Business Column – Homelink needs conducive environment

By Alex Tawanda Magaisa

THIS article aims to highlight some of the key elements that are essential for the success of the Homelink programme and similar strategies aimed at rejuvenating the faltering economy

. I believe that the governor of the Reserve Bank genuinely wants the Homelink facility to succeed in as far as it is a strategy for sourcing scarce foreign currency from Zimbabweans currently living in the diaspora.


However, in order to achieve success it is necessary to address not only the actions of private actors in the market but also to critically re-examine the role of the state with a view to influencing changes to the manner in which the affairs at both the political and economic levels are conducted.

The article pursues four arguments:


Firstly, that there is a key connection between the state and the market such that they have an impact on each other.


Secondly, the economy cannot be separated from the political context in which it is located. Consequently, that the goal of economic turnaround is dependent on the creation of a politically conducive environment in which the rights of private actors are secured.


Finally, while the current focus on the misdeeds of the private actors in the market may be useful, it is equally necessary to critically monitor and advise the state to create an environment that is viable for free economic activity.

The state plays a crucial role because it determines the environment in which economic players act. Where the institutional and legal structures have sufficiently developed it enables people to invest their resources and create means for wealth maximisation.


This entails that such fundamental issues as the rule of law, constitutionalism and fairness are largely taken for granted in those countries where states have developed over a long period of time and have sufficiently established key tenets. The market functions well where freedom is tolerated.


Unfortunately, in some states such fundamentals are still the subject of dispute and the states have failed to guarantee the minimum freedoms. Where states are failing or have virtually collapsed such as in Somalia, the market has also suffered.


The few people who are able to place themselves at an advantage mainly because of some connection to the political class become the so-called entrepreneurs. This situation produces a small but greedy caste with a voracious appetite for the country’s economic wealth. In these states it is the easiest means to gain access to wealth and resources. The picture of luxuries enjoyed by a small caste is deceptive.


Thus both the state and individuals have responsibilities to ensure that the market works. The state normally controls the actions of individuals through regulatory mechanisms. These regulations help to curtail the excesses and limitations of the market while providing a secure and predictable environment in which businesses operate.


In order to attract the required appeal and legitimacy, these regulations must be based on the rule of law. They must be fair, just and reasonable. Law should not be a means to legitimate abuses, but a mechanism for fostering free will and productive activity. The actions of the state towards its individual citizens must be grounded on the rule of law in order to gain legitimacy and acceptance by the people on whom the law is applied.


The economy cannot be separated from the political context in which it operates. Economic policy is directed by the state, which is controlled by politicians. Therefore, what actions and policies they take at the political level also filter into the economic domain. It is thus futile to talk of economic revival in an atmosphere of political stagnancy.


For example, among the chief causes of the shortages of foreign currency in Zimbabwe is that the country is simply not producing enough for export purposes. A country that used to get most of its foreign currency from tobacco can no longer muster half of what it could produce five years ago.

In addition to capital flight, Zimbabwe has been severely affected by skills flight as productive citizens have left in their thousands for new pastures to escape the suffocating political and economic climate.


For example, the flight of skilled men and women in the farming sector and the subsequent importation of those skills in countries such as Nigeria and Zambia is indicative of the impact of the political conditions that fail to take account of the economic landscape. It can be safely stated that the troubles in the economy have a direct connection with the uncertain and unpredictable political climate.


The Homelink facility initiated by the RBZ was a good idea whose major shortcomings are the unfortunate circumstances attending to its birth. As the RBZ rightly pointed out at the time, the same policy has been pursued in other countries such as Ghana, the Phillipines etc.


The idea is that a nation’s people living in the diaspora will send money to their home nation. While this is a source of foreign currency, it is by no means a reliable and predictable one. It is highly dependent on the availability of consent between the state and the governed – in this case, the people in the diaspora who are expected to send the money.

While the authorities spoke positively about promises to invest in Zimbabwe, it is still a very small section of the diaspora that is capable of making any tangible investment that will make a huge difference in the country. Most people in the diaspora are toiling to make a living where they are and at best can only send small amounts which help their families on a daily basis. The incentive for sending money is not so much to invest but to help their families to survive and cope with a tough situation.


In the diaspora, there are very few Zimbabweans who are employed in the formal sector where there is a predictable and secure income. The Ghanaians and Phillipinos to whom frequent reference is made have a longer history in the diaspora than Zimbabweans who are still grappling with the basics of survival. Most Ghanaians have settled and a good number is within the formal sector and have the capacity to mobilise large-scale investment.


In any event, the success of the similar homelink programme in Ghana is directly connected to the consent arising from the political changes that took place at the turn of the century. The new government in Ghana has enjoyed greater goodwill among the domestic and diaspora citizens. Quite often the government officials are in London and New York, organising gatherings at which influential Ghanaians are courted for purposes of attracting investment.


It is that investment Zimbabwe needs from its citizens in the diaspora but I’m afraid firstly the capacity is still limited and secondly there is no relationship of consent between the majority of these people and the state.


There are a few things that the state can do to ensure that the country’s fortunes are revived sooner rather than later.


Firstly, it is necessary to promote a conducive environment for the conduct of economic activity. That requires the protection and enforcement of fundamental freedoms. It also requires that regulations for the conduct of business must be constitutional.


All civilised nations try as much as possible to conduct affairs on the basis of the rule of law. There is no doubt that at present, Zimbabwe has suffered negative publicity such that attracting investment not only from foreigners but also from its citizens in the diaspora has become a monumental task.


There is intense competition among states and those that offer conducive environments have an advantage and are more likely to succeed.


Secondly, the country must take a more responsible international relations position. It is all very well to look to the East but there is no doubt that the East itself also looks to the West for investment. The West has its excesses but the strategy is to engage it in union with other countries in similar circumstances and not to remain isolated.


There is no reason why Zimbabwe cannot exploit its advantages towards both the East and the West as long as it conducts its affairs according to norms generally accepted at the international level. Even countries like China, to whom Zimbabwe has now turned, have been engaged in a long process of change and engagement with the West as they move towards establishing viable market economies.


The governor of the RBZ is probably doing his best under admittedly very difficult conditions. He may have presided over the successful turnaround of the CBZ in the 1990s, which like a phoenix sprung from the ashes of the collapsed BCCI empire. There has been talk this time round, of his efforts and proclaimed gains in making a successful turnaround of the Zimbabwean economy.


The difference between then and now is that whereas at the CBZ he was the commander of the army, this time he is only a divisional commander whose responsibilities cover a single battallion. He will need the cooperation of the other battalions and in particular the high-command to ensure that this battle is not in vain.


It is not just the citizens and the market that must mend their ways, but the state must also do all it can to ensure that conditions necessary for economic change take place. It is not simply about a change in personnel or indeed political parties – it is the change in ideas, policies and practices of those that control the state and the economy that is required for success.


* Alex Tawanda Magaisa is Baker & McKenzie lecturer in corporate and commercial law at the University of Nottingham. He can be contacted at

alex.magaisa@nottingham.ac.uk

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