Finance minister Mthuli Ncube’s United States jaunt last week was always expected to yield what it yielded — an empty basket. It’s no rocket science.
In an article published in this column last year titled Why Ncube will not get us debt relief, an argument was put forward that “The US cannot be ignored in our economic recovery matrix due to the influence it wields over multi-lateral institutions and their affiliates.”
As Ncube was on his way to Washington to plead the case for Zimbabwe, Donald Trump, the US president, renewed sanctions on Harare citing that no meaningful political and economic reforms had been advanced by Harare, basically telling Ncube that no financial assistance was coming the way of Zimbabwe through international financial institutions (IFIs). Ncube thought he had a good story to tell about how he was generating a primary budget surplus, how he was containing the growth of money supply and how the country was letting free market forces rule as evidenced by the managed floating exchange rate.
Apparently, all this did not impress Trump. The column predicted all this last year when it carried the argument in the article titled Why the US won’t come to the party, that “Here is the point that (President Emmerson) Mnangagwa and many economic analysts seem to be missing; the numerous pre-conditions for external funding outlined in Zidera such as freedom of expression and association, indisputable elections, addressing and redressing human rights abuses, for instance, are all subordinate to the key concern of property rights protection.” Ncube, two weeks ago belatedly acknowledged that the issue of property rights in the context of compensation for farms forcibly acquired from white farmers was, in his own words, “the bigger elephant in the room”. Shockingly, in the US last week, Ncube chose to talk about mice instead of the bigger elephant he had so accurately identified.
What is the solution now that chances of receiving debt relief and unlocking affordable external funding are next to zilch? This is where Strive Masiyiwa comes in. We are not about to ask Masiyiwa to fund the country, let alone asking him to use his powerful connections to help Zimbabwe get funding. It’s about how he has succeeded in starting and growing his businesses in places where traditional entrepreneurs and Western business deem there was no money to make.
Enter Clayton Christensen, the father of the ground-breaking disruptive innovation model and Efosa Ojomo, the Nigerian and former MBA student of Christensen at the Harvard Business School. Together with Karen Dillon, Christensen and Ojomo have recently co-authored a book called The Prosperity Paradox: How Innovation Can Lift Nations out of Poverty, to explain the findings of their research on how disruptive innovations have lifted nations out of poverty and will continue bringing prosperity to nations.
Disruptive innovations are innovations that create new markets and pull in infrastructure and new supporting industries by making products and services once inaccessible to the majority of people simple to use and affordable. This is how Masiyiwa has made his money.
This is how Mo Ibrahim became a US dollar billionaire by making telephones accessible and affordable to the masses through mobile phones. This is how Henry Ford brought prosperity to America by making cars simpler and affordable to the average American. Similarly Masiyiwa, has launched disruptive innovation after disruptive innovation. EcoCash, EcoSure, these have enabled the unbanked and the uninsured to enjoy convenient and relatively cheaper banking services. Masiyiwa’s latest disruptive innovation of introducing solar power to rural areas is promising to make electricity affordable and accessible to the majority of Zimbabweans (who live in rural areas).
The prosperity paradox is an extension of the disruptive innovation model to macro-economic development. I have confidence in this model because disruptive innovation is a classic grounded theory, meaning that it is based on uncovering the key concerns of a group of people. A journal article I wrote and was published in an international peer reviewed journal showed how and why disruptive innovation is a classic grounded theory. The extension of disruptive innovation to macro-economic development comes hardly as a surprise — it is simply an extension of a classic grounded theory to a new area of application.
What is this paradox? The paradox is that the accepted traditional model of economic development is that for economic development to happen, infrastructure and supporting structures must first be put in place to attract investment, yet disruptive innovation says when an innovation that creates a new market by pulling in the majority of people who prior did not consume a product or service, the necessary infrastructure and supporting economic networks will be pulled in, not pushed.
Highways were not needed before Henry Ford made cars affordable to average American through his famous Model T. When the Model T made cars affordable and accessible to the once excluded masses, the necessary infrastructure and supporting economic networks were pulled in — highways, car showrooms, parts retail, car insurance, parts manufacture, car repairs, out-of-town suburbs and second-hand car dealerships. Japan made cars affordable to the majority of people in the world through its sub-compact vehicles, disruptive innovations in their own right — massive industrial development was pulled in, not pushed as a result.
Typical of classic grounded theory, Christensen meticulously distinguishes types of innovations into three categories: market-creating (disruptive) innovations, sustaining innovations and efficiency innovations. These types of innovations have different impacts on economic development. Market-creating or disruptive innovations create massive employment. Sustaining innovations make good products better — they do not pull in new consumers, but existing consumers replace old versions with newer improved versions — the net effect on employment and economic development is marginal. Efficiency innovations reduce the production costs of the current product by eliminating waste, releasing more capital which usually finds no suitable home to invest. Efficiency innovations cause unemployment as people get retrenched to “right-size” organisations.
Zimbabwe’s past prosperity was based on market-creating (disruptive innovations). Let us consider Bulawayo as an example. The former Cold Storage Commission (CSC) was a disruptive innovation — it made beef affordable and accessible to the majority of Zimbabweans. As a result, it pulled in massive infrastructure and supported a powerful economic network or cluster in Bulawayo. It supported the National Railways of Zimbabwe (NRZ) which transported cattle from the ranches (themselves part of the cluster pulled in by beef as a disruptive innovation). In turn, the NRZ pulled in a cluster of engineering firms that manufactured and repaired NRZ’s wagons. The NRZ, the CSC and engineering firms were the largest employers in Bulawayo, contributing to Bulawayo’s local tax revenue base that supported the Bulawayo City Council, itself a massive employer. Once land reformed disrupted disruptive innovation (pun not intended), the whole economic cluster in Bulawayo collapsed, hence Bulawayo’s decay.
What is my point? Ncube and his advisors need to know that as a country we need to educate our nations to be disruptive innovators, finding out areas where the majority of Zimbabweans and Africans are not consuming because of lack of affordability. We disruptively innovate, creating new markets — the necessary infrastructure will be pulled in. For starters, let us re-disrupt by way of agriculture which was once a powerful disruptive innovation where products were made affordable and accessible to the majority of Zimbabweans. Make the farms productive once again. We have told Ncube before that the white farmers are offering government a deal where government pays nothing to compensate the white farmers — it is time he took this offer seriously — it is the only way out that will make us re-establish our once powerful agro-based disruptive innovations.
Brett Chulu is a management consultant and a classic grounded theory researcher who has published research in an academic peer-reviewed international journal. — email@example.com