Zimbabweans now living in extreme poverty as economy implodes

Victor Bhoroma analyst

WITH Zimbabwe’s economy all but confirmed to contract by at least 8% in the year 2019, households are feeling the heat as poverty levels surge at alarming levels.

Zimbabwe’s last recession cycle occurred from 2000 to 2008 when the local economy contracted at an average of 7,41% in each year. The period saw massive de-industrialisation, company closures, foreign investor flight, job losses, and decline in agricultural productivity and escalation in poverty levels.

Current salaries for most entry-level to supervisor or managerial-level jobs on the local market have fallen below the Poverty Datum Line (PDL). Poverty Reduction Forum Trust (PRFT), a consumer rights watchdog, says during the month of July, an average family of six needed at least Z$1 684,45 to sufficiently source food and non-food items. With month-on-month (MOM) inflation averaging 17% since February 2019, the family basket could now be over Z$2 300 per month.

An extra weight of financial pressure has been added on households with schools opening for the final term of the calendar year when fees and transport fares have been hiked by more than 500%.

Salaries in Zimbabwe’s public and private sectors have largely remained static in the past three months despite skyrocketing inflation and price distortions in the economy.

A few private sector organisations are offering discretionary allowances to cushion employees but the rate of inflation has been unforgiving. The government tabled a 76% salary increment to its restive civil sector which would see the lowest paid civil servant pocketing Z$1 023, up from Z$582.

The increment falls far short of civil servants’ demand of Z$4 750 (US$450 when tabled) for the lowest paid worker. The minimum salary of Z$1 023 (US$90) in government condemns almost all civil servants to extreme poverty. It also means that a large percentage of workers in the private sector have been pushed into extreme poverty too.

People living in poverty are those who are considerably worse-off than the majority of the world population. Their level of deprivation means they are unable to access basic goods and services that are considered necessary to an acceptable standard of living.

The World Bank defines extreme poverty as living below the International Poverty Line (IPL). The daily per capita IPL is a global absolute minimum of US$1,90/per capita or US$9,50 for a family of five in a day as of October 2015. This means a family living below US$285 (Z$3 200) per month is considered extremely poor. The World Bank points out that more than half of the extremely poor people in the world live in Sub-Saharan Africa (SSA).

In fact, 413 million people in the SSA region (out of the world figure of 736 million) lived on less than US$1,90 a day in 2015, a figure more than all the other regions combined. If the trend continues, by 2030, nearly 9 out of 10 extremely poor will be in Sub-Saharan Africa.

A 2017 report by ZimStat pointed out that 71% (over 10 million) of the Zimbabwean population lived in poverty. Extreme poverty numbers were 30,3% in rural areas compared to only 5,6% in urban areas.

The same report points that poor households spent more than 42,5% of their income on food while non-poor households spent only 28% of their income on food per month. It is worth noting that ZimStat poverty figures for December 2017 showed that the Poverty Datum Line (PDL) for a family of five was US$556,50 when the US dollar had trading parity with the local bond notes.

Fast forward to August 2019 and the rate is now 11,26 to the US dollar yet incomes have remained largely static, condemning over 90% of the Zimbabwean population to extreme poverty.

Poverty levels in Zimbabwe increased slightly in 2018 but are spiking in 2019 as access to good schools, health care, decent accommodation, electricity, fuel, gas, safe water and other critical services such as insurance remain elusive for many people due to hyperinflation. The country is plagued by 18-hour power cuts since May 2019 and unending fuel shortages while public health infrastructure is in a dilapidated state.

The informal sector, which employs over 75% of the total workforce, has also been affected by unrelenting power cuts and fuel shortages. Zimbabwean poverty levels have been worsened by Cyclone Idai which devastated the eastern parts of the country in March 2019 and the El-Niño droughts that have hit all southern African countries affecting agricultural productivity.

In February 2019, the Zimbabwean government launched a plea for international assistance to the tune of US$3,2 billion to feed over 7,5 million citizens who are food insecure. To avert starvation, the government is channeling more than US$300 million to the importation of more than a million metric tonnes of maize before the 2019/20 harvest.

To make matter worse, unemployment levels are spiking as companies are retrenching to cut operating costs. The manufacturing industry and banking sectors have been worst affected with at least five top-tier banks formally retrenching in the past six months. Hundreds of formal jobs are still on the line in the economy as various businesses grapple with the realities of hyperinflation, fuel and foreign currency shortages, power cuts and currency change-induced losses.

The government urgently needs to implement policies to avert the rising extremes of poverty in the economy. One way of doing this is to adjust civil service salaries in line with official inflation figures or adjust salaries quarterly according to movements on the interbank rate as those are the two key determinants to consumer price increases.

The Tripartite Negotiating Forum (TNF), whose sole agenda would be to discuss the macro-economic situation and the erosion of workers’ salaries, should be convened periodically to review remuneration trends in the market in light of the upward adjustments of fuel, transport, rentals, school fees, food and medical aid.
The business sector through the Confederation of Zimbabwe Industries (CZI) and labour through the Zimbabwe Congress of Trade Unions (ZCTU) have been calling on government to revive TNF talks in order to find lasting solutions to the existing economic challenges.

One of the major causes of poverty in the world is economic inequality. The economic meltdown in Zimbabwe is helping to widen the rift between the rich who have access to foreign currency and other necessities, and the poor working class who earn most of their income in the local currency.

Policies to accelerate income redistribution such as upward reviews to pension benefits, reduction in income tax (Pay as You Earn) and provision of basic healthcare services in public hospitals now need prioritisation by the government. Without the redistribution of incomes, resuscitation and implementation of TNF agreements and provision of basic services such as electricity, Zimbabwe’s extreme poverty levels will haunt the government in the near future.

Bhoroma is an economic analyst. He is a marketer by profession and holds an MBA from the University of Zimbabwe (UZ). For feedback, mail him on vbhoroma@gmail.com or alternatively follow him on Twitter @VictorBhoroma1.