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Friday, December 9, 2022
HomeGuest BlogOPINION: Economic Meltdown Pushing Many Into Poverty

OPINION: Economic Meltdown Pushing Many Into Poverty

As the festive mood grips the nation, there is a feeling among most Zimbabweans that the 2018 Christmas will be dull. Economic woes headlined by cash shortages, fuel shortages, multi-tier pricing and price hikes for basic goods and services are rapidly pushing the majority of the population into poverty. A wave of price increases in September has left disposable incomes depleted for the majority of the local workforce. The Zimbabwe National Statistics Agency (ZimStat) last recorded the Poverty Datum Line (PDL) at $691.00 as of October 2018. With month on month (M-O-M) inflation rate increasing to 16.44% in the same month, chances are that the PDL has risen beyond $800 in December. The PDL represents the cost of a given standard of living that must be attained if a person is deemed not to be poor. The index is also linked to the monthly family basket which gauges the average market prices of basic goods and services for a family of six as measured by the Consumer Council of Zimbabwe (CCZ). These indicators show that the cost of living has gone beyond the reach of many in a country where net salaries for civil servants average $500.00 and unemployment rate is as high as 92%.

Even though the unemployment rate is debatable due to the surging number of Small to Medium Enterprises (SMEs) where most survive on, there is no doubt that most of those that have found respite in small businesses were pushed out of employment by economic conditions.

People living in poverty are those who are considerably worse-off than the majority of the 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. World Bank defines extreme poverty as living on less than US$1.90 per day as per October 2015 standard. Prior to that, the global line was $1.25 a day. A recent report by World Poverty Clock pointed out that over 72.3% of the Zimbabwean population are poor with about 5.7 million people living in extreme poverty. Individual poverty prevalence is 84.3% in rural areas compared to 46.5% in urban areas, while extreme poverty is 30.3% in rural areas compared to only 5.6% in urban areas. These numbers are further worsened by El Nino droughts that have hit southern African countries in the last 2 years and affected agricultural productivity.

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Agriculture provides direct and indirect employment for over 70% of the Zimbabwean population, as such the recent price hikes for agric inputs have serious ramifications on many livelihoods in the country. As farmers are planting for the 2018/2019 cropping season, prices for seeds, farm implements and fertilizers have more than doubled from last season prices. Most retailers charge in Bond/RTGS but their prices are pegged on the parallel market US Dollar rate where the greenback is fetching as high as 350%. The price increases affect the whole chain with transport providers also hiking prices for their services due to fuel shortages. The result could be low productivity and food insecurity for most small holder farmers who rely on agriculture as their source of their livelihood.

Health services in Zimbabwe have long been dominated by private players due to the collapse of the public health institutions over the years. Drugs now look as if they are a “luxury” due to the exorbitant prices charged by private health service providers and pharmacies. Retailers and service providers have long resorted to using the black market Bond to US Dollar rate of 350%. Medical Insurance service providers are slowly indexing their services to the US dollar to protect themselves from losses that arise when patients do their claims. The high prices have pushed medication beyond the rich of a majority of patients especially the poor. To compound the situation, doctors at various public institutions downed tools on the 10th of December in protest to poor working conditions. Part of their demands is to be paid in foreign currency by the employer and for the government to prioritize procurement of medicine.

The incessant foreign currency shortages and liquidity constraints in the market have also forced most producers especially miners and manufacturers to lay off part of their workforce in order to stay afloat. The government has for long talked about creating jobs with a clear understanding that high unemployment levels lead to extreme poverty. In its Poverty Reduction Strategy Report for 2016 to 2018, the Zimbabwean government identified unemployment and economic recession as major causes of poverty.

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Parents with school going children are also finding the going tough as most schools hiked tuition fees and uniform prices to shield themselves from the advancing inflation. School dropout numbers will certainly increase under such conditions. Cross border traders who make a living through importing various merchandise for resale locally have not been spared as well. High exchange rates have pushed prices beyond the reach of most customers. Business has never been the same since September.

 

One of the major causes of poverty in the world is economic inequality. The economic meltdown is helping to widen the rift between the rich and the poor in Zimbabwe. The rich have unlimited access to clean water, food, clothing, shelter, medication, transport, employment opportunities and state resources among other needs. As economic woes bite, the rich maximize their opportunities and live large while the poor slide into extreme poverty. There is an urgent need for the government to find lasting solutions to key economic problems bedeviling the nation such as exchange rate disparities that cause multi-tier pricing, cash shortages, foreign currency shortages and price hikes that lead to high inflation levels. The economic meltdown is being felt more by vulnerable groups such as the elderly, women, school children, AIDS patients, the youth and the disabled. A number of groups such as civil servants, small holder farmers, pensioners, farm workers and other unskilled workers are in great danger of sliding into extreme poverty.

Victor Bhoroma is business and economic analyst with expertise in business management aspects. 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 Skype: victor.bhoroma1.

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