Zimbabwe has reached decision point

By Brian Sedze

Folks, this is serious stuff. Something in Zimbabwe has to give in. I don’t normally take such an alarmist position, but I believe that we are near a tipping point and I think the increased unemployment is a catalyst to reaching that tip.

The level of unemployment has reached alarming and unsustainable levels due to massive retrenchments, alarming levels of deindustrialization’s, exporting of jobs to South Africa and China due to high imports, high sovereign risk, institutional rigidities, low foreign direct investment which is all leading to massive despair, poverty ,idleness ,possible seething anger and a nation of nothing else except vending .

A man cares little for ideology, statements of intention, propaganda, historical imbalances and many other dummies being sold, no matter how noble, when he has no work and his family is starving.

The economic slide shows no sign of receding or ending but rather it’s on heightened deceleration. The government reassuring creed is that something is being done. Let that something be done!! That something is the hard decision points.

Zimbabwe cannot afford to be poor yet it is rich in resources’ and has innumerable other comparative advantages. The county needs to change its economic policy, operating environment and laws to attract foreign direct investments.

Rand’s classic book, “Atlas Shrugged”, is set against the background of difficult economic times marked by disappearance of innovators and industrialists, not unlike the situation we see today in Zimbabwe.

Large and small companies are failing and the government invokes the “too big to fail” and “national emergency” mantras and selects the winners in industry, not based on their merits but on the basis of lobby efforts, political influence and “national interest”.

This is not to say some of the goals are not practicable and laudable but there is real danger that we are yet know the economic abyss we face if we continue with this trajectory without making hard decisions.

The tools currently chosen to correct the decline are not compatible with achieving sustainable comparative advantages but rather promote investors to flee this jurisdiction and some of the investors never considering us as a choice investment destination.

I was thinking today about how much effort it takes to be rational in this irrational world. It’s a lot of effort. Rational thinking shows that reckless populist policies damages investor confidence and undermines the economy.

My rational thinking is that the government may have to backtrack on some of its major policies or we will soon have no fiscal space even to pay the revered civil servants.

The reason to backtrack is self-evident for any rational person to see, that the economy is in a downward spiral. Nothing seems to be in place to stop the haemorrhage. Maybe one’s rational is someone’s irrational but facts never lie and I chose to stick by them.

The Indigenisation and Economic Empowerment Act is a noble and laudable act but remains the biggest impediment to attracting and retaining Foreign Direct Investment (FDI).

The act is an avoidable self-inflicted constraint which must be repealed or massively amended. The imperative should be to grow the economy first rather than sharing the inherited diminished Rhodesian industry crumbs.

If the government has candid conversations with itself the truth will prevail that Zimbabwe no longer has any significant industries to “indigenise “and resultantly create new employement. The industries are now too few and almost run down such that most are not worth the effort of making a business plan to acquire the loved 51% equity.

Priority should be to seek new capital to propagate new industries then think of a properly structured indigenisation policy or act maybe 10 or so years from now when the national cake is enlarged. Further unrelenting barrage of pronouncements on the act undermines any hope of job creation, increase in tax base and export growth.

It’s impossible to create a country of 6 million entrepreneurs so the act is rather a loud sounding nothing piece of legislation to the masses.

The indigenisation law is an attempt to appease the same old Zimbabweans who have means to benefit from the government largesse. It may be painful to the policy makers to know that the 90% of the unemployed care less of the ideology of ownership more so when these owners are the same faces who benefited from the land reform.

Many have truly said that choosing not to choose is a choice in and of it. Deciding not to decide has as many consequences as the decision – but it is easier to hide behind the nonsensical “its policy” thing.

Analysis and facts show that a once self-sufficient agro based Zimbabwean economy has dismally failed to produce maize, potatoes, tomatoes, onions, wheat and many basic agro products for its citizens a decade and half after “ land reform”.

The choice we have to make is to make a hard climb-down .Humiliating as it may sound, it is the most simple and rational decision to make.

It is better to bring contract farmers and joint ventures farming partners with expertise to do part farming for us irrespective of their colour, origin, ethnic or nationality, even if they are the same expelled and loathed farmers.

The country will benefit from sufficiency, investment, job creation, and contract farming fees, taxes, export growth, imports reduction and more importantly the reincarnation of downstream industries.

The government then can concentrate its energy and resources to support vulnerable small scale and peasant farmers then leave commercial farming to experts. Commercial farming is ideally a full time business which requires dedication in time resources.

It cannot be run from a full time job office somewhere in Harare. Land reform is/was a plausible act by the government of Zimbabwe but in some respects it has failed to deliver economic health and sanity.

We should accept our incompetency’s and work on skill transfer from the contracted farmers and joint venture partners. We may not really be good commercial farmers after all or maybe we chose the wrong people to farm for us.

The government is exhibiting lack of seriousness and rationality maybe as a method of avoiding consequences of tough decisions. “Parkinson’s law of triviality (PLOT), also known as bike shedding or the bicycle-shed example is C. Northcote Parkinson’s 1957 argument that organizations give disproportionate weight to trivial issues.

It’s trivial and not the core of the solution to devote energy in parastatals remuneration structure. It’s a triviality away from the bigger picture of making these organizations work.

In any case a salary ceiling only acts as a deterrent to attract and retain talent that should drive strategic innovation especially from a position where most of these institutions are technically and or actually insolvency. It’s performance rather not salary absolutes that should set remuneration ceilings.

Most Parastatals/Arm’s Length Businesses no longer fit desired economic strategic intentions. They are no longer sustainable and over years have survived on tax payer bail outs. They often are controlled by politicians thus lacking accountability and transparency.

The problem is widespread in the world. Most of these parastatals no longer have any strategic purpose and in the public interest must be sold to competent, innovative and resourced buyers, this being done in a transparent manner.

The other parastatals should be subject to Build Operate and Transfer transactions twinning this with skills transfer for a number of years. The entities deemed strategic should implement a robust “comply or explain “corporate governance codes maybe along the lines of Sarbanes Oxley Act.

The hard decisions on these parastatals and state enterprises will create massive revenue inflows, create employment and widen the tax base.

A fallacy peddled by the industrial lobby groups especially those that inherited Rhodesian companies is that that retooling and protectionism for will create employment including downstream and upstream industries, something they have repeatedly failed to do for decades.

It’s delusional and deceptive as the truth backed by reputable research points to loss of middle and lower skill jobs to technology and automation upon retooling.

This lesson was learnt in the early 80s during the Thatcher-Murdoch alliance to break unions that were resisting automation. If we haven’t learnt that more than three decades later I think we have to start questioning the competencies of some of our bureaucrats who get convinced by the arguments of these lobbyist.

It’s also not true that retooling and protectionism will make local industry competitive. Without unique products and solutions there is no chance to compete on a global scale.

Except a few companies the country is devoid of any new products and solutions for decades on end. The creation of new innovative industries is the right way for the country. To do this in the backdrop of no significant country resident capital the country will need to attract foreign direct investment.

The government need to ease to set up business and reduce the cost of registering. A simple solution that seems to evade all the policy makers and other technocrats will be to have a one stop centre for business registration which houses Registrar of Companies, Zimbabwe Revenue Authority, Zimbabwe Investment Authority, and City Licensing, National Economic Empowerment and Indigenisation Board, NSSA, Reserve Bank, ZIMDEF and many other institutions involved in enabling a business to start operating.

This one stop shop can either be physical or online.

The government seems not to be investing its time in thinking because these solutions are all there to devise and implement. It should not take weeks to register a company as if Zimbabwe has no competition for investment.

Zimbabwe must have a unitary system to collect taxes and fees from business. Business is overladen with a plethora of government institutions all clamouring for the same little revenue made making it admistratively difficult and expensive to operate.

There should be a unitary way of collecting taxes, fees, levies and other government agency related costs. This doesn’t necessarily have to be a physical one stop shop though that will still be ideal.

The government believes that as long as it’s still remotely feasible it must tax its citizens to the very last cent. Zimbabwe must provide tax incentives to growth sectors like tourism, SMEs, Innovation/Incubator stage businesses, growth point businesses and special economic zones.

A country competing with the world for tourist never acts in a reckless manner to introduce new hefty tax regime. It’s an act any neutral observer will believe is meant to promote tourism in neighbouring countries at the detriment of creating local jobs.

The one size fit all tax model makes it impossible to grow promising industries and to germinate new enterprises.

The government should not take the sweat, labour and innovation of productive individuals without any inhibition. Its duty is to create an environment to grow the economy to ease the pain being endured by its unemployed citizens.

Zimbabwe has few choices but has hard decisions to make.

The level of pain and suffering of its people due to increasing unemployment and under employment needs hard decision by government. Humiliating climb downs are a better evil than perpetuating policies and laws that apparently are not working.

Brian Sedze is an author on Innovation, President of Free Enterprise Initiative and Chairman of Africa Innovation Hub. He can be contacted on [email protected]