Eric Bloch:Unlocking Zimbabwe’s growth potential

VITALICY Kramarenko,  leader of the International Monetary Fund (IMF) team to Zimbabwe, is reported as stating that fully unlocking the country’s considerable growth potential would require significant progress in structural reforms. 

Expanding thereon, he said, the priority areas requiring such reforms include reducing labour market rigidities, establishing security of land tenure, and clarifying ownership requirements under the indigenisation legislation, in addition to other necessary economy-related reforms.

Although undoubtedly some of the hard-core Zimbabwean politicians will vehemently differ with him, his forthright enunciation of the immense need for constructive reforms is most commendable.

 

Assuredly, the Zanu PF politburo in general, and President Robert Mugabe, Didymus Mutasa, Saviour Kasukuwere, and many others will wholly disagree with him.  Instead, they will seek and strive to espouse the disastrous policies which have not only horrendously decimated the economy for more than a decade, but will do their utmost to pursue their fixative policies which cataclysmically retard the slight economic recovery achieved since 2009.

However, no matter how vigorous may be resistance to policy change, major reforms in policy are a prerequisite of a substantive economic recovery, and for realisation of the very immense economic potential which Zimbabwe has.  Only those who are myopic in their perceptions of the economy’s needs can differ with the IMF assessment of policy change needs.

 

Kramerenko and his team are deserving of unreserved commendation for their forthright recognition of the realities.  Regrettably, however, many will not only withhold such commendation, but will also be scathingly castigatory of the call for those reforms.

While many different factors will impact upon achieving the economic recovery and realisation of the gargantuan potential of the economy, those identified by the IMF team are amongst the foremost.  Key to recovery and growth is that Zimbabwe engender very considerable investment, both foreign direct investment, and domestic investment, and that it attract substantial international lines of credit and loans.

 

Investment is needed to create employment for the hundreds of thousands of employable Zimbabweans presently devoid of gainful, formal sector employment.  Such employment will very markedly lower the appalling poverty links characteristic of life for the majority of Zimbabweans.  I

 

nvestment will generate inflows of critically required capital, and technology-transfer.  It will be a major stimulus of exports, which favourably impact upon the downstream economy of the investment ventures, and will be a significant source of revenue to the fiscus by way of direct and indirect taxation.

However, the extent of investment will continue to fall far short of requirements if the policy reforms identified by the IMF as being necessary, and allied reforms, are not determinedly pursued by government.  Investors will not invest (save for a few high-risk-takers) unless they have confidence that their investments will be secure, and potentially gainful, and those policy reforms are prerequisites of investors having such confidence.

Almost without exception, investment ventures are reliant upon employment of labour, with harmonious employer and labour relationships.

 

Such relationships existed at one time in Zimbabwe but, as unemployment in the shrinking economy increased, concurrently with labour’s purchasing power being progressively eroded by the hyperinflation of yesteryear, that changed.

 

Understandably, labour demanded substantial wage increases, but invariably meeting those demands was far beyond the means of employers, whose businesses were grievously contracting. Labour relations progressively declined, and the confrontation intensified as various trade union and activist bodies became increasingly aggressive.  Now government is worsening the situation with intended revisions to labour legislation which are wholly targetted at labour aspirations and expectations, in contemptuous disregard for employer needs and economic realities.

The issue of security of land tenure is most key to realising Zimbabwe’s economic potential.  The foundation of the economy has always been agriculture, but from 2001 to 2009 it contracted exponentially. Although there has been some increased productivity since 2009, agriculture remains a minuscule portion of the tragically contracted economy.

 

New farmers, precluded from land ownership, have no collateral to access essential funding.  Concurrently, having observed government’s diabolical disregard for property rights and for obligations under bilateral investment protection and promotion agreements  in respect of rural lands, potential investors fear that in the future government will unhesitatatingly appropriate urban lands, enterprises, and other investments.  Real security of land tenure will meet collateral needs for agricultural and other entrepreneurs and will allay a key fear of potential investors.

Allaying those fears also requires a comprehensive re-think by government on its indigenisation and economic empowerment legislation.

 

The legislation should be facilitative of indigenous entrepreneurship, and should give incentives and motivate collaboration and mutually beneficial intervention between indigenous and non-indigenous investors.

It should not reduce non-indigenous investors, be they domestic or foreign, to enforced minority status, devoid of control over the wellbeing of the enterprises, and equally devoid of security over provided technologies, market access and funding.

 

The legislation should stimulate creation of new indigenous ventures, whilst motivating indigenous participation with non-indigenous investors, in existing and new enterprises, on a reciprocally willing, negotiated basis, rather than by enforcement and imagery of expropriation.

Approximately a fortnight ago, Economic Empowerment minister  Kasukuwere, was reported as stating that revisions to the legislation will be announced by the end of this month.  Undoubtedly, the revisions contemplated by government, and by him in particular, are founded-upon the reports of the numerous economic sectoral boards established by him to consider and review the legislation.

However, indications over the last few months suggested that some of those boards (or, in any event, of a majority of the appointees to the boards) had dogmatically preconceived (and ill-conceived) perceptions, to a very major extent founded upon representations of extremist activist groups.

Government, and all the ministers, in revising and modifying the laws, need to have regard not only to the advice of the boards, but also of the existing business community at large, of potential foreign investors, of bodies such as IMF, World Bank, African Development Banks, and the like, and of economic commentators.  They need also to learn from the successful experiences (such as those of India and Malaysia) and the unsuccessful experiences of others, instead of inventing a new wheel doomed to break not only itself, but the economy as a whole.

 

Eric Bloch

Top