Refocusing Zim for production and sustainable development

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Zimbabwe needs to refocus its energies and take a bold stance towards industrialisation and creating new jobs.

Zimbabwe’s economy is arguably quite resilient relative to other countries in Africa. However, recent economic and political events in the country have put this resilience under the spotlight and to some extent dashed the hopes of most optimists of any industrial growth. The ultimate stress test has been adequately felt by all in recent days, especially those charged with the responsibility of putting food on the table at a time when reserves are fast dwindling at an alarming rate.

By Eve Gadzikwa

One is not surprised where we find ourselves today given recent events whose overall impact has resulted in growth stagnation at best and retrogression at worst.

The nation’s future growth trajectory hangs in the balance due to the fact that Zimbabwe is said to be at the “tipping point” given its precarious position politically, economically and socially. Enablers such as modern technology to boost industrialisation, ICT infrastructure, governance frameworks, policies and procedures,

standards, local and FDI, research and development are all urgently needed to improve Zimbabwe’s productive capacities and to unlock value from primary raw materials. Zimbabwe must also leverage on its bilateral and multilateral trade agreements by deploying skilled manpower to drive trade and to improve Global Competitive Index (GCI) ratings.

One is almost tempted to join the band wagon of describing and regurgitating the problems bedeviling the country and saying what we don’t want. Rather than devoting this space to highlighting known problems, this article seeks to proffer possible short-terms solutions aimed at realigning Zimbabwe’s factors of production towards potentially profitable value chains on which the country has competitive and comparative advantage.

The article, whilst not prescriptive attempts to highlight some key enablers which must be attended to urgently in order to bring some positive sustainable results in the short to medium-term, it also attempts to explore possible long-term strategies to kick-start a development agenda rather than focusing merely on delivery which has a narrow view.

Reality check

A good starting point is to evaluate where we are now. Cause and effect diagrams and root-cause analysis are useful here. Most companies implementing management systems e.g. QMS, EMS, FSMS, etc, are familiar with these terms.

Closely linked to this is Environmental scanning in terms of Political, Economic, Social, Technological and Legal (PESTEL model) is not an academic exercise but determines an honest assessment of Zimbabwe’s future growth prospects in the short to medium term.

This is where it is important to separate economics from politics so as not to cloud strategic options.

Short-term

In the short-term, taking ownership and control of factors of production e.g. land, materials, money, people (skills) is central to driving sustainable industrial development.

Today, government wage bill is unsustainably high relative to the country’s development agenda, leaving only 14% of total revenue collections for productive capacity. In addition to measures introduced to curtail revenue outflows, fiscal space must be significantly widened to allow for productive growth. This must be complemented by realistic economic stimulus, production incentives, tax breaks and a stabilisation facility.
Attention must be paid to:

developing competitiveness tools;

setting up a modern Quality Infrastructure system to support industrial development, trade, global competitiveness;

fostering closer partnerships between business, government, institutions of higher learning and Membership Business Organizations (MBOs);

formation of an independent Apex Business Body in order to establish and communicate a collective vision board;
creation of an attractive investment climate;

establishing affordable lines of credit at the right cost and tenure;

good governance and strengthening of accountability institutions;
developing and implementing business friendly policies

research and developments building an effective ICT infrastructure; and Establishing an affordable and stable energy source.

Mid-term

Zimbabwe is operating in a US Dollar currency which has allowed the economy to stabilize. In the medium term, benchmark comparators will need to be considered to level the playing field by broadening use of a more diversified basket of currencies.

Export competitiveness of the strong US Dollar against weaker currencies in trading markets e.g. South Africa Rand makes it difficult for Zimbabwe to export into these regional markets. This is made worse due to high costs of doing business (cost of labour, energy, multiple license requirements etc) and low capacity utilisation.

Long-term

A long-term horizon view must address the following:

creating a business friendly environment;

debt clearance;

focus on correction of key economic fundamentals e.g. grow foreign reserves (equivalent to five years), Increase industrial capacity utilisation to 75%, improve investment climate;

restore business confidence economic stability (employment growth); and improved investment climate.

Conclusion

Despite the raft of government measures which were recently put in place in response to identified business gaps, a lot needs to be done to normalise economic fundamentals and engender sustainable industrial development i.e;
improve ease of doing business environment;

improve quality of goods;

build adequate financial reserves;

broaden fiscal space;

build investor and consumer confidence; and implement an effective debt clearance strategy.

In short, until these key economic fundamentals are dealt with, we will keep doing the merry-go-round. That said, it is necessary to applaud some of the country’s government driven transformation reform agenda which is being to stop the hemorrhaging in the economy. Statutory Instrument (SI) 64 which was announced to reduce the widening trade deficit, protect local industry and to control the of importation of basic commodities manufactured in Zimbabwe.

These restrictive measures were met with mixed reaction. While the announcement favored some local producers with capacity to produce, to some extent it resulted in unintended consequences both at home and externally, especially from South Africa which is now threatening to hit back by requesting Zimbabwe to phase down duty and surtax imposed on certain South African goods.

As if that was not enough, earlier pronouncements of the indigenisation policy and announcement to introduce bond notes have also been met with equal stiff resistance from some quarters.

Needless to say, due to public perception and sentiment around these issues, business confidence levels are at an all-time low for some industry players and civil society who have become weary of the unpredictable nature of business operating environment.

The major reason for lack of confidence seems to emanate mainly from unintended consequences of some of these reforms and inconsistencies in implementation of the same reforms.

In taking a development approach to resolution of these problems, the writer is convinced that, ultimately, the standard Zimbabwe sets for itself going forward of economic turnaround is a function of how well we own the problem and to what extent we are prepared to sacrifice immediate gains for long-term benefits.

Painful adjustments in terms of allocation of government expenditure must be made to restore confidence as well as paying attention to production.

Time is of essence and everyone has a role to play in getting desired results. If we are to get back on track with a development agenda Zimbabwe needs to refocus its energies and take a bold stance towards industrialisation and creating new jobs. Business problems need business solutions.

Re-arranging seats on a sinking titanic will only drown what’s left of the ship but taking a short-term, medium-term and long- term horizon to current problems will deliver inclusive and sustainable industrial development while at the same time building trust and restoring confidence with local and foreign investors.

Gadzikwa is the director-general of Standards Association of Zimbabwe. These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society. E-Mail: kadenge.zes@gmail.com and cell +263 772 382 852.

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