Eric Bloch: Policy shift key to economic recovery

ZIMBABWE has irrefutable potential to have a thriving economy of such magnitude that poverty amongst its populace would be virtually non-existent.

Column By Eric Bloch

It could have one of the most vibrant economies in Africa, with employment for almost all desirous of income-generating work, and nationwide economic empowerment.

The desired economy would be devoid of national debt, have a recurrent favourable balance of trade, fiscal inflows more than sufficient to assure continuous provision of essential services by government including health, education, provision of utilities, maintenance and enhancement of infrastructure and much else).

The ability of Zimbabwe to create and develop such an economy is indisputable because of the magnitude and diverse nature of its resources. There is tremendous wealth of mineral resources including gold, platinum, diamonds, lithium, chrome, tantalite, coal, methane gas and much more in Zimbabwe.

Although the country has a significant and growing mining sector, the extent of its production is a fraction of that which it could be.

In addition to the minerals is land of long-proven immense production potential of different agricultural products, with burgeoning outputs throughout the twentieth century.

Sadly, production has fallen instead of increasing. The country also has exceptional tourism sector potential, being vested with a remarkable array of spectacular attractions.

Although currently withered and derelict, Zimbabwe manufacturing sector was extremely buoyant, producing a wide variety of products for the local and export markets.

Given the right national policies and effective recovery measures, industry can not only be revitalised to its former levels but also develop to even greater levels.

And, despite the magnitude of the “brain drain” of able Zimbabweans to neighbouring territories and further afield, there are still many with considerable skills and aspirations which can be used productively.

However, not only is very little of this massive potential being realised, but the economy endlessly limps along, with more and more becoming unemployed and increasingly poverty-stricken.

Government (or, more correctly, elements of the political hierarchy) would have one believe that the cause of the long economic morass is the imposition of so-called “illegal international sanctions”.

This seeks to mislead the populace and divert recognition from reality that the pre-inclusive government political leaders continue to pursue destructive economic policies which not only preclude the economy’s recovery, but also worsen the country’s economic circumstances.

The impediments to economic recovery and growth include immense deterrents to achieving investment which is a prerequisite to recovery. If economic wellbeing is to be restored and enhanced, both domestic and foreign direct investment is crucial.

That investment triggers off employment creation, generates export enhancement and import substitution, is the source of substantial downstream economic activity, and increased revenue inflows to the Fiscus.

This heightens gross domestic product.

Of the many deterrents to investment foremost are Zimbabwe’s disastrous policies of indigenisation and economic empowerment. None can deny there is a critical need for participation in the economy by indigenous Zimbabweans, and for an overwhelming majority of Zimbabweans to be meaningfully, economically empowered.

But Zimbabwe has sought to achieve this in a deleterious manner, triggering the collapse of many enterprises while creating yet another deterrent to investment necessary to stimulate and facilitate economic wellbeing.

Almost all investors demand investment has substantial security.

When an investor is confronted with a statutory requirement that after injecting the necessary capital resources and operational funding into the investment venture, and often also effecting technology transfer and of diverse proprietary rights (such as usage of patents and trademarks), as well as releasing access to the investor’s markets, a majority of the venture’s equity must be vested in indigenous individuals or entities, the investor is confronted with massive potential loss of investment security.

Moreover, that loss is often accompanied by limited expectation of equitable compensation for the enforced disinvestment. This has been so since 2008.

Zimbabwe’s legislation has prescribed a minimum for indigenous ownership of enterprises of 51%. Since that legislation was foolhardily promulgated, investment in the Zimbabwean economy has dwindled to minuscule levels.

As if sufficient harm to attracting investment had not been done by the ill-considered and damaging legislation, that harm has been progressively intensified by dogmatic and authoritarian statements, threats and enforcement actions directed by government at the mining and financial sectors, as well as at multinationals and other enterprises avariciously sought after by those who are well-connected politically.

But instead of learning from the tragic experiences of the past five years or so, some of the senior political leaders have been more and more vociferous in demanding intensification and acceleration of the indigenisation programme.

Last week the discouragement of investment was increased multifold. Speaking at the Zanu PF annual congress in Gweru, President Robert Mugabe is reported to have stated 51% indigenisation of the nation’s enterprises did not suffice, and that the indigenisation level should be 100%.

That was effectively a blatant statement that non-indigenous investment is unacceptable, and has driven yet another nail in the economic recovery coffin.

That statement, if correctly reported, is even more damaging to Zimbabwe’s contemptuous disregard for property rights.

Until there are major policy transformations and a complete metamorphosis, economic recovery will remain mere wishful thinking, while intensified decline is assured.

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