Zimbabwe urged to close rich-poor gap

Major structural changes in the Zimbabwean economy to alleviate poverty and reduce income inequalities are recommended in the bold and forward-looking report of the Riddell commission of inquiry into incomes, prices, and conditions of service.

The 330-page report of the nine-member commission published here recently offers a broadly based package of policy recommendations, including higher minimum wages, increased taxes on companies and better- paid individuals, reform of the industrial relations system, substantially more land and better credit and marketing facilities for peasant farmers, the squeezing of pay differentials , and a gradual phasing out of food subsidies.

The package of policies sets out to redress the imbalance in the economy between a privileged high-income minority (chiefly white but with an increasing black elite) and the masses living close to subsistence levels in the rural economy.

The target groups to whom the commission, headed by economist Roger Riddell, addresses its policies are primarily the low- paid urban work force, the mining and agricultural labor forces, and the peasant farmers and their families. To tackle urban poverty, Mr. Riddell and his eight colleagues (four black and four white) propose that minimum wages throughout the economy be raised over the next three years to reach 90 percent of the so-called poverty datum line level -- that is an estimate of the amount each family needs to meet day-to- day living requirements as well as providing for health, education, and retirement. Assuming an inflation rate of some 15 percent a year over the next three years, this would mean that urban minimum wages would have to rise by an average of 30 percent a year, while in farming the annual rate of increase would exceed 40 percent.

To narrow income differentials the commission recommends that taxes on middle- and upper-income groups be increased, while a system of job evaluation and grading would be adopted to squeeze middle- level incomes. Persons earning more than 20,000 Zimbabwe dollars a year ($28,500 US) would not be permitted salary increases apart from cost-of-living adjustments designed to maintain existing real income levels. In addition, the wealthy would be the target of increased rates of tax and possibly a wealth tax and capital gains taxation, neither of which currently applies in Zimbabwe.

In the peasant sector, the most important recommendation is that "much more land" is needed to resettle farmers drawn from overpopulated areas. The report estimates that some 220,000 families must be resettled compared with the present program designed to resettle 34,500 families over the next three years. In addition to land, investment in expertise, credit, transport, and marketing facilities is advocated along with a policy of "viable" prices for foodstuffs and agricultural products designed to increase peasant productivity and incomes.

To end the existing dual-economy situation whereby urban workers rely on rural landholdings as a source of supplementary income and of eventual social security, the commission advocates substantial investment in social infrastructure in the towns, especially housing, allied with a social security and national pension program to protect the elderly, the poor, the unemployed, and the disabled.

In addition, it says that food prices in Zimbabwe are among the lowest in Africa, while the quality of fodstuffs is among the highest in the world. This low level of food prices cannot be sustained, it says, and it calls for a gradual phasing out, over time, of food subsidies. Higher wages will protect the work force from rising food prices, but it will still be necessary to provide some form of supplementary compensation (possibly higher social security payments) for those unable to pay the higher prices.

These far-reaching policy recommendations are not costed in the report, but the proposal for a major expansion in bureaucracy -- the establishement of a tax commission, a wages commission, a wages tribunal, a national housing authority, a trade union training authority, and so on -- and the proposed national pension fund scheme imply that the program, if adopted in its entirety, will be very expensive.

It's a very ambitious report, and much of it represents only a starting point as the recommendations on pricing, taxes, and pensions, to name but three, will require considerable further investigation and study, but it is the most important such report to have been published in Zimbabwe for more than 25 years.

Although the report is unlikely to endear itself either to the hard-line free enterprise businessmen at one extreme or the hard-line socialist militants at the other, it will be well received by both organized labor, which may be disappointed at some of the findings, and organized business, which will obviously positively dislike several major recommendations. But the report is far better than many businessmen feared.