Develop sustainable economic model

THE economy is one of the biggest challenges Zimbabwe faces today. The current economic fragility, which coincides with global economic slow-down predicted for 2019, presents a critical threat to national stability.

Existing economic characteristics associated with high unemployment, fuel shortages, currency crisis, dysfunctional economic fundamentals, weak institutions and absence of an economic model has implications for business and ability to attract sustainable investments.

The paradigm of political thinking which has been used to govern the economy cannot be sustained in the current realities. It is clear that a serious paradigm shift is unavoidable. This article provides a critical perspective of the urgent need of a sustainable economic model (SEM) for Zimbabwe beyond the current interventionist strategies against social and economic realities facing the country.

Contemporary economics outline an economic model as a construct of designed economic variables which deliver sustainable wealth creation for social and economic development. An economic model helps understand and predict impacts of changes in economic variables (Tucker, 2005). Observations have shown that countries with pronounced economic models tend to perform better.

Predictability associated with economic models is a key driver to attracting sustainable and long term investors. An economic model forces fiscal discipline, societal value behaviours and inspires economic success. Typical case studies can be cited of Japan, South Korea, China, Singapore and United Kingdom. An economic model has potential for predictable value creation, informing fiscal systems, taxation model and national competitiveness.
In Africa, Mauritius’s economic model was developed to create the financial capital hub of Africa, while Zimbabwe’s crisis economic model (CEM) inspires capital flight.

The context of Zimbabwe’s crisis economic model characterised by dysfunctionalities, institutional fragilities, corruption, interventionism, policy inconsistences, debt fatigue, speculative business models and short-termism.
A crisis economic model resembles a scenario where economic resources are continuously directed towards perennial economic problems that never seem to be resolved to such an extent that it becomes a normal way of life. Consequently, crisis economic models have their own beneficiaries.

What can be puzzling about Zimbabwe is that it is a natural resource rich country with a small population of about 13,5 million people. But the quality of life is relatively poor (UN Report 2019) resembling a rich man who dies of hunger.

Having an economic model is a receipt for economic success if supported by strong economic leadership. In Africa, Rwanda comes to mind. Emerging and developed economies like South Korea, Japan, China, Singapore, Taiwan, US, France, German and Norway have succeeded on the basis of their strong economic models.

For example, South Korea’s economic model is largely driven by technology and manufacturing similar to Japan.

Following the destruction of Hiroshima and Nagasaki industrial hubs during WWII, Japan’s economic model of leadership in electronics and automobile manufacturing spurred its economic recovery.

Similarly, UK’s economic model is largely around a strong financial and services sector. There is a saying that, “all money flows to London” because London is the financial hub of the world. Using its thinkers and thank-tank institutions, China developed an economic model which achieved being the second largest economy.

In Africa, countries like Mauritius built their economic model around financial services, trade and tourism.
Mauritius is a small island whose natural resources cannot compare with Zimbabwe, but has GDP per capita of USD10,186.16 as compared to Zimbabwe’s USD1,079.61 in 2017 respectively (Trading Economics, 2018).

Mauritius is fast becoming the London of Africa because of its tax economic model (low taxes) which attract hosting financial capital. Kenya’s economic model is largely driven by tourism and agriculture similar to Rwanda which provides a typical Japanese scenario.

Following the genocide in Rwanda, the country’s economic model spurred economic recovery and growth driven by strong leadership and zero corruption.

Having an economic model is an urgent priority for Zimbabwe than relying on short-term interventionist strategies. The economic direction of Zimbabwe need to be convincing and predictable to enable attracting sustainable investment. An economic model will help inform economic governance with predictability in fiscal systems, investment environment and societal value behaviours.

However, an economic model requires strong institutions and leadership. In my previous articles in 2018 titled: Zimbabwe must build strong institutions and Reform Reserve Bank first, I alluded to the significance of strong institutions if convincing economic recovery is to be achieved. While the issue of economic model seem not so much talked about by many so-called economic analysts in Zimbabwe, it is puzzling how the chanting on currency as Zimbabwe’s key economic problem raises questions. The bond note was introduced, followed by the RTG dollar, which is unlikely to deliver the magic.

Basic economic fundamentals start with production leading to trade and wealth but the reality in Zimbabwe is the opposite. As such, currency cannot be an issue alone, but the crisis economic model being pursued.

At the moment, you cannot tell which economic model sectors such as agriculture, mining, financial services and manufacturing in Zimbabwe are feeding into. A typical model for the agricultural sector would be composed of designated high value export farming and domestic demand crop production.

In cases where the economic model is appreciated and supported by the general society, success chances are high. While President Emmerson Mnangagwa pronounced the vision of Zimbabwe becoming middle income economy by 2030, it can only be achieved with an accompanying clear economic model along the lines pursued by Lee Kuan Yew, first prime minister of Singapore, credited for creating a modern economy of Singapore (Asia Times, 2005).

Singapore created an economic model to support its leader’s vision of a modern economy driven by export targeted manufacturing and services heavily exposed to global markets which were underpinned by sustainability practices. Singapore’s economic successes were mainly driven by economic planning and implementation (Huff, 1995).
To date, Singapore houses majority of the top 10 sustainable companies in the World (DAVOS Report, 2017). The Singapore Stock Exchange prides itself of its sustainability reporting practices and strong corporate governance which has contributed to sustainable capital attraction. Singapore achieved a GDP per capita of US$55 600 in 2018 (Trading Economics, 2018)

Developing a clearly defined economic model is a crucial sustainability step for Zimbabwe, which is urgent than ever before. Without a clearly defined economic model, convincing sustainable and long term capital will be challenging. There is need to bring together a small group of think-tank institutions in Zimbabwe to develop an economic model to reconfigure the country’s direction and recover 20 years of lost economic progress.

The biggest challenge many African countries face is having economic models and strategies being developed or prescribed for them by foreign consultants in the absence of genuine local thinkers and experts.

China developed its economic model using local independent and government-related think-tanks. By the time the President of China or the government sign any deals, great work would have been done by their think-tanks to ensure everything fits in their economic model.

Finally, developing an economic model for Zimbabwe is not a game of populist analysts and individuals but real thinkers. While President Mnangagwa set up his Presidential Advisory Council (PAC) for operational governance advisory support, there is still need to bring think-tanks institutions into another platform because no government on this planet has all the solutions.

Using think-tank institutions both those government related and independent institutes has great credibility and domestic legitimacy. The United Kingdom used its think-tanks to come out of its double-deep recession while Chinese think-tanks were instrumental in developing the Belt and Road Initiative (BRI). Zimbabwe need to bring genuine think-tanks and thinkers to develop an economic model. In most cases, an economic model becomes a national document which continue to be implemented even if there is change of government.

It does not have to be developed along political party lines but national interests with future generations in mind. Developing an economic model is a cornerstone for convincing economic recovery and long-term development of Zimbabwe.

Rodney Ndamba is an academic and founder of the Institute for Sustainability Africa, an independent think-tank and research institute. These weekly New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society. — and cell +263 772 382 852.