The “business” definition of insanity is of one who does the same “unwise” things repeatedly yet expects better results. While this characterisation of our economic state of affairs may seem a bit stretched and even a little harsh to our country, on closer examination it feels very close to what has been going on over the past five years.
Elementary economics would reveal that any country which fails to reign in its import bill against declining export income is surely and certainly digging its own grave. Yet despite this seemingly obvious state of affairs, which in the case of Zimbabwe is made even more clearer by the existence of trade restrictions by major trading blocs such as the US and leading multilateral financial agencies, we continue to pursue suicidal economic policies while expecting our economic fortunes to improve.
Granted there has been some marginal decline in the current account deficit during the first quarter of 2015. While the jury is still out on the main reason for this, it does appear that the liquidity crunch is now beginning to bite all and sundry. Even those who could import tonnes and tonnes of anything foreign suddenly are realising that without a thriving local economy that is supported by a robust industry, gains can only be shortlived.
This, inevitably, is the prime consequent worry for the country. Going forward, the external position is likely to remain under pressure from a high import bill, as the rebound of exports does not match the steep rise in imports, leaving an anticipated current account deficit of 28,5 percent of Gross Domestic Product (GDP) by the end of 2015. There is a possibility of compression of exports due to the unfolding decline in commodity prices. Our BoP position remains precariously difficult at a time when growth in manufactured exports is slow while the country has insufficient foreign currency reserves at its disposal to finance the current account deficit.
In other words as a country we chose to send hard earned moneys to foreign lands rather than invest in creating local jobs and wealth at a time most of our graduates are failing to secure gainful employment.
The sad part is that by pursuing this pro-foreign policy at the expense of local we are killing the hen that lays the golden egg. Over the past decade Zimbabwe has paid a huge price by opting to embark on a land redistribution programme.
Regrettably, at a time we should be celebrating the emergence of a new group of entrepreneurs to emerge from that exercise in the form of tobacco farmers, we instead do little to preserve the huge moneys that come into the country.
Most recently and repeatedly, we have also noted the resurgence of debate on the importation of Japanese cars that are cluttering our roads. In its current form this debate has conviniently focused on consumer choice and stayed away from a deeper analysis of issues at hand. The first such issue is to remind each other of Government’s last minute reversal a few years back on a decision that had been made to ban the importation of such vehicles. The second is that our major trading partner, South Africa, who are enjoying the fruits of our policy impasse have since long banned these vehicles from not only being traded to their citizens but driving on their roads. Botswana has also followed suit.
More importantly in this car debate, Government must bear the primary responsibility to reverse the trend. For starters they make policies, but more critical is that the enforcement agencies have watched with little interest the willful and incessant refusal by Government departments, ministries and parastatals to abide by the Presidential directive to buy locally assembled vehicles. Even as late as the current Parliament overtures are still being made to bring in vehicles that are made in South Africa. The irony of it is that as these overtures are being made, the same members of Parliament are bitter that their own allowances are not being paid. Of course like most of public institutions there is a failure to link their own day to day practices with deteriorating socio economic conditions.
Government through its various arms is by far the largest buyer of cars. If our Government were to make a determined effort to ban importation of foreign vehicles within own ranks, we have no doubt that Willowvale Mazda Motor Industries will be back on its feet in no time. The chain reaction would also be felt across the entire value chain which include companies such as Chloride who make batteries, Astra paints etc. At its peak the motor industry could support up to 100 000 jobs. There is no reason why we cannot go back to this scenario.
Ultimately it’s about building our competitiveness and enhancing sensitivity to market forces. The idea of opening up borders across Africa is very good and must be accelerated. However, this should not mean that we must become blind to practices in those countries we trade with. Not only does South Africa have a robust buy local initiative but through their BEE programme and strong procurement laws, they provide subsidies to companies that export to Zimbabwe. In 2013 alone the motor industry received over 10 billion Rands in export subsidies. For one to secure an order, you must have a certificate that demonstrates that you employ locals and that you abide by preference practices. That is hardly free trade.
Then we have some arguments that suggest that before we prefer local products we must ensure that our industry has been fully revived. This is a difficult argument to follow because it seeks to divert attention on the key issue by making reference to a situation.
The real issue is that given the current priorities, liquidity crunch and numerous trade barriers that have put on a country that is using the United States dollar at the moment, we need to preserve all the moneys we have. We can not allow a situation that sees industry close, agriculture collapse, unemployment rise, government fail to pay suppliers and yet our appetite for externalising money keeps growing. At some point, all things will grind to a halt.
In an age where speed of innovation and implementation is critical, governments of slow acting nations will have to intervene in markets on a more regular basis to guarantee market stabilisation. There is an urgent requirement on the part of Government to say no more imports in most sectors. The Ministry of Agriculture has done that repeatedly with results for the poultry industry in particular very pleasing. Were it not for that boldness, Irvines, Suncrest and multiple small scale farmers would not be in existence. That is boldness in the face of real opposition. The challenge is for the rest of Government to follow suit. We must save our dollars and surely we will prosper.
These articles are being coordinated by Lovemore Kadenge, President of the Zimbabwe Economics Society (ZES) email firstname.lastname@example.org, cell 263 772 382 852
Kipson Gundani, Chief Economist Buy Zimbabwe