IT has been widely reported that Zimbabwe is intensifying its engagement with global creditors to seek an accommodation on debt arrears and is targeting key international financiers on the sidelines of the annual meetings of the multilateral institutions in Lima, Peru, starting today.
The country’s debt arrears to the three multilateral institutions, the International Monetary Fund, World Bank and African Development Bank, currently stands at US$$1,8 billion.
As Zimbabwe engages creditors, one needs to critically reflect on the pace of implementation of reforms at home which will have a bearing on how our case will be perceived given our global ratings.
The World Economic Forum (WEF) Global Competitiveness Report has a bearing on Brand Zimbabwe and the faster authorities put the wheels into motion towards reversing this downward negative trend, the faster we will see the country access finance.
The “one-stop-shop” concept is one case in point — a noble idea given the size of our small US$14 billion GDP economy.
However, one should factor in soft issues:
- Inability to negotiate contracts (Essar deal);
- Lack of transparency in awarding tenders (prepaid meters and solar water heating geysers);
- Selfish, personal and political interests;
- Rampart smuggling;
- Poor corporate governance in State-owned enterprises (SOEs/Parastatals);
- Poor savings culture/debt overhang (government domestic and foreign debt)
- Low confidence in the investment laws (Indigenisation Laws).
- High political risk (investments will not flow into Zimbabwe until it has a clear plan to secure return on investment);
- High financial risk & low investment options and;
- Problems associated with weak institutions.These soft factors would render the cosmetic concept of “one-stop-shop” at worst null and void and at best moderately successful.The “one-stop-shop” concept, which has been proffered as a solution to deal with bureaucratic processes of registering companies and obtaining relevant licences is noble but not a panacea if implemented in isolation.For real impact, it must be part of a much bigger solution.There must first be “political will” and “consistent focused effort” towards dealing with the above soft issues which are currently making ease of doing business very difficult and expensive.
A close look at results published by the WEF Global Competitiveness Report for 2015-2016 show that Zimbabwe has tumbled further to position 125 from 124. This is not only informative but also worrying.
Rather than ignoring the writing on the wall, one needs to closely review the effects of “soft issues” such as corruption head on.
Rwanda for example, dealt with the issue of corruption and so did Botswana. Both countries are relatively small economies which are now shining examples of countries in Africa that took a deliberate policy and bold steps towards improving domestic savings during a period of less than 20 years.
Rwanda is now considered an innovation hub only two decades after the genocide that threatened to destroy the country’s future while Botswana has huge domestic savings.
I was recently in South Korea, home of innovation and Samsung, once again, the issue of political will and ideology rings true of a nation that was determined to move forward after the war in 1951.
You can see the stark contrast of how North Korea, which adopted a Soviet Union ideology is now suffering. The results are there to show what can be achieved if the right political, economic and social ideologies are adopted.
South Korea is enjoying vibrant, progressive and sustainable growth while North Korea is wallowing in abject poverty. Soft issues have a bearing on confidence and rankings.
Similarly and closer to home, “value-addition and beneficiation” are the new buzz words enshrined in the economic blue print, ZimAsset. The concept will not yield much or happen in a vacuum.
There must be a deliberate and consistent government effort towards capacitating local industry and promoting import substitution by complementing hard and soft skills.
When value-addition does not make economic sense to industry players, those operating their businesses will simply revert to importation of finished goods for trade and in the process exporting jobs.
The proposed Diamond Polishing Centre will also face the same “still birth” and we will continue to export raw minerals. The same goes for exportation of raw animal hinds, raw cotton, unprocessed tobacco etc (exporting jobs further).
Externalisation of the United States dollar will continue until local investors see the economic benefit of investing locally.
Value-addition and beneficiation can only yield positive results when corresponding effort is placed on supporting human processes to manage talent, improve transparency, accountability and fairness in business practices.
For quick turnaround of Zimbabwe’s fortunes, authorities must focus on areas where we enjoy competitive advantage and improve our global rankings.
Some interesting sector observations that need immediate attention are:
- Agro-processing sector — (ZIA should identify investors for new technology transfer to process locally-available raw materials perhaps through Public Private Partnerships (PPPs) or Build Operate Transfer ( BOT) models;
- Manufacturing sector — (ZIA should investigate potential investors to invest in viable local companies with excess capacity e.g textiles, tobacco.
- Mining sector — (ZIA should promote import substitution by finding investors to support local engineering companies which have the capacity to boost supply of locally manufactured quality goods to the mining, agriculture, construction, transport, manufacturing sectors. At the moment, due to capacity constraints, the mining sector is still importing almost everything. Engineering firms should form clusters around sectorial value chains;
- Timber sector — (ZIA needs to urgently address the problems/opportunities of this sector by looking into the issue of property ownership rights. Exotic/ indigenous trees for timber production are getting depleted through indiscriminate chopping down of trees for fire wood by those converting the use of forests to grow maize.There is clearly no plan to replant any trees to the extent that in the next few years we will have no forests left. Besides supplying Zesa with electricity poles, Zimbabwe used to export timber to South Africa, Zambia, Botswana and Kenya, which will soon become a thing of the past and;
- Energy Sector — (ZIA to look into corruption at State Procurement Board and awarding of tenders for prepaid meters and solar water heating geyser project which was launched on September 29 2015.
Critical success factors for the Solar Water Heating Programme include:
- government must assure banks of captive market;
- government must assure players policy consistency;
- nationwide awareness creation is needed in all languages;
- Government must ensure availability of affordable funding options;
- Legislators must be members of recognised associations;
- SAZ must review local standards;
- Practical awareness and training for stakeholders;
- Capacitation of relevant institutions (Standards Association of Zimbabwe) and;
- Local universities and colleges are churning out more than 30 000 graduates per annum who have no future prospects of finding jobs.
The large informal labour market is growing everyday. ZIA needs to urgently look into the potential of brining investors who are willing to retrain the graduates and over 30 000 retrenches in entrepreneurship skills to enable them to set up new businesses because unemployment is at an all-time high.Zimbabwe must urgently create jobs by forming new businesses in technical areas. New technology is required to enable artisans to supply local market with quality goods.Zimbabwe must stop importing nuts and bolts and start making quality goods locally.
The country is at the precipice and Lima, Peru is the tipping point.
Gadzikwa is director-general, Standards Association of Zimbabwe and president elect of African Organisation for Standardisation (ARSO). These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society. E-mail firstname.lastname@example.org and cell: +263 772 382 852