The impact of structural adjustment on the urban informal sector in ...

increased by 100 per cent; and exports increased by 4 per cent while imports increased by 200 per
cent. And by 1992 the Zimbabwean dollar had been devalued to 38 per cent <strong>of</strong> its 1989 value in
relation to the US dollar. Also, by 1992 it was estimated that about 25,000 employees had been
retrenched. Meanwhile, the population continued to increase at about 2.8 per cent per annum; the
number <strong>of</strong> school leavers looking for work stood at about 300,000 per year when only about 10,000
new jobs per year were being created; and unemployment rates were 48 per cent for the 15 - 19 year
age group, 37 per cent for the 20 - 24 year age group, and about 9 per cent for the 25 - 29 year age
group; and no appreciable foreign investment was forthcoming.
It is clear from the foregoing that two years after the inception <strong>of</strong> ESAP, living standards in
Zimbabwe had declined and that the country was still mired in an economic quagmire from which
there seemed to be little hope <strong>of</strong> revival, at least in the near future, ESAP measures notwithstanding.
It was also clear that the emerging problems <strong>of</strong> unemployment and underemployment were not only
frictional but <strong>structural</strong> and that the Social Dimensions Fund was not only inadequate but ill-equipped
to deal with the <strong>structural</strong> problems. Overall, there was no strong evidence <strong>of</strong> a move towards
restructuring along the lines anticipated by ESAP, except for the few cases in horticulture, furniture
and tourism whose economic consequences for the economy as a whole were marginal.
A general survey <strong>of</strong> businesses undertaken by the Central Statistical Office in early 1993
indicated that there was a general pessimism among them about future economic prospects. This
particular survey indicated that 86 per cent <strong>of</strong> the firms were operating below capacity, with the "Drink
and Tobacco", "Metals and Metal Products" and "Food Stuffs" being the worst affected with close to
or above 90 per cent <strong>of</strong> the respondents operating below capacity. Most firms expressed pessimism
about the general economic situation with only the firms in "clothing and footwear" and "textiles"
expressing optimism. Most firms complained about rises in unit costs <strong>of</strong> production and more
generally felt that:
Weak domestic market demand and labour disputes were ... the major constraints
preventing firms from achieving the full potential <strong>of</strong> their plant capacity. Weak export
market demand and breakdown <strong>of</strong> machinery and shortages <strong>of</strong> foreign currency were cited
as constraints affecting the industry. [CSO Business Tendency Survey, 1993, p. 1]
<strong>The</strong> combined effect <strong>of</strong> falling output and increasing money supply coupled with a belated credit
crunch and currency depreciation not only negatively affected the majority <strong>of</strong> the industries which had
been protected by the import-substitution regime, and which were very import dependent, but it also
gravely affected the living standards <strong>of</strong> all segments <strong>of</strong> the low income population in that prices <strong>of</strong> final
goods and services rose phenomenally between 1989 and 1992 with the cost <strong>of</strong> food rising by 93 per
cent, clothing by 62 per cent, <strong>of</strong> amenities by 50 per cent, <strong>of</strong> medical care by 44 per cent, <strong>of</strong>
transportation by 94 per cent and <strong>of</strong> education by 92 per cent.
It is within the context <strong>of</strong> the foregoing stagflationary consequences <strong>of</strong> ESAP that the study was
undertaken as to ESAP's <strong>impact</strong> on the urban informal sector. It should be indicated that in Zimbabwe
about three quarters <strong>of</strong> all households have at least one member working in the formal sector, and that
there are cross-remittances between the formal sector, the urban informal sector and the communal
sector. Thus developments in the formal sector have repercussions on the other two sectors.
4.3 Consequences <strong>of</strong> ESAP relevant to the urban informal sector emanating
from the formal sector
At this stage it is necessary to summarize the main ways in which the foregoing stagflationary
consequences <strong>of</strong> ESAP may have been transmitted to the urban informal sector. It should be noted that
the overall macroeconomic environment, in terms <strong>of</strong> the structure <strong>of</strong> production and labour utilization,
manifested allocative, technical and distributive inefficiencies. <strong>The</strong> allocative inefficiency was reflected
in declining aggregate output and the existence <strong>of</strong> pervasive unemployment and underemployment; the
technical inefficiency was reflect in the existence <strong>of</strong> excess capacity in the formal sector; and the
distributive inefficiency was reflected in the legacy <strong>of</strong> a skewed distribution in income and <strong>of</strong>
inequitable access to assets especially as related to the communal and informal sectors. Now, since
a substantial aspect <strong>of</strong> the urban informal sector has evolved as an induced outcome <strong>of</strong> the overall
macroeconomic environment, particularly the relationship between the formal and communal sectors,
it may be expected that the structure <strong>of</strong> the urban informal sector reflected the overall inefficiencies
as well.
In summary then, the main effects <strong>of</strong> ESAP on the urban informal sector may be expected to
have been transmitted through the following consequences <strong>of</strong> ESAP on the overall economy:
(i)
An increase in the cost <strong>of</strong> inputs - <strong>The</strong> fact that the advent <strong>of</strong> ESAP was associated with an
overall increase in the rate <strong>of</strong> inflation would be expected to increase the costs <strong>of</strong> many urban
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