Zimbabwe could learn from Sassa amid its Covid-19 crisis
The informal sector accounts for 90% of country’s workforce, with the formal and informal divide exposed by the pandemic
Zimbabwe’s first confirmed Covid-19 case was announced on March 20, and the first death on March 23. Ten days later, the government, through the promulgation of a series of statutory instruments such as statutory instrument 83, announced a prevention, containment and treatment emergency response that began with a 21-day nationwide lockdown.
This arrived in the context of a country already crippled by hyper-inflation, health system deficiencies, production stagnation, crop failure, mass unemployment and basic service delivery failures.
Zimbabwe’s informal economy employs close to 90% of the country’s labour force as the formal economy has all but collapsed. The informally employed represent a significant breadwinner constituency, whose dependents comprise vulnerable sections of the populace. The restrictions on mobility and the closure of borders meant immediate loss of employment and income.
In addition, the local government ministry used the first lockdown phase as a smokescreen behind which to demolish, without consultation, the vending cabins and stalls of informal traders. On May 16, the lockdown was indefinitely extended, with relaxations mainly designed to enable the conducting of public examinations and the resumption of formal commercial and industrial business operations. After 48 days of being forced to stay at home, the socio-economic plight of the informally employed was ignored under the lockdown extension measures.
These seemingly innovative measures belie a cash crisis in which cash has moved from the banks to the street at exorbitant premiums
As if living in a parallel universe, the government of Zimbabwe announced a Z$18bn ($720m) economic recovery and stimulus package, which primarily targeted formally constituted and registered businesses. Within this scheme, monetary and macro-financial measures were adopted that resulted in the overnight return of the multi-currency system, sanctioning the use of both the Zimbabwe dollar and the US dollar.
A three-month social support cash transfer grant of Z$600m, targeting 1-million vulnerable households and to be administered by the department of labour and social welfare, was also announced. This gave hope for the informally employed given their ad hoc operations and unregistered status. Lastly, the National Social Security Authority (NSSA) announced a once-off discretionary bonus by doubling pensioners’ regular monthly payout for April.
However, these three responses to the socio-economic impact of Covid-19 are sub-optimal. First, the monetary and macro-financial measures that officially reintroduced use of the dollar proved self-defeating, as it spurred a hyper-inflationary cycle that led to further devaluation of the Zim dollar. A number of factors caused this incongruity, the first being a pre-existing liquidity crisis that has seen 96% of local transactions conducted via plastic, the internet and mobile money.
These seemingly innovative measures belie a cash crisis in which cash has moved from the banks to the street at exorbitant premiums (up to 25%). There is also a dual pricing system for cash and non-cash purchases, with the latter being more expensive. This dual pricing system has also been fueled by an interbank exchange rate officially pegged at $1 to Z$25 in a pricing system determined by informal market rates.
Second, the restricted access to banking services due to the lockdown, as well as allegations of governing elites who typically purchase dollars at the official rate to sell on the black market at highly chalked-up rates, have all but reinforced demand for informal foreign currency exchange services. The price has shot up from Z$40 to above Z$60 to the dollar since the lockdown.
These macro-economic measures led to a spike in basic commodity prices and government’s imposition of a price moratorium that further led to a scarcity of sugar, cooking oil and mealie meal in supermarkets. The lockdown hyper-inflationary environment eroded the purchasing power of the pledged social assistance long before reaching its target.
The second measure of Z$600m ($24m interbank, $10m informal) means a household allocation of Z$600 translates to $24 (interbank) or $10 (informal). The total consumption poverty line (TCPL) for a family of five is pegged at Z$6,420.87, about $107.01 per month (informal). TCPL varies from one province to another, but at either rate the payout’s real purchasing power is 10 times lower since it’s not paid in cash. It is therefore further eroded by the taxes along its transfer chain — in this case mobile money transfer, bank charges and a government-imposed 2% tax.
The third intervention by the NSSA pensioner payouts of Z$200, also transacted in local currency and through bank transfers, is further eroded by the bank, mobile money and government tax charges. This reduces the implied bonus of Z$400 to about $16 and $6.66 at the formal and informal market rates, respectively. These measures amount to mere tokenism.
The SA social grants system, by comparison, largely conforms to the expectation that social protection should be predictable, durable, consistent and transparent
Zimbabwe has a broad, well-documented spectrum of social protection measures that mainly fall into four broad categories of social safety nets, social insurance, labour programmes and social care services. However, bad governance and corruption have compromised the functionality and efficacy of these measures. The most well-intentioned and efficiently targeted ones have failed to keep up with the hyper-inflationary environment.
Zimbabwe can draw best practices from SA’s social grants programme that runs within a fairly stable (albeit stagnating) economy. A case in point is the SA Social Security Agency’s (Sassa) child support grant, which is subject to annual review but is currently at R440 per child. There is also the Covid-19 social relief additional R300 for the month of May, which translates to between $30 (interbank) and $42 (informal market).
From June until October 2020, there is an additional R500 per caregiver, regardless of the number of children. It is also worth noting that under the “Sassa Cares” programme all other grants will increase by R250 for six months.
The SA Older Persons’ Grant also offers instructive lessons. It is pegged at about R1,800, which translates to about $100 (informal) compared to the Z$200 (between $3.33 and $8). However, these best practices are at present not replicable in Zimbabwe in the absence of the much-needed political will to promote economic stability and stem corruption.
The department of labour and social welfare and NSSA are characterised by inefficiency and high levels of corruption. The SA social grants system, by comparison, largely conforms to the expectation that social protection should be predictable, durable, consistent and transparent, with communities fully aware of their entitlements.
The Covid-19 experience is a decisive moment for counting the human cost of bad governance and channeling the country on the path to reform in Zimbabwe. While Covid-19 has no doubt served to worsen existing vulnerabilities and inequities, importantly it may be “a catalyst for designing and implementing new economic models that help us to arrive at a more safe and just space”. Stemming endemic corruption that has seen public officials drain state resources with impunity is a critical starting point.
Further to this, the country’s broader social protection architecture needs to be rethought towards responses that abandon the political gesturing and tokenism of piecemeal approaches for longer term, structurally adaptive and contextually sensitive interventions.
• Mashingaidze is a researcher in the human security and climate change programme at Good Governance Africa.