HomeOpinionRitesh Anand Column: Zim and the 10 drivers of economic transformation

Ritesh Anand Column: Zim and the 10 drivers of economic transformation

A FEW weeks ago I wrote about the importance of economic transformation in Africa to ensure that growth is sustainable and continues to improve the lives of its people; that countries now need to vigorously promote economic transformation. Growth so far has come from macro-economic reforms, better business environments and higher commodity prices. But economic transformation requires much more.

Ritesh Anand Column

According to the African Centre for Economic Transformation (Acet), what African countries need is more Diversification, Export competitiveness, Productivity increases, Technological upgrading and more improvements in Human well-being. In short, they need growth with Depth.

Exports provide the opportunity to expand production, boost employment, reduction of unit costs and
increase incomes. It also enables a
country to better exploit its comparative advantage to generate
higher incomes which help pay for
the investments in skills, capital and technology needed to upgrade a
country’s comparative advantage
over time.

The knowledge and exposure to competition gained from
exporting help in diversifying to
new economic activities and raising productivity. Export competitiveness can be measured by a country’s
global export share divided by its
global GDP share. If this share is high, 
the country exports a higher share of
its GDP than the world average.

Around 60–70% of the population in Africa lives in rural areas, mostly dependent on agriculture. So increasing agricultural productivity would be a powerful and logical way to raise standards of living. Indeed, in most industrialisation experiences, the rise in agricultural productivity allowed agriculture to release labour to industry, produce more food to moderate any hikes in urban industrial wages, supply raw materials for processing in industries, increase exports to pay for transformation inputs and enhance the domestic market for industrial products. With cereal yields now running at about 1 500 kilogrammes per hectare, or a third of the yields of the comparators, hence raising agriculture’s productivity has to be a key part of the economic transformation agenda.

Zimbabwe has had a thriving agricultural sector and boasted some of the highest yields in the region. It is imperative for Zimbabwe to regain and develop its agricultural sector to improve productivity. Zimbabwe has vast tracts of land lying idle with yields continuing to decline significantly since 2000. Yet agriculture forms the backbone of Zimbabwe’s economy and provides support for many sectors, including the manufacturing and financial services sectors in Zimbabwe.

Productivity gains can come from more efficient use of existing resources and technology to produce the same goods and services, but rising productivity can be sustained only through new and improved technologies and increasing the ability to master more sophisticated economic activities.

Furthermore, as technology rises in manufacturing, a transforming economy can produce goods that command higher prices on international markets. In both production and exports, the shares of medium- and high-technology manufacturing in Sub-Saharan Africa are generally low — at around 12%, less than a third of the 39% for the developed countries.

Improving human well-being involves many factors, including incomes, employment, poverty, inequality, health and education, as well as peace, justice, security and the environment.

The two most directly related to economic transformation are GDP per capita and employment. If GDP per capita is rising and remunerative employment opportunities are expanding, economic transformation will result in shared prosperity and income inequality will be reduced or at least controlled.

GDP per capita in Sub-Saharan Africa has not yet doubled its level since 1970, but for the comparators it has more than quintupled — a performance that African countries should now aspire to.

A transforming economy would have an increasing share of the labour force in formal employment as the shares of modern agriculture, manufacturing and high-value services in GDP expand and as entrants to the labour market become more educated. The share of formal employment in the labour force is therefore a good indicator for tracking the human impact of economic transformation.

Although there is no formula for economic transformation, there is some agreement on policies and institutions that have been important in driving the transformation of successful countries. Beyond peace and security, these include:

  • Increasing state capacity for macro-economic management, public expenditure management and guiding economic transformation,
  • Creating a business-friendly environment that also fosters effective state-business consultation and collaboration on economic transformation,
  • Developing people’s skills for a modern economy,
  • Boosting domestic private savings and investments,
  • Attracting private foreign investment,
  • Building and maintaining physical infrastructure,
  • Promoting exports,
  • Facilitating technology acquisition and diffusion,
  • Fostering smooth labour-management relations, and
  • Identifying and supporting particular sectors, products, and economic activities in each country’s potential comparative advantage.The exact combination and sequencing for the 10 drivers may differ from country to country and even in the same country it may change over time. But awareness of how successful countries have used the drivers to help them transform can help African countries as they develop their own strategies.

    Over the last 35 years, Zimbabwe has developed numerous economic strategies and plans. President Robert Mugabe recently announced his government’s 10-point plan for economic growth (interestingly, there is significant overlap between Zimbabwe’s 10-point plan and the 10 drivers of economic transformation). This is over and above the government’s ZimAsset economic blue-print. The success of any plan or strategy is not in its formulation but in its execution and this is where we have let ourselves down. We have also lacked long-term vision.

    When was the last time someone spoke about Zimbabwe 2050? What is our vision for Zimbabwe in 2050? Unfortunately, many Zimbabweans have become very short-termist and are simply trying to survive. No one has the luxury of thinking about what Zimbabwe should or could look like in 35 years. Long-term success for anything, let alone an economy, requires planning, a purposeful vision and a determination in execution.

    Zimbabwe requires foreign direct investment, there is no doubt. Much has been said about tapping into the diaspora as substantial funding is repatriated to Zimbabwe.

    Zimbabwe has enormous potential for sustained growth and poverty reduction given its tremendous endowment of natural resources, existing stock of public infrastructure and comparatively skilled human resources.

    Realising this potential will require a further renewal of institutional and operational capacity in the public sector, further improvements in basic services, delivery as well as deep reforms in economic policies and investment climate. Most importantly, it requires unity and commitment from all stakeholders to build a better Zimbabwe.

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