short-term considerations of needing to obtain foreign currency, I believe it is incredibly short-sighted to remain passive.

Looking at things positively then, what can businesses do? In this regard I would like to look at the three pointers mentioned above give some suggestions.

Half Baked Capitalism

The business community needs to make a bold public stand that if trade liberalisation and structural adjustment are not accompanied by political reform the economy is doomed in the long-term. Government needs to be told in no uncertain terms that its action in undermining the universities, the courts and opposition political parties will result in the failure of the economic reform programme. Government continually needs to be wholeheartedly committed to transforming the entire Zimbabwean economy and society to make it democratic. Business needs to support publicly University academics, the judiciary, the legal profession and credible human rights organisations, all of whom are endeavouring to ensure that Zimbabwe becomes truly democratic.

Small Government

Business needs to encourage Government to become small. It needs to be pointed out to Government that trimming the civil service in itself is not the answer. Business should not encourage the notion that the Party is the master of society. In this regard I am particularly critical of joint business ventures with ZANU PF and acts such as donating to the ZANU PF Building Fund. These actions undermine the concept of multi-party democracy and tend to reinforce the Party’s attitude that it is the master of Zimbabwean society not its servant. Likewise, pandering to individual politicians contributes to the notion, in their minds at least, that they are more important than mere coaches providing the right environment for industry to flourish.

Corruption

I feel strongly that unless business encourages Government to deal with corruption and assists Government in combating corruption, the success of the structural adjustment programme will be severely hampered. In this regard business can do two vital things to combat corruption: First, business must realise that the end to corruption starts with business. The time has come for businesses in Zimbabwe to decide jointly that they are not going to tolerate any form of corruption or extortion. Whilst I am fully aware of the difficulties in adopting this stance, business needs to be assisting in exposing corruption wherever it occurs. Secondly, we need to encourage Government to realise that the best weapon to combat corruption is an open system where there is a free flow of information. Business needs to support those publications which are endeavouring to expose corruption.

In conclusion, you might be sitting back and asking “is this all necessary?” Do we really have to jeopardise our position and be more forceful? If you are asking that question I would like to conclude by telling you a story about my Roman Law professor. In my second year at university, I did a course called Roman Law which was designed to weed out some 60% of our law class. In the first term we were given several assignments and one of my fellow students had the gall to ask whether the assignments were compulsory. Our professor, who happened to be German, answered as follows: “No, they are not compulsory, but neither is breathing compulsory. If you do not breathe you die. If you do not do my assignments you fail”. The same applies to you. It is not compulsory that you as businessmen make a stand on these issues. If anything it probably makes a lot of sense in the short term to keep quiet. However, I believe that unless the business community takes action structural adjustment and trade liberalisation are doomed to failure.