Reconstructing Zimbabwe: The 8 necessary keys
By Itai Zimunya
Whilst the anti-corruption crusade seems to dominate the public discourse in Zimbabwe, uncertainty seems to be creeping back as an economic challenge. The population is becoming restive.
At the centre of this swelling national expectation is the Minister of Finance, Patrick Chinamasa who is surrounded by a host of challenges. Three questions seem to constantly nag him on a daily basis.
The first key question is how to expand the economy without increasing our national debt? Second is how to materially improve the welfare of ordinary citizens, and lastly, how to make that growth sustainable?
The three questions above are distinctively big and possibly elusive at the same time. This article seeks to emphasise some policy options which when implemented, could help break the perceptions and or fears of another season of economic collapse.
The Zimbabwean economic narrative presents a paradox. The country is richly endowed with resources, land for agriculture, minerals, a celebrated human resource base, relative political stability and a great climate but its economic indicators display poor and suffering people.
This then begs the fundamental question: why does our Minister of Finance sweat so much to look for avenues to grow the economy amid all these national endowments? Why are the people of Zimbabwe poor amid such wealth?
There are two dominant narratives of how and why Zimbabwe appears cursed amid a wealth of resources. Sanctions and corruption commonly feature- jointly or individually- as justifications for economic collapse in Zimbabwe largely depending on where one is located politically.
This discussion does not seek to debate which of the two, sanctions and or corruption, contributes more to this crisis. Rather, perhaps, as we propose a set of policy prescriptions to Zimbabwe, such issues will be cured through our broad spectrum policy injections.
Many economists, domestic and international often engage Zimbabwe and her questions emotionally and or politically. Whilst emotions and politics are human and common, there comes a time we need to rise above them and put Zimbabwe first. This is the spirit in which this paper and its eight prescriptions are framed.
• The first primary economic shock-therapy for Zimbabwe is strategic support to the Small-Medium Economic (SME) sector.
Since the collapse of large scale manufacturing and the agricultural base in Zimbabwe, there has emerged an active small to medium economic base that is currently producing, trading and providing services to drive the economy.
Besides the public service, the next biggest employer in Zimbabwe is the SME sector. The challenge to Minister Chinamasa is how to inject “life” into this sector. There is no one size fits all, but a collection of antidotes to be taken concurrently.
The SME development is not only a function of availing resources like finance, but matching that finance to fair taxation, trade support /facilitation and continuous entrepreneurial training.
For example, we focus on the furniture industries of Lupane (hardwood) and GlenView 5 which produce excellent products which, in most cases, depreciate due to the vagaries of nature as the proprietors do not afford necessary storage services.
Why can we not have ZimTrade assist these manufacturers export their products to the central and east African region?
Why doesn’t the government itself support the buy Zimbabwe campaign? Honourable (MP) Temba Mliswa was spot on when he advised government to support local industries by purchasing its vehicles from local sources.
The colonial Rhodesian government stabilised and grew the economy through creating local demand by boosting internal trade: hence the rise in Willowvale and Quest motor assembly companies, Chiredzi ethanol plant to create more than eight months of fuel cover and a thriving arms industry supported by the Midlands steel industrial base.
We may detest colonial Rhodesia and her racist policies, but we certainly have lessons to learn on how they insulated that government from sanctions.
Their strategic intervention was on the supply side (production) and a demand side concentrated on supporting the local industry- including clothing, food, construction, health, education among other sectors.
Is it not stupid, for all of us as a nation to claim to support and value agriculture but continue to buy our provisions from across the region? What sense is there in getting our chicken, eggs, potatoes, tomatoes, onions, beef, milk, and beans, among other products from South Africa and Brazil?
Is our agricultural system designed in an economic and productive way or in some political fashion where “party members” benefit from inputs and schemes? Is there a positive co-relation between the party and production?
Is there a central agro planning unit in Zimbabwe which sets the quantities and qualities of products to be produced to avoid the current traditional “speculative” or guesswork agriculture which is disconnected to the market?
Minister Chinamasa’s priority must be to support the SME and agricultural sectors. This finance must be accessed formally through the banking system using merit and not politics. Ideas and projects must flourish irrespective of political affiliation.
• Secondly, the institutions that support business development like taxation, company registrations and other certifications must be more visible and accessible in the provinces to avoid the expired idea of the sanctity of the capital city.
Does a Gwanda based beef processor need to come to Harare to get their papers sorted? At what cost in terms of time and money? The issue of decentralisation is not only political but administrative too.
It is an inevitable economic developmental issue. Having Provincial Ministers of State is not enough.
• The third major policy focus must be the support for beneficiation of our products. This policy target of beneficiation has been Africa’s desire for decades. We must admit that our failure as a country is not mainly a function of “sanctions” but our own complicit and weakness or both to international capital.
Our minerals must be processed as the debate in the platinum industry is currently shaping. Who, in this government, supports the export of raw gold, diamonds and other minerals when a diamond cutting machine, for example, costs $80,000 in China?
Have we failed, even as state corporations, to acquire these machines and export jewellery- at a benefit ten times more than the current? Minister Chinamasa needs to question his colleagues in Cabinet.
Is it a lack of will or lack of capacity on the side of government? Zimbabwe can easily open her own “Platinum valley” where licensed companies compete to produce high quality jewellery to supply the insatiable growing global middle class in Nigeria, South Africa and Asia.
The crisis of small minds comes herein. There is a dangerous sense of entitlement and self-importance in Zimbabwe. There are people who (mis)use their power to want to do all there is in the world.
They want to be farmers, want free inputs, they want mines and they want to supply goods to the state- all in an ad-hoc and speculative fashion. The high level Marange, Rhino horn and elephant tusk syndicates reveal this sense of entitlement or “it’s our time to eat”.
On agro-based industries, there is a rising global demand for organic food. Zimbabwe has the land and capacity but for some unknown reason, it in fact has a net food deficit herself. Our land value is locked in the dispute of ownership.
Whilst ownership is important, the government must institute an audit and allow fixed term (like25 year) leases between the owners and investors so that we unlock the value of our land.
Many classical economists place Foreign Direct Investment (FDI) as a key economic booster in post colonial countries like Zimbabwe. I disagree strongly. FDI is very necessary as a complementary and not primary economic growth prescription for any post colonial state. FDI without redistributive policies perpetuates duality of the haves and nots.
• The forth point is policy clarity and consistency to attract FDI. Government’s investment policies need to be consistent, easily understandable and congruent with other policies like labour and indigenisation among others.
In spite of the existence of the Zimbabwe Investment Authority, sinking money in Zimbabwe still takes more than six months and often accompanied by changing requirements depending on who or which Ministry is negotiating.
In other countries competing for the same investment, it takes 14 working days to get a project finalised.
The undervaluation and delay in our investment discussions is not necessarily because of lack of capacity within the state. People’s pockets seem to take priority before national interest. Corruption is the challenge.
That’s why, like the Essar-Zisco deal, sad allegations that a national resource worth $20billion was sold for $800million surface. Zimbabwe has experts both in Zimbabwe and in the region which can help it negotiate and knit sound investment portfolios where the state benefits.
It’s a matter of choice and leadership.
President Mugabe and his Cabinet must chose whether they want the state to be led by party deployees or sharp experts who may not give a damn about party cards or slogans. Zimbabwe has abundant human resources, and it’s the government’s choice to grow the economy or suppress it through prioritising politics.
State facilitatory and regulatory institutions need to work well especially against a well organised private sector whose common trait in the global south is brutal extraction in pursuit of super profits.
The private sector-assisted by some vampire Northern states will always fight against local beneficiation in a bid to maintain Zimbabwe as a source of raw materials. That is a live fact and the government must be alive to this, including in its dealings with China.
Europe and China have the same interests in Zimbabwe, resource exploitation. International corporations are well known for tax evasions, labour abuses, under invoicing and transfer pricing. Zimbabwe needs to get the private sector to conform to national laws and work in developmental spirit.
• The fifth variable that Minister Chinamasa needs to factor is corruption. In Zimbabwe, corruption has a positive co-relation with power and sex. Favours, contracts, cuts are largely offered to people connected to the ruling party chefs.
Most of these are male speculative merchants who operate shelf companies. Speculative economics does not grow an economy as it relies on flamboyance, posh cars and designer suits.
This paper is not arguing that connected people must not get into business. They must, but in a fashion that increases production and thus, creates jobs.
• The sixth element is externalisation. Minister Chinamasa must introduce incentives for the repatriation of capital or incomes into Zimbabwe by the Diaspora or some people that had externalised their capital.
With due respect, why export our scarce US$ educating our kids abroad when, as a nation, we can sink such funds into local institutions and improve local skills, employment and development in higher education.
Why can’t the Presidential scholarship support 10,000 students at local universities.
Why doesn’t that fund support say, 100 students per country per year from the former front line states so that, apart from cementing Zimbabwe as a centre of academic excellence, the country also takes advantage of its much celebrated education capacities.
Whilst Zimbabwe needs to master other skills which are limited in local institutions, the policy to send students abroad needs to be targeted towards technology transfer and not flamboyance and self interest.
• The seventh factor is promoting national savings. Minister Chinamasa needs to push for a national sovereign wealth fund so that Zimbabwe grows and saves for the future at the same time.
Corporate and private household savings need to be protected partly through certainty of currency. The rumours of bringing back the Zimbabwe dollar kill any desire to bank by both corporate and individuals.
Oversight over the banking sector also needs to be improved to secure people’s hard earned cash.
• Eighth is reforming the state. The notion of reform has not been acceptable to and within Zanu PF. Perhaps, that party is yet to learn from other countries whose governance framework is similar to Zimbabwe’s. China, Mozambique and Tanzania quickly come to mind.
The state in Zimbabwe is too much focused on security and political power over other interests like the economy. How does one account for the missing black rhinos, for the slaughtered lions and elephants?
How does one account for the looting of diamonds and gold when Zimbabwe has such strong security institutions? Is it because these security institutions are weak, complicit or just that their officers are simply deployed to secure power?
No meaningful development, albeit excellent policy prescriptions, can take place at national level without the active support of the central intelligence institution. Intelligence is not just a political or security issue, but very much at the heart of development.
Once intelligence is deployed to development, it will be rare to get stories of missing ivory or public sector managers siphoning funds to buy mansions on the Durban coast among other scandals. The interest of security must expand beyond power to development.
The eight factors above are useless when considered as isolated prescriptions. When taken as a combination, with political will, Minister Chinamasa may strike gold in 2014 and beyond.
Zimbabwe had turned the corner through its re-distributive policies of land reform and indigenisation- though a lot still needs to be done. That the policies failed, as others argue is a separate debate.
The key thing is that Zimbabwe shifts towards the right economic framework. The prescriptions herein, in addition to many others, if well implemented, have a propensity to make Zimbabwe rise and shine.
It is possible but needs leadership. Will Minister Chinamasa have the ability to rally his cabinet colleagues to unite around the need to put Zimbabwe first even through ZimAsset? Time will tell.
Itai Zimunya is an economic researcher based in Mutare. You can contact him on firstname.lastname@example.org