Inheriting a battered economy, the newly elected government faces a huge task making the economy work again.
Financial Matters: Tinashe Kaduwo
One of the critical causes of the high poverty rate in the country is the scarcity of sustainable and well-paid jobs as a result of a protracted de-industrialisation. The growth of the manufacturing sector should be the top priority of the incoming administration as it leads to job creation, especially for the youth which will, in turn, contribute to poverty alleviation. Statistics show that in sub-Saharan Africa alone, over 70% of the region’s population is below age 30, the probable case of Zimbabwe.
Unemployment has reached catastrophic levels and young people have lost any hope of landing a decent job. Considering that industry represents one-quarter to one-third of total job creation in other countries across the globe, industrial development will create new opportunities, more jobs, and contribute to poverty alleviation and should be the government’s top priority.
A holistic approach to industrial policy, focussing on diversification and economic complexity, is critical. In fact, data shows that the most economically diverse countries are also the most successful. Bearing this in mind, policymakers must emphasise some key drivers of successful manufacturing sector support when elaborating industrial policies.
Top of the agenda should be human capital. In order to grow and be competitive, the manufacturing sector needs capable, healthy, and skilled workers. There is need for the government to adjust the education curricula to ensure that skills are adapted to the market and should include special attention to youth. The government has to revisit curricula to focus on skills acquisition and build the capacity for entrepreneurship and self-employment through business training at an early age, skills upgrading at an advanced age, and better promotion of science, technology, engineering, entrepreneurship, and mathematics as well as vocational and on-the-job trainings.
Cost is another key driver that the government has to address. In order to accelerate industrial development, the new government must bring the cost of doing business down, addressing cost-effectiveness challenges such as energy, road networks, security, financing, bureaucratic restrictions, corruption, dispute settlement, and property rights, among others. They should also ensure the effectiveness of special economic zones to fast-track the process bearing in mind that its also a long-term investment. The country also has to look at its trade policies. Industries are more likely to evolve in the presence of sufficient or competitive networks.
To make the economy more attractive to capital, the government should consider offering tax incentives to firms in order to unlock job creation which in turn increase individual and household incomes thereby boosting domestic demand. Higher purchasing power for households will increase the size of the domestic market given a key factor in the success of industrialisation. The government should also note that manufactures require heavy investment and should be driven by the private sector. Its role should be to facilitate access to finance, especially for small and medium enterprises, by developing and effectively managing instruments appropriate to the stage of development in critical sectors. These include loans, guaranties and other ventures funds. In order to better attract foreign direct investment, policymakers should address the poor risk perception that scares off potential investors or sets excessive returns expectations.
These key factors will help have a successful industrial policy. If accompanied by research and development, it will have a greater impact. Therefore the government should summarily facilitate research and development, enable technological innovation, curve the productivity gaps, increase competitiveness with deregulation, facilitate the coordination among actors, upgrade the agriculture and mining sectors to add value and boost productivity and competitiveness, and promote the development of higher-productivity sectors.
Kaduwo is an economist at Econometer Global Capital. — email@example.com or firstname.lastname@example.org