Mugabe, economic growth and Africa’s elusive quest for a benevolent dictator




Former Zimbabwe President Robert Mugabe

The dramatic end of Robert Mugabe’s reign is surely a case of life imitating art. Mugabe will go down as Africa’s most successful autocrat, having ruled Zimbabwe with an iron fist for 37 years.

Yet Mugabe, like Jomo Kenyatta, started out as one of those African leaders who had the makings of one of those much sought after benevolent dictators.

In fact, for the first decade of independence, Zimbabwe was Africa’s rising star, even as Mugabe cunningly and ruthlessly eliminated all his opponents, friends and foe alike.

By the mid-90s, the predominantly state-owned economy was struggling, and Mugabe was having to bribe different constituencies with unsustainable public goodies — pay rises, jobs for the boys, pensions for war veterans and so on.

LAND REDISTRIBUTION

If you feed a beast, you better keep doing it, or it will devour you. Finally, he went for land redistribution, something he had been postponing since the mid-eighties, having chosen first to deal with his political competitors instead of unifying the country so as to confront the colonial land injustice.

In 2000, Mugabe lost a referendum seeking to extend his stay by two more terms.  He was undeterred. From then on, politics in Zimbabwe became war, and the economy caved in.

At its peak in 2000, Zimbabwe’s income per head was just about 10 percent above the Sub-Saharan Africa average.

Eight years later it was less than half, having contracted by half, as the rest of the region was growing.

GREAT MYSTERY

Zimbabwe’s trajectory is dramatic but not exceptional.  Because their case is so stark, Zimbabweans do not have to contemplate where the rain started beating them. They know. Many people here continue to wonder where the rain started beating us, even why the Asian tigers left us behind, as if it is a great mystery.

The difference between economic overachievers and underachievers is not that the former outperform the latter consistently.

Rather it is a result of the under performers failing to sustain economic growth and socio-economic progress in general. Underachievers are characterised by episodes of rapid growth and social-economic progress interrupted by episodes of stagnation or regression, sometimes quite catastrophic, Zimbabwe style, but more often than not, they are not as visible.

The reason why we continue to be befuddled by our underachievement is because we see the growth episodes but we discount the cumulative effect of the downturns.

GROWTH MODELS

If you think of socio-economic progress as a race, the industrialised countries are marathoners, the Asian tigers and other overachievers are middle distance runners. The underachievers are sprinters who sprint, collapse, get up, sprint, collapse and on and on.

Economists’ conventional growth models do not help. They are designed to explain the differences in per capita income between two periods, for instance Kenya (US$ 110) and South Korea(US$ 130) in 1965 and Kenya (US1,400) and South Korea today (US$28,000).

This column has discussed this subject. (“Huge investment in education is a pre-condition for economic take-off” Saturday Nation, September 26, 2015).

Studies based on these models do not capture the nuances of what predisposes some countries to sustain progress and others to fits and starts.

This question is the subject of a study by IMF economists Andy Berg, Jonathan Ostry and Jeromin Zettlemeyer titled ‘What makes growth Sustained?’ published as an IMF paper in 2008 and in the 2012 edition of Journal of Development Economics.

AFRICAN COUNTRIES

As the title suggests, the study investigates growth episodes, that is why growth episodes in some countries last four or five years at most, and others 15 or 20 years.

We call these duration models because they focus on explaining how long something lasts instead of the magnitude of the thing itself. What do they find?

First, they find that African growth episodes are the shortest, averaging 5.7 years,  and the countries they call Emerging Asia have the longest episodes, averaging 19 years.

But when they grow, African countries grow faster than other regions. When African countries grow, they grow faster than other regions, by between 9 and 10 percent compared to Emerging Asia’s 5 to 9 percent. And when African economies slump, they  contract by 3 percent per year, while Emerging Asia’s growth goes down to 0.7 per cent.

EQUALITY

Second, they find that long growth durations are explained by “the degree of equality of the income distribution; democratic institutions; export orientation (with higher propensities to export manufactures, greater openness to FDI, and avoidance of exchange rate overvaluation favourable for duration); and macroeconomic stability.”

The factors are listed in order of significance. They are telling us that equity and democracy are the key to sustaining growth.

This is probably more intuitive when put the other way round. Growth that is not broad based and inclusive is not sustainable.

If growth benefits only a few, the widening rich-poor gap will precipitate political problems sooner or later. Democratic institutions have two effects that sustain growth.

POLITICAL RISK

First, they buttress the rule of law. Second, they mitigate political risk. Notably, the study investigated the impact of democracy as well as dictatorship. It found that dictatorship undermined growth sustainability more than democracy enhanced it.

Export orientation is the third most important determinant of the length of growth episodes. As this column has explained before, there are two distinct factors that underpin this.

Export orientation is an imperative for an economy to be externally competitive, which in turn mitigates crony capitalism.

Because most poor countries’ comparative advantage is in abundant cheap labour, export orientation drives the economy towards labour intensive investment, which is more equitable and inclusive.

Third, since the world market is big, export industry can expand for a long time before running into demand constraints.

The opposite of export orientation is import substitution, or domestic market orientation if you like. Import substitution gives policy makers a lot of latitude to protect favoured firms from competition.

POOR COUNTRIES

Because poor countries tend to import capital intensive goods, it also has a capital intensive industry bias. Both these factors predispose the economy to inequality and crony capitalism. And of course, the growth of inward looking industries is constrained by the size of the domestic market.

Sometime ago, this column stirred up a bigger furore than I would have expected by postulating that Tanzania was on course to leapfrog Kenya as East Africa’s economic powerhouse.

It is  useful to revisit the analysis using the duration model. For Kenya, we can identify two growth spurts, the first lasting five years (2003-2007), averaging 5.6 percent per year and an ongoing one eight year one (2009-16) averaging 5.4 percent per year.

The average annual growth rate of the other 13 years is 1.7 percent. The average annual growth rate for the entire period is 4 percent.

Tanzania has one episode starting in 1995, now in its 23rd year, average 6 percent per year. Since 2001, Tanzania’s growth rate has fallen below 6 percent in only three of the last 15 years, lowest being 5.1 percent.

ELUSIVE GROWTH

With a 2.6 percent population rate, our 4 percent growth is an income per person growth rate of 1.4 percent per year. Tanzania’s population growth rate is 3.1 percent, the 6 percent growth rate is a per person income growth rate of 2.9 per cent.

In effect, Tanzania’s per capita income is growing twice as fast. The difference is far from trivial. It translates to a 15 percent difference in per capita income in a decade and 35 percent gap in two decades.

This is precisely what has happened. When Tanzania’s current growth episode began in 1995 our income per person (at purchasing power parity) was 50 percent higher. The gap has fallen to 14 percent. Enough said.

In 2013, we developed an economic blueprint for a broad based inclusive growth centred on raising the productivity of the poor and job creation, in short, a labour intensive economy.

This was to be buttressed by a new Constitution. Both initiatives were frustrated. On the constitutional reform front, the Kibaki wing of NARC walked out of Bomas and went on to write the ill fated “Kilifi Draft.”

CAPITAL INVESTMENT

The bottom up employment focussed strategy was jettisoned for the glamorous top down infrastructure (i.e capital investment) led Vision 2030 which we were told would deliver 10 percent per year growth in no time. One of the unintended consequences of the Asian Tigers extraordinary economic success was to engender an irrational allure for economic miracles. Vision 2030 is the ultimate in this kind of folly. I repeat. Ten percent per year growth is neither necessary nor achievable.

The economy accelerated to 7 per cent growth but as we approached the 2007 election, political and distributional grievances were palpable. It did not require much to ignite.

We warned the Kibaki people many times, but they dismissed the warnings. The economy is growing, they said. In the mid-term review of the ERS written in February 2006, we wrote: “The apparent departure from the employment focus of the ERS seems to us to be a serious betrayal of the trust of the Kenyan. The people took the employment pledge seriously and it will probably be the most important consideration in their verdict of the NARC government’s performance.”

DEMOCRACY

Many, or perhaps not so many, thought that in the 2010 Constitution we had finally achieved a  national consensus on democracy, rule of law and equitable development.

The Jubilee administration has spent the last four years burying the economy in a mountain of unproductive debt, and the last three months digging itself into a political hole.

The Jubilant duo have clung to power at whatever cost, but like Mugabe, the only place it can take them, and the country, is to the dogs.

I am not surprised that they have done so — they do not know any better. What is surprising is the multitude of cheerleaders that should know better who seem to think we are on to a good thing.

A multitude of Zimbabweans once thought so, too.

David Ndii, an economist, is currently serving on the NASA technical and advisory committee. He leads the NASA policy team. ndii@netsolafrica.com; @DavidNdii