Market, respect for property rights key to economic turnaround

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Finance Minister Patrick Chinamasa

Zimbabwe, once referred to as Africa’s jewel, has, for 36 years since independence in 1980, orbited in economic unevenness, having repeatedly failed to grow its economy.

By Kipson Gundani

The country has failed to carve out an economic growth trajectory, falling behind Singapore, Malaysia and Kenya, countries that used to be in the same developmental league. At the top of its problems is a declining manufacturing industry, leading to unemployment, budget deficits and resultant rising poverty levels.

I know this can be attributed to many factors ranging from economic mismanagement, corruption, politics, etc. In this instalment, I will, however, focus on two key elements which I think are at the centre of Zimbabwe’s economic misfortunes. I guess it is the desire of every progressive Zimbabwean for our beautiful sovereign nation to be a hub of industrialisation, commerce, international trade and prosperity. Wanting something is never a problem, anyone can aspire to achieve. The chemistry is on how to achieve and what are the capability enablers that should exist and what role should one play?

I envy a country where the majority are masters of their own destiny, people are empowered and emancipated, where no one is jobless and the standard of living is good for everyone. We always wish for a society where economic welfare does not only end up in major cities but trickles down to the most remote and vulnerable places in our country and in which income per capita improves annually. This alone will provide social security safety nets and promote poverty alleviation.

In order for Zimbabwe to achieve this, there are a number of things that the country ought to get right and it is the collective responsibility of all Zimbabweans to put their heads together in search of a winning formula. The building blocks for such a vision are already there in the form of the abundant God-given natural resources and the highly educated and hardworking human capital that the country boasts of. When all these resources are fully exploited and blended well, then we can rest assured that we are on the right track to economic recovery and sustainable development.

In the quest for the winning formula, the easiest thing to do is to describe a problem and the difficult part is to suggest solutions. Fortunately for me, the two solutions I will briefly highlight during this piece are well known to all. The challenge is one of implementation which relates to the how, by whom, where and when.

I will preface my views by saying that Zimbabwe needs to re-design the economy based on current economic activity given what the country has gone through and what it has. The economy of 1997 and that of 2013 are very different.

It is easier and more beneficial to create a new economic dispensation than to try to recreate the old one as conditions have changed fundamentally.

Amid the harsh economic times that the country is experiencing, the word economy has come to be closely associated with concepts of bond notes, Statutory Instrument 64 and Finance minister Patrick Chinamasa’s national budget. What is often forgotten is that the science of economics is a much broader field that encompasses how scarce resources are disbursed throughout a population. Zimbabwe is not just a country that is experiencing a normal recession, but a country with severe market inefficiencies that has been in recession for close to 20 years.

The first missing link is markets. Zimbabwe is wrongly integrated in the global markets. The highly publicised view that open markets are universally beneficial is absurd and Zimbabwe is a victim of that deceit. Basic economic principles suggest that supply follows demand and productivity follows markets. Open markets will never benefit economically weaker nations as long as political boundaries exist. In reality, when your country is strong, you want others to open their markets for you and when your industry is weak, it makes business sense to protect your own markets by restricting imports, something that the SI64 of 2016 and other statutory instruments that came before like Statutory Instrument 126 of 2014 are trying to do though in a spasmodic way. These offensive and defensive strategies apply in all spheres of life.

It is, therefore, imperative that the economy’s consumption patterns be realigned with the country’s balance of payments position so as to generate a sustainable consumption culture that allows the economy to sustain and continually reproduce.

Consumption of locally produced goods has an immediate stimulus impact on the productive sector which, through the vertical and horizontal linkages, it has with other downstream industries; transmits the multiplier effect to benefit the whole economy through increased aggregate economic activity. This increase in aggregate economic performance allows for economic growth and national development.

The second imperative which in my view is a major missing link is property rights or respect for property rights or the perception on property rights, whatever you want to call it, depending on where you are coming from.

Property rights are one of the most fundamental requirements of a modern economy and modern development economics.

Zimbabweans have been under the spotlight for the last 15 years after the fast-track land reform programme, leading to a “dead capital” situation on land — supposedly the biggest asset people have. Agriculture does not operate in a vacuum. It is inextricably interwoven with the rest of the economy.

Before we begin to resuscitate agriculture, we first need to recognise, as do our economically thriving neighbours, that secure property rights are sacrosanct. These property rights must be expanded into the communal areas.

Once secure tenure is in place, we need to do two further things to rebuild agriculture, provide affordable funding and knowledge. Business loans are secured only against title.

Our scenario has been worsened by our poor performance in the World Bank doing business rankings leading to a very poor investor perception on Zimbabwe. It becomes imperative that we build confidence surrounding issues relating to property rights and declare that Zimbabwe adheres to international norms as it relates to property rights issues and that no expropriations of private property will be entertained.

An expeditious issuance of title to the resettled farmers will go a long way in building confidence and revolutionising agriculture. Where private property is secure, effort and investment follow. Where it is absent, so too are the supporting factors of development.

Deliberate efforts to securitise land and guarantee markets will be a trigger fact in the economic transformation of Zimbabwe notwithstanding other macro-economic challenges. This will be the corner-stone of moving forward to a state committed to a technically sound long-term development agenda.

Developmental states are able to trigger and sustain growth and poverty reduction over extended periods of time, leading to a structural transformation of the economy and society. They successfully remove impediments to participation of the poor in a growth dynamic.

Gundani is the Chief Economist of Buy Zimbabwe. These New Perspectives 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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