Income redistribution to the vulnerable through budgeting

By Victor Bhoroma

Zimbabwe’s 2023 national budget will be presented within the coming 2 months, with a lot at stake in terms of income redistribution to marginalised areas of the country and addressing the widening gap between the rich and the poor. The World Bank Economic Update on Zimbabwe released in June 2021 contains some worrying trends on the increase in extreme poverty in the country. The report points out that the number of extremely poor reached 7.9 million. The COVID-19 pandemic added more than 1.3 million people to extreme poverty in an environment where persistent droughts (effects of climate change), high levels of inflation and economic instability had already devastated many livelihoods. The World Bank classifies the extremely poor as people living on less than US$1.90 a day (Less than US$57/month). According to the Zimbabwe National Statistics Agency (ZimStat_2022), extreme poverty in Zimbabwe has been rising over the past 3 years, growing from 29% in 2018 to 34% in 2019, 49% in 2020 and 43% in 2021.This means that at least 2.2 million Zimbabweans have sunk into poverty since the new government came into office in 2018. Harare is one of the biggest contributors to poverty statistics in Sub-Saharan Africa, a situation exacerbated by the fact that most of the countries with high cases of poverty are characterised by conflict, civil wars, or unrest.

Glaring inequality

Inequality in Zimbabwe has risen sharply from 45 in 2017 to 50.3 in 2020 as measured by the World Bank Gini Index, with the richest 10% of Zimbabweans consuming 20 times more than the poorest 10%.

The Gini index measures the extent to which the distribution of income (& consumption expenditure) among individuals or households within an economy deviates from a perfectly equal distribution. This means that there is unequal access to basic necessities such as clean water, basic education (especially online education), basic health care, access to electricity, urban housing, employment opportunities, government subsidies such as agricultural inputs and other critical public services. A case in point is the alarming rise in school dropouts and drug abuse among the youths in Zimbabwe. According to the United Nations Children's Fund (UNICEF_2022), close to 50% of the country's youth are not in school due to poverty exacerbated by the COVID-19 pandemic. The report says the percentage has more than doubled in the last 3 years. Before the pandemic, 21% of Zimbabwean youth were not in school. Now the number stands at 47%.

Income Redistribution through budgeting

It is the role of the government to transfer income and wealth from the rich to the poor. Tools such as taxation, decentralisation of public services and devolution are imperative to income redistribution. In consultation with rural district councils (local governments) and citizens through budget outreach programs, the government should allocate more funding for infrastructure projects to provinces where cases of extreme poverty are highest such as Matebeleland North, Mashonaland Central and West, and Manicaland. The past 20 years have seen massive disinvestment by industries from Bulawayo to Harare due to perennial water shortages and droughts, decline in consumer buying power and underdevelopment. Public services such as access to efficient registrar facilities (for birth certificates, identity documents and passports) should be decentralised to provincial capitals and all towns.

Chapter 14 of the Zimbabwean Constitution provides the need for provincial and local governments to use a portion of national resources to determine development priorities within their areas (whilst remaining subordinate to the central government). Lastly, there should be a deliberate effort to address infrastructure gaps in marginalised towns through building schools, sanitation projects and maintaining roads.

Why Zimbabwe needs income redistribution

The distribution of income within Zimbabwe has never been of critical importance as it is now since it affects social and political stability within the country. High levels of poverty and inequality are the major causes of the skyrocketing cases of criminal activities across the country (Drug abuse, murder, armed robberies, and human trafficking), increase in undocumented emigrants to neighbouring countries and suicide cases.

Addressing Public Service Delivery Mess

Poor salaries and deteriorating conditions of service have paralysed public service delivery in Zimbabwe with education, health care and policing worst affected. Health care professionals (nurses, doctors, and other medical specialists), teachers and lecturers have been in permanent industrial action mode for the past 5 years as a result of poor working conditions and poor remuneration. Workers from selected state entities and councils have also been engaging in industrial action to force the government to review salaries as well. Corruption and taking bribes in government departments has been naturalised. It is imperative for the government to chart a permanent solution in terms of remuneration to fix the mess and improve public service delivery. The Zimbabwean economy and general living standards in the country cannot grow without the government paying civil servants living wages in line with other southern African countries.

Social Safety nets

Economic decline has seen an increase in unemployment and informalisation with most informal jobs (88% of total employment) lacking job security, income consistency and insurance. Considering the above, the government needs to increase fund allocations for basic health and childcare utilities, social grants for child headed families, disability benefits and other facilities for the socially vulnerable such as children, the elderly and pregnant women. Critically, there is need to adjust pension payouts and civil service remuneration in line with inflation trends.

Importance of budget consultations

The role of the government is to identify areas of priority for public service delivery, social service, and infrastructure development. The identification can only be perfected through budget consultations. Consultations ensure local communities in rural and urban areas support the levels of spending being proposed and that the spending suitably reflects citizens priorities. Thus, the budget consultation process provides an important opportunity for the community to be actually involved in the budgeting process.

Of importance is the fact that various constituencies across the country have specific problems. Most rural areas grapple with poor road infrastructure while some have challenges with animal diseases, some its access to or delivery of basic education, some its access to health care, some its telecommunications connectivity or electricity and some it’s about food security. This makes a one size fits all budget ineffective in addressing community problems.

The depreciating local currency and high levels of inflation have made life unbearable for workers and households as the price increases do not match income adjustments from salaries and other sources such as informal trade. The situation is dire in urban areas. The Zimbabwe Vulnerability Assessment Committee (ZimVAC_2022) reported that nearly 83% of urban households are now struggling to buy the food they need for their families. They are unable to buy basics such as bread, mealie meal, meat, and cooking oil. The groups at risk are the chronically ill, women, school children, youth, farmers, and semi-skilled workers (formal and informal sector). Hence, government policies divorced from eradicating the rising cases of extreme poverty can only help entrench it. If no action is taken (through income redistribution) on addressing extreme poverty, Zimbabwe will witness an astronomic rise in criminal activities. It will also witness a rise in a corrosive culture of looting public resources and other social vices that will take ages to fix. The effects of inequality will be felt and be paid for by ordinary citizens. The budget forms a critical part of addressing inequality and other social ills brought about by years of high inflation, unemployment, marginalisation and underdevelopment in the country.

Victor Bhoroma is an economic analyst, writer and lobbyist for free market economics. He holds an MBA from the University of Zimbabwe (UZ). Feedback, please email him on vbhoroma@gmail.com or follow him on twitter @VictorBhoroma1.