Does paying more for local really matter?

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A number of researchers and organisations are taking a closer look at how money flows. What they are establishing is the profound economic impact of keeping money in the country and how the fate of many communities around the nation and the world increasingly depend on it.

Kipson Gundani

The Zimbabwean economy is languishing not because too little cash comes in, but its fate. Money is like blood. It needs to keep moving around to keep the economy going. When money is spent elsewhere, at big supermarkets in Dubai and Europe, non-locally owned utilities and other services such as online retailers, it flows out. By shopping at the corner store instead of abroad, consumers keep their communities from perishing.

This is what makes the Buy Zimbabwe campaign the greatest initiatives to ever emerge out of this country since 2010. Buy local campaigns serve a very crucial function of alerting a community about the significance of their buying choices in the market, which is the key cog of the well being of the economy. The most common question that is often asked by the consumer is, however, “what about that higher cost of local goods?” In reality, the difference falls away once you consider the increase in local employment as well as the relationships that grow when people buy from people they know.

Although we are currently a service-providing nation, we are still just a generation away from being a nation of producers. The question is: what economic framework will help us reclaim those skills and that potential. We could find ourselves doubly stuck because domestic manufacturing is no longer competitive. While no community functions in isolation, supporting local trade helps recreate the diversity of small businesses that are flexible and can adjust to changing needs and market conditions.

In a world of increasingly global competition, nations have become more, not less, important. As the basis of competition has shifted more and more to the creation and assimilation of knowledge, the role of the nation has grown. Competitive advantage is created and sustained through a highly localised process. Differences in national values, culture, economic structures, institutions, and histories all contribute to competitive success. There are striking differences in the patterns of competitiveness in every country; no nation can or will be competitive in all industries. Ultimately, nations succeed in particular industries because their home environment is the most forward-looking and dynamic.

We need to be reminded that, national prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labour pool, its interest rates, or its currency’s value, as classical economics insists.
A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. Companies gain advantage against the world’s best competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home-based suppliers and demanding local customers.

Talk around Zimbabwe continues to centre on liquidity challenges, depressed demand, fear of deflation and rising imports. One executive even had the temerity to suggest that the present economic scenario is worse than what this country experienced at the height of hyperinflation in 2008. Such is the human mind that in times of trouble it forgets what has been experienced and tend to exaggerate the pains of current circumstances and over glorify the past. Even in the bible during the famous journey from the land of captivity in Egypt to Canaan, the Promised Land, God himself had to reprimand Israelites for opting to return to prisons of Pharaoh allegedly because times there were better. Sadly, most of these poor souls could neither listen nor understand and thus had to be destroyed before reaching Canaan.

In our present Zimbabwe, we seem to be going through a similar epoch. We have now become used to transacting in United States dollars. Instead of changing factors that affect our productivity, competiveness and ability to realise goals that have been set in ZimAsset, we mourn, express powerlessness and glorify the past, including its darkest moments. Unfortunately, by so doing our condition worsens and fail to appreciate that the power is within us to remodel and prove that we are masters of our own destiny.

The solution lies in both public and private sector moving away from a culture of apportioning all the blame on government and begin to address those problems that stare us in our faces. Questions we need to begin to ask are: How do we generate our cost structures? Of the costs that presently confront us, which one can we slash and deal with in a manner that makes us lean, but importantly set a basis for robust growth? How can we increase transparency in executive perks and communicate to every single employee that salaries are necessarily linked to productivity? As we ask ourselves these questions we can then isolate those issues that are in our control and work out strategies for tackling concerns that require a more collective approach.

In a typical market economy, at least as defined by Adam Smith, what our country is facing would be a serious opportunity for emerging entrepreneurs who would cease these distortions to offer new products and services that meet and satisfy customer needs. However, what is evident in our country is that the free market does not exist.

Instead, monopolies still exist; pricing collusion even among our SMEs is rampant. Cartels that are run along mafia lines where the price for unregulated behaviour is very steep are also in fair abundance.

The conventional wisdom that guides the thinking of many companies and national governments that labour costs, interest rates, exchange rates, and economies of scale are the most potent determinants of competitiveness have led captains of industry to press for more government support for particular industries and this has led to a growing tendency to experiment with various policies intended to promote national competitiveness, from efforts to manage exchange rates in the Zim dollar era, to new measures to manage trade through various forms of preferences.

As the nation limps through the pitiable growth, many towns and cities are hurting. Buy-local campaigns can help local economies withstand the downturn. This is a hopeful message in a recession because it is not about how much money you have got, but how much you can keep circulating without letting it leak out.

Gundani is the chief economist of the Buy Zimbabwe Trust. The views expressed in this article solely belong to the writer. These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the ZES. E-mail: kadenge.zes@gmail.com, cell +263 772 382 852

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