Covid-19 implications on the economy (II)


THE Covid-19 crisis threatens the world with socio-economic disasters of gargantuan proportions.However, the pandemic also offers governments a rare opportunity to undertake policy changes that will address the short-term public-health challenge, and also boost the global economy’s long-term growth potential.

Prosper Chitambara

It is vital that governments the world over would seize the moment and the Covid-19 crisis. For instance, governments should immediately take advantage of the lower global price of oil and pass these cuts to consumers through lower prices for fuel and electricity.

For Zimbabwe, the coronavirus pandemic provides a golden opportunity to look inwards for solutions to our development challenges and rethink macro-economic and development policy. An important lesson emerging from the Covid-19 pandemic is that strategic and smart state intervention is very critical.
Therefore, to sustainably address the structural challenges that have been brought to the fore by the Covid-19 pandemic requires the reorientation of the state into a developmental welfarist state.

Countries with strong developmental welfarist-oriented economic models (such as Singapore, Denmark, Norway) have been better able to deal with the pandemic.
Developmental welfarist states that people and their basic human rights should be put at the centre of development. They offer social protection by assuring (at the very least) a minimum income: provides access to food security, health care, education, housing, employment and social welfare services to all of their citizens.

This implies that our macro-economic and development priorities must be based on the attainment of socio-economic rights through the adoption and implementation of a human rights approach to development that ring-fences expenditures in sectors such as agriculture, water, sanitation, health, education, infrastructure, employment-enhancement, well-targeted cash transfers for households living in extreme poverty conditions such as child-headed families, persons living with disability, the elderly, and the chronically ill to enable them to purchase a basket of basic commodities.

The Covid-19 pandemic has exposed the lack of preparedness and resilience of the economy. The government at both national and local level has not been able to adequately provide basic social services such as water and sanitation, electricity and public health.

This has compromised the capacity to adequately deal with the pandemic and makes the country vulnerable to future pandemics and disasters.

The health challenges of Covid-19 for the country are daunting. Zimbabwe’s health system is weak and its health workforce overburdened. Zimbabwe has fewer health professionals per capita than most countries, making any impact on the health sector more pronounced.

The number, quality and capability of health care workers as a ratio of the population is low. According to the World Health Organisation (WHO), as at 2016 Zimbabwe had a skilled health professionals’ density (per 10 000 population) of 12,7. This points to a huge deficit. The WHO identified in 2006 a minimum density threshold of 22,8 skilled health professionals per 10 000 people to provide the most basic health coverage.

The country’s nurse establishment was last reviewed in 1983 yet the population has increased significantly since then. This has left a huge shortage of nurses at public health institutions with the situation worse in rural areas. Most rural health facilities have on average two nurses, which is highly inadequate.

Going forward, it is critically important to ensure that human resources for health (HRH) planning takes into account demographic trends and developments.

Appropriate incentives must be designed to ensure equitable distribution across urban and rural areas ensuring access to under-served populations.
The Covid-19 pandemic also exposes our over-reliance on donors to fund our public health system. The government spends a relatively small share of gross domestic product (GDP) on health care, projected at about 2% in 2020 down from an estimated 3% in 2019.

The inadequate public financing of health has resulted in an over-reliance on out-of-pocket and external financing, which is highly unsustainable.

Development assistance towards the health sector is projected at US$360 745 139 in 2020, up from US$316 224 754 in 2019. We must wean ourselves of donor dependency and assume full financial and economic responsibility over our own developmental trajectory. No country can sustainably develop on the basis of donor dependency as shown by the experiences of developmental welfarist states. We must use what we have to initiate and sustain our own development.
Others have argued that the government does not have much room for fiscal freedom.

However, nothing could be further from the truth. For instance, there are many opportunities to cut back on non-productive recurrent expenditures. A good example is the role of medical tourism in crowding out resources. There is an African idiom that “if a man does not eat at home, he may never give his wife enough money to cook a good meal”.

This applies to locals seeking medical help anywhere but home (for example, medical tourism by political elites at the expense of the taxpayer). The cost of medical tourism could build 25 district hospitals overnight. Ultimately, our greatest challenge is not lack of resources but rather poor stewardship and deployment of the resources we have and wrong priorities.

To address the shortage of essential medicines, there is need to build the capacity of local drug manufacturers such as the National Pharmaceutical Company, CAPS, Pharmanova and Datlabs through import-substituting industrialisation.

The increased reliance on donor dependence for health care funding and drug procurement poses a demand-side constraint for local pharmaceutical manufacturing firms as drugs for HIV and Aids, tuberculosis and malaria are procured externally.

Currently, local drug manufacturers supply only about 10% of the drugs used locally with about 60% coming from exports with about 30% being donated medicines. Zimbabwe has a comparative advantage in the pharmaceuticals which must be harnessed through government support. The country can learn from its past when it strategically intervened in various ways to nurture and promote the industrial sector.

Zimbabwe is already confronting myriad health challenges, including HIV and Aids and tuberculosis, meaning a lot of people in the country may be immune-compromised and more at risk of serious complications.

The emergence of Covid-19 will surely have a devastating and lasting impact on an already fragile health system. The Covid-19 pandemic has made clear the importance of an effective and affordable health delivery system.

The immediate efforts need to focus on limiting the spread of the virus, providing care to those who fall seriously ill and ensuring that other health challenges are not neglected. We must also keep in mind the longer-term strategic imperative of making progress towards universal health coverage (UHC).
Government must explore options and strategies for innovative mobilisation of resources, building on best practices involving: (i) On the supply side, the implementation of fiscal decentralisation with increased transfers from the central government to provincial and district health institutions and facilities on the basis of needs and performance. (ii) On the demand side, explore the possibilities for the establishment of a health insurance system. About 95% of Zimbabweans are without health insurance.

The WHO has been advocating a tax on sugar-sweetened beverages to finance public health. The “sugar tax”, apart from reducing consumption of sugary drinks, also raises additional revenues for Treasury to address public health challenges. Beyond health system responses, there is a critical need to develop and strengthen social protection systems.

Chitambara is a scholar based in Harare. This article was first published in the Zimbabwe Independent.