By Eve Gadzikwa
In the last installment, I focused on “The Role of Corporate Governance in Leadership”. Since then, I have noted that while the national code on corporate governance, which was launched in 2015, received wide acceptance both in business and government, very little practical application has been seen on the ground, largely due to lack of commitment by economic actors to implement it at micro and macro level.
Training gaps have also been an impediment to the full uptake of the code despite the fact that globally, codes have become accepted benchmark standards for restoring public and investor confidence.
Government has subsequently adopted the Public Sector Corporate Governance Bill in the first quarter of 2016, to address governance shortfalls relating to public sector management. The Bill aims to give a guideline on service conditions and remuneration of heads of parastatals, state enterprises and local authorities who have been resisting moves to rationalise employment terms and to cap monthly salaries. This reluctance has had an overall negative impact on the public sector and infrastructure spending since very little funds are left to support operational activities and infrastructure investments.
A culture of consumptive imports has forced government to implement measures to curtail spending on goods that can be made in Zimbabwe much to the delight of local manufacturers. Recent confidence-building short-term restrictive measures, for example Statutory Instrument 64 of 2016 (SI 64), have resulted in an increase in local production of certain goods. These measures evidently have saved a number of jobs, restored confidence in this sector but with unfortunate unintended consequences of reduced import duties.
In a recent development, Zimbabwe further announced the introduction of market surveillance measures to complement government’s Consignment-Based Conformity Assessment Programme introduced in 2015. Through this programme, authorised service providers in collaboration with relevant regulators, will provide consumers additional assurance on the quality of high-risk locally produced goods to safeguard the health and welfare of the nation. To this extent, standards of products can be set and maintained.
In the economic sphere, there have been mixed reactions to the introduction of the bond note which is backed by liability to the tune of US$200 million through Afreximbank. Confidence is at an all-time low, particularly after the coming in of the bond note which was supposedly introduced to incentivise exporters. Its success will be measured by how well commitments to both locals and foreign investors will be honoured.
Recently, Zimbabwean banks have witnessed cash shortages following the central bank’s measures to curtail withdrawals. Moreover, Zimbabwe has been discussing the need to consider optimal currency options as a medium of exchange, for example the rand. Furthermore, the Indigenisation and Economic Empowerment Act, policy on nostro accounts and labour reforms are all discussion points with an impact on general confidence levels.
Zimbabwe can trace its problems way back into its history.
To a large extent, the nation has been on a perennial reactive path for the last decade. Given its multiplicity of challenges and complex operating business environment, it is fair to say government appears to be largely inward looking and reactive in its approach. For instance, it is only until recently that the nation has seen the need to aggressively re-engage with the West in order to find lasting solutions to its internal and external debt trap and extinguish long outstanding obligations which involve the public and private sectors as well as multi-lateral funders.
Needless to say, the nation has been carrying the yoke of an unsustainable cost structure, suffering cyclical liquidity crises and running budget deficits since 2012. This has been further execrated by low appetite for cross-cutting policies, high cost of doing business, poor investment grade sovereign rating, poor competitiveness against international markets. All of these factors are well-documented and responsible for hampering smooth economic growth.
In addition, limited long-term funding strategies, consumptive behaviour, coupled with multiple crises characterised by four pillars, for example financial, liquidity, trade and low confidence levels at home and abroad have kept the nation in a reactive and spiraling mode.
“Zimbabwean economy still in serious trouble despite increase in capacity utilisation”, was the caption of one of the stories carried in our local media. This story coincided with the release by the Confederation of Zimbabwe Industries last week of the 2016 Manufacturing Sector Survey which indicated that capacity utilisation in the manufacturing sector has increased from 34,3% in 2015 to 47,4%. It is undeniable, this increase in capacity is largely attributed to a raft of restrictive measures under SI 64 introduced by government to support local industry.
While this is true, it is also true that this protection is indeed short-term and unsustainable in the absence of foreign currency. One cannot ignore such a significant jump in growth prospects of this sector under the right conditions and perhaps even to consider some of the factors which could have contributed to this welcome positive trajectory.
More importantly, the writer seeks to take a closer look at some governance and policy factors which may have weighed against some producers who failed to enjoy any gains and instead suffered job losses due to company closures.
In doing so, it is apt to recap on the definition of corporate governance.
Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. The same definition is relevant for the public sector given that, governance essentially involves balancing the interests of many stakeholders, such as shareholders, management, customers, suppliers, financiers, government, multilateral funders and the general community.
That said, it follows that standards in governance and policymaking should be strictly adhered to by the private sector at micro level and government at macro level, if Zimbabwe is to restore confidence of its many stakeholders both at home and abroad.
After all, we talk a lot about standards in products and services but not much is said about the impact of governance standards and policymaking especially at macro level. Both are critical in restoring confidence in the public sector yet no commitment to benchmarks is evident on the ground.
Here is a proposed framework to improve standards in governance and policy-making at macro-level:
- Commitment to uphold the constitution (the supreme law of the land);
- Commitment to pay outstanding debts to (local and foreign) attract fresh foreign direct investment;
- Reduce government spending (wage bill as percentage of Gross Domestic Product);
- Reduce poverty (Sustainable Development Goals);
- Financial inclusion (inclusive society);
- Policy on foreign investment (high conversion rate of proposed investments);
- Predictable, simple, cost-effective application of polices and laws (ease of doing business policy);
- Dealing with corruption (monitoring corruption indices);
- Settlement of remittances by exporters and foreign investors (nostro policy);
- Measures to improve aggregate demand (monitor job and confidence indices);
- Investment in innovation (industrialisation policy);
- Improve foreign reserves through exports (local content regulations and trade policy);
- Upholding the law (compliance with legal provisions);
- Allocation of resources for contracts (due diligence, approval and project implementation);
Promoting efficiency (management systems, reports, evidence-based research);
- Investment in people (talent management);
- Investment in information communication technologies (innovation);
- Border management (one-stop concept);
Risk management (risk-adjusted strategies); and Institutional strengthening (productivity, results-based approach, performance).
Gadzikwa is African Organisation for Standardisation president and Standards Association of Zimbabwe director-general. These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society. E-mail: email@example.com, cell +263 772 382 852.