Conditions key to economic revival

LAST week I highlighted the immense economic potential of Zimbabwe, notwithstanding the devastation of the economy over the last 17 years.

Eric Bloch

So serious has been the economic mismanagement and destruction of the economy over that period that at the present more than 80% of the population is practically struggling to survive on incomes below the Poverty Datum Line (PDL), being the minimum income necessary to survive without endangering health. More than half the population has incomes below the Food Datum Line (FDL), being the income essential for food health necessities.

Extreme poverty has become a characteristic of Zimbabweans, over and above the loss of an estimated three million people who have fled the country to seek employment abroad, resulting in massive dissolution of family interactions. The tragedy is that the magnitude of Zimbabwe’s economic opportunities is so great that the country could be (and one day will be!) one of the largest economies on the climate of Africa.

Last week’s column sought to emphasise the five most pronounced of those opportunities, effective exploitation of which would beneficiate Zimbabwe.

The are many measures that must be pursued to realise economic recovery and growth possible because of the magnitude of resources of which Zimbabwe is fortuitously endowed. Government must vigorously pursue effective policies instead of being driven by political ideologies and misguided objectives. Among the actions government must vigorously pursue are:

A key need of Zimbabwe is investment. Funding is a prerequisite for the stability and financial security of the money market, in general, and the banking sector in particular. Of even greater importance, investment is essential for the recovery, development and growth of the industrial sector, the agricultural sector, tourism, commerce and virtually all other economic sectors.

However, due to many years of economic erosion, the availability of investment funding in Zimbabwe is miniscule, and therefore an absolute prerequisite is foreign direct investment (FDI). Because of the magnitude of Zimbabwe’s resources, and its immense economic potential, there is a vast interest within the region and further afield in Zimbabwean investment opportunities.

However, the extent of investment is relative minute in relation to that which is needed, and overall potential.

The harsh reality is that the majority of would-be foreign direct investors are fearful over the security of their investments.

While most support the principle of indigenisation, they are not prepared to provide all the capital funding of the investment venture, effect transfer of their exclusive technological resources, provide access to their markets, and then have other shareholders not only imposed upon them (instead of their identifying desirable indigenous co-shareholders, and agreeing the terms and conditions of their future relationships).

Because of Zimbabwe’s ill-considered indigenisation policies, and frequently confrontational political statements, potential investors are immensely insecure and concerned as to the future security of their investments.

Therefore, despite their interest in Zimbabwean opportunities, they look elsewhere in the region for investment opportunities.

Consequently, the debilitated Zimbabwean enterprises do not access the funding, technological, and other inputs that would assure their survival, recovery and growth, national resources are not adequately exploited, much-needed employment is not created, revenue inflows to the fiscus are minimised, the Zimbabwean trade balance continues to be increasingly negative, among many other economic negatives.

If potential investors were assured of absolute investment security funding would flood into Zimbabwe, and the economy would grow from strength to strength.

Recently, government has made encouraging statements, especially so in relation to amendment of indigenisation and taxation laws, but so far it has been almost all talk and very little action. This government has recurrently demonstrated that it can only function at three speeds, being Slow, Very Slow, and Stop. But if it can implement the constructive changes stated by Finance minister Patrick Chinamasa and government in general, there could progressively be a monumental inflow of foreign investment.

The foundation of the Zimbabwean economy, in the “Good Old Days”, was agriculture, with Zimbabwe being renowned as “the breadbasket of the region” whereas now it is dependent upon imports to meet basic needs of the populace.

Not only did agriculture meet many of the population’s needs, but it was also the provider of employment for several millions of the population, and generated considerable foreign exchange earnings.
Agriculture needs to be restored to its former glory, which is possible for the land is as fertile now as ever.

This is provided government assures land occupation security, water and energy supplies, availability of inputs, free open-market pricing of outputs and sufficient recovery of the financial sector to assure availability of agricultural funding (with the land being available as meaningful collateral security).

Of equal importance is that the state manages its finances. Not only must it curb the immense corruption which is a tragic Zimbabwean characteristic, and which critically erodes governmental resources, but it needs to ensure effective expenditure.

The excessively large and consequently costly public service must be trimmed. Similarly, expenditures such as international travel and large vehicle fleets must be reduced.

Government needs to prioritise infrastructural maintenance and development including proper maintenance and enhancement of irrigation and other water supply services, reliable and continuous energy supplies, reliable rail and air and telecommunications, among others.