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Review of the NDS-1

THE National Development Strategy 1 (NDS-1) was officially launched by President Emmerson Mnangagwa on Monday November 16, 2020. The NDS-1 has 14 priorities which include: Economic growth and stability; food and nutrition security; governance; moving the economy up the value chain and structural transformation; human capital development; environmental protection, climate resilience and natural resource management; housing delivery; digital economy; health and well-being; infrastructure and utilities; image building and international engagement and re-engagement; social protection; youth, sport and culture; and devolution. The NDS-1 seeks to move the country from a lower middle-income society towards an upper middle-income society by 2030.


Prosper Chitambara
economist

The NDS-1 is an ambitious development strategy, which seeks to address some of the most binding constraints militating against inclusive economic growth and sustainable development in the country. In a departure from the past, the NDS-1 has clear macroeconomic objectives and targets as well as social and development objectives and targets. A major critique of the out-going Transitional Stabilisation Programme (TSP) is that it has clear economic growth targets with no explicit targets on employment creation and poverty reduction.

The TSP is, therefore, not based on a holistic approach to sustainable development that integrates economic, social and environmental imperatives and considerations. It is rather predicated on the underlying conventional macro-economics assumption of “trickle down” that once economic growth is attained it will automatically result in employment creation and poverty reduction.

The NDS-1, however, corrects the above anomaly. For instance, the NDS-1 is targeting to create 760 000 jobs as well as economic growth of not less than 5% per annum. This is quite ambitious but feasible in my view especially if we focus on labour intensive sectors such as agriculture and infrastructure projects. Jobs are critical as they provide a critical nexus between economic growth and sustainable development. The NDS-1 is also targeting to reduce the percentage of Zimbabweans who are in extreme poverty to 10,1% in 2025 down from 38,9% in 2020. Focusing on poverty-reducing sectors such as agriculture, health, social protection and education will help to realise the poverty targets. The NDS-1 is targeting universal social protection coverage by 2025.

On a positive development, the NDS-1 has a clear results framework and implementation matrix for better execution and accountability. Past development strategies have tended to lack an implementation matrix making it difficult to implement them and to hold anyone accountable.

The NDS-1 has however not been costed to determine the total financing requirements. However, what is indisputable is the fact that the country has a huge financing gap owing to years of gross under investments in critical sectors of the economy. The NDS-1 envisages that development assistance will increase from US$500 million in 2020 to US$1 billion by 2025. This is unsustainable.

We need to be moving away from donor financing. Opportunities abound for greater domestic resource mobilisation. For instance, broadening the taxation base through facilitating transition from informality to formality is one such opportunity. This can be achieved through the creation of enabling and supportive policy, institutional and regulatory, that reduces the cost of doing business and improves the investment climate as well as lowering the barriers and high cost of transition to formality.

The full operationalisation of the Sovereign Wealth Fund is also critical to ensure greater mobilisation of domestic savings. Domestic savings are critical for inclusive growth and sustainable development as revealed by the growth success stories of countries such as China, Singapore, South Korea, Japan and India, among others. For instance, the spectacular economic growth of China in the past four decades has been associated with an equally remarkable high rate of saving.

The gross national saving as a percentage of gross domestic product (GDP) has averaged 40%, reaching an unprecedented 53% in 2007. The high and rising aggregate saving and, thus the low and declining share of consumption in the GDP, constitute a central feature of the Chinese economy. In Zimbabwe, for a long time put gross national savings as a percentage of GDP has been in negative territory for a long time implying that we are a highly consumption-driven economy, and consumption is the enemy of investment and development. It is therefore important going forward to entrench macroeconomic stability as a basis of promoting domestic savings.

The diaspora can also play a greater role in terms of financing development back home given the right economic and political incentives. For instance, diaspora bonds are a relatively inexpensive way of raising funds for development back home. A number of African countries such as Kenya, Ethiopia and Nigeria have in the past successfully issued diaspora infrastructure bonds to help finance infrastructure development. Diaspora engagement does not feature prominently in the NDS-1 and this must be corrected.

Importantly, the NDS-1 completely left out people with disabilities. Notwithstanding this omission, the Education Amendment Act, 2020 which came into effect on March 6, 2020 and aligns the Education Act (Chapter 25:04) with the Constitution guarantees the right of pupils with disabilities to be provided with suitable infrastructure. It is therefore necessary to ensure that adequate budgetary resources are allocated to ensure the implementation of the Education Amendment Act.

The NDS-1 is coming at a time when the economy has been experiencing some measure of macro-economic stability as evidenced by the slowing down inflation resulting in some measure of price stability as well as exchange rate stability. The current account surplus has provided a strong basis for sustaining foreign exchange stability. Industry capacity utilisation has also shown some gains.

Challenges, however, still remain with respect to the high levels of poverty, food insecurity, informality and public indebtedness; the limited fiscal space; inadequate social protection coverage; weak institutions; corruption; huge infrastructure deficit particularly in terms of water and sanitation; weak public health delivery system owing to years of gross underinvestment among others.

Maintaining price stability is critical and will depend largely on the ability to control/bridle money supply growth. However, given the huge demands/pressures on the expenditure side and the limited fiscal space, there is a possibility that government may be forced to seek recourse to monetary financing and/or even domestic borrowing.

Government recently signed the Global Compensation Deed with former white farmers valued at US$3,5 billion. It is not yet very clear how this is going to be financed but there is a possibility that government could issue bonds which would worsen the debt position thereby affecting the country’s re-engagement efforts given our current huge arrears.

Ultimately, the success or lack thereof of the NDS-1, depends on whether we have strong, accountable, transparent, and inclusive institutions to drive its implementation as well as a sustainable financing model relying largely on domestic resources to finance it. Strengthening of institutions will also help to restore confidence, promote capital and investment inflows as well as to tackle leakages such as illicit financial flows.

Dr Chitambara is a development economist who is based in Harare

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