Zim Economy Among ‘least competitive’

ZIMBABWE was ranked as one of the countries with the least competitive economies according to the 2009 Africa Competitiveness Report unveiled at the World Economic Forum (WEF) last week.


Economic researchers who compiled the report cast the spotlight on areas where urgent policy action and investment were needed to ensure that Zimbabwe’s economy is revived.

The report identifies, among others, limited access to financial services as a major obstacle for Zimbabwe’s enterprises.
It also pointed out that underdeveloped infrastructure, limited healthcare and education services and poor institutional frameworks as making Zimbabwe less competitive in the global marketplace.
According to the report, Zimbabwe was ranked 133rd on the overall index out of the 134 country’s surveyed scoring 2,9 points out of a possible 10.
On “efficiency enhancer” the country was ranked 131, scoring 2,9 points.  Zimbabwe was ranked number 134 on “basic requirements” scoring 2,9 points. The country scored 2,9 points on “innovation factor” where it was ranked number 122.
The report reflects research findings of three institutions –– the World Economic Forum, the African Development Bank and the World Bank.
The report said Zimbabwe needed “financial development and trade was crucial to making the country and the region more competitive if it was to ride out the current crisis”.
It noted that Zimbabwean businesses could become more competitive, if its government and international partners improve access to finance, resist pressure to erect trade barriers, upgrade infrastructure, improve healthcare and educational systems and strengthen institutions.
The country continues to struggle and to lag behind in harnessing its natural resources and opportunities available to it to develop and advance economic growth for its population.
The current global economic crisis makes the economic situation of the country even more dire, despite the country’s strategic positioning, as the main supplier of the world’s major minerals such as gold and platinum, and raw materials such as tobacco, flowers and cotton.
Commenting on Zimbabwe and Africa’s economic standings, Jennifer Blanke, co-author of the report said: “We are finding that overall African countries tend to be less competitive than many other regions. When you talk about competitiveness, you’re talking about the productivity of nations, for the capacity to produce goods and services, provide employment”.
However, there are a few nations that she calls “shining lights” in Africa; countries that are “quite competitive by international standards”. These include South Africa, Botswana and Mauritius.
Blanke said good governance was vital for growth in Zimbabwe and Africa. “Basically, it’s the institutional or the governance environment that sets the rules of the game, allows for a level playing field and ensures all of the actors understand and have faith in the market. This is the key issue underlying everything else”.
Investment analyst, Philip Chichoni said the problem facing Zimbabwean business and manufacturers was that of low priced imported goods.  
“At the root of the problem is the seemingly high cost of production in Zimbabwe. Goods from South Africa, Brazil and other countries are landing at prices much lower than the cost of production here,” he said.
Chichoni said the Grain Millers Association of Zimbabwe has recently been lobbying for the introduction of tariffs on imported maize meal to protect the local industry, citing that they are being priced out of the market by imported maize meal.  
“Imports are cheaper for a number of reasons. First, the industry in the exporting countries is at an advanced level in terms of technology and mechanisation. Second, the industry is functioning effectively without the problems of power cuts, water shortages and scarcity of foreign currency to purchase spare parts and raw materials.”
“Zimbabwean manufacturers face these challenges and more. As a result, their operating costs are comparatively higher.
“The other problem is that of low operational levels. South African, American, Asian and European companies enjoy massive economies of scale,” Chichoni said
The report’s recommendation to increase competitiveness was increasing access to finance through market-enabling policies. Africa’s financial systems have been deepening and broadening in recent years, but the current global crisis threatens to reverse this trend and undermine recent progress. It is now even more important to upgrade the necessary frameworks for sound, efficient and inclusive financial systems.
The report said keeping markets open to trade was also important.
“Protectionist forces are emerging in response to the global economic crisis. Yet, such measures will further reduce demand and restrict growth. Africa’s leaders must resist domestic political pressures to erect trade barriers that would make the region’s recovery even more difficult,” said Blanke.
Economist Brains Muchemwa said after years of strangulation, “the local industry was not in the best shape to compete, but will gain more largely from cross-border financing opportunities and fairer exposure to markets with higher spending power as Zimbabwe is among the countryies with the lowest GDP per capita in Africa at less than US$380”.
Coronation Financial Service investment analyst Lance Mambondiani said if Zimbabwe and the Sub-Saharan region were to benefit from sustainable economic growth, there was need for regional integration to increase trade competitiveness.
“Integration tends to promote higher growth through such channels as improved resource allocation, greater competition, technology transfers and learning and improved access to foreign capital. Trade and investment tend to increase in countries which have opened themselves up to the world economies and growth itself tends to promote integration,” he said.
“Needless to say, Africa is a totally different proposition to the EU or Nafta countries. African countries have a history of bad governance, dictatorships and protectionism. Whether a common ground can be achieved to narrow political divisions is perhaps the biggest stumbling block in implementation.”
Gilbert Muponda said Zimbabwe “needs to invest and attract investment in major sectors of the economy to improve infrastructure, limited healthcare and educational services, and poor institutional frameworks that make it less competitive in the global marketplace”.
The report said infrastructure remains one of the top constraints to businesses in Africa. “Energy and transportation are among the main bottlenecks to productivity growth and competitiveness in Africa. Investment in upgrading infrastructure would both place Africa on a higher growth trajectory as well as serve as a fiscal stimulus at a critical time,” the report said.
Inefficient basic education and healthcare systems constrain Africa’s productive potential as well.
“Unless educational and healthcare systems are upgraded in Africa, firms will continue to be constrained in their move up the value chain, and economic development will be hindered,” it said.
It is the second report on African business environment to leverage knowledge and expertise within the three organisations.

BY PAUL NYAKAZEYA

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