HomeAnalysisAdvancing Zim’s economy towards SDG8

Advancing Zim’s economy towards SDG8

Nyasha Mandeya
DESPITE Zimbabwe’s commitment to the United Nation’s eight 2030 Sustainable Development Goal (SDG8), Covid-19’s impact on global trade has impeded achieving this aim. To sustain progression towards SDG8, the Government of Zimbabwe should consider how best to support Zimbabwe’s global trade activity and agreements.

Within the United Nations` 2030 Agenda for Sustainable Development is SDG8, which focuses on global economic growth. Accordingly, SGD8.1, 8.2 and 8.5 focus on economic growth, productivity and full-employment, respectively. The main aim in SDG8.1 is the attainment of 7% annual growth in real domestic product per capita in the least developed countries, with growth of real GDP/capita being a key marker of welfare.

For 8.2, the aim is to improve productivity, measured as real GDP/employed individual through focusing on labour-intensive high-value sectors, and diversification.

For 8.5, the aim is full-employment with equal pay, measured by the unemployment level and average wage. Achieving these goals will support global long-run economic growth and increased welfare.

Zimbabwe is 142nd in the overall Prosperity Index rankings and overall, performs most strongly in Education and Safety and Security. Although Zimbabwe has moved up the rankings table by eight places since 2011, it remains weakest in Enterprise Conditions.  Zimbabwe’s economic growth declined from 2017 through 2019, contracted in 2020, but saw an uptick in 2021. Using the measure of GDP per capita, which is the gross domestic product divided by midyear population, where GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products.

It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. World Bank data in current US dollars shows that:

Zimbabwe GDP Per Capita for 2020 was $1,128, a 2,42% decline from 2019.

Zimbabwe GDP Per Capita for 2019 was $1,156, a 14,5% decline from 2018.

Zimbabwe GDP Per Capita for 2018 was $1,352, a 1,24% increase from 2017.

Zimbabwe GDP Per Capita for 2017 was $1,336, an 8,8% decline from 2016.

This lag in economic growth and productivity has been attributed to the extended effects of climate shocks that crippled agriculture and electricity generation as well as a fiscal adjustment, a volatile currency, and the negative impact of the Covid-19 pandemic, which led to lockdowns, reduced investment inflows, concerns on ease of doing business, weak institutions and rampant corruption broken supply chains and low research and development (R&D). Given these standings, additional progress is required for Zimbabwe to meet the SDG8.

Due to the interconnected nature of the global economy, through global value chains (GVCs) and liberalised trade, the domestic economic impacts and supply chain disruptions of Covid-19 in Canada were exacerbated. GVCs, being the fragmentation of production across nations so that it occurs where it is most cost-effective, have become a central mechanism for global manufacturing with countries becoming specialised.

This specialisation has occurred where countries had a comparative advantage that allows them to produce a good at a lower cost than another country, which reduces the cost of goods for consumers.

Liberalised trade is a critical component to GVCs as it allows goods to be transferred between countries without the impediment of barriers, such as tariffs. This free-movement is supported by economic theory as it allows the diffusion of technology, enhanced factor productivity, and higher wages which supports global economic growth, and welfare. With the economic disruptions observed following the onset of Covid-19, there are concerns regarding the feasibility of the 2030 SGD8 and the utilisation of liberalised trade.

As Zimbabwe continues to recover from Covid-19, government action which would support Zimbabwe`s global trade and achievement of SDG8 should be considered.

Prior to the onset of Covid-19 there was general consensus regarding the benefits of liberalised trade for economic growth. With the free-flow of goods, capital, and services, economies around the globe experienced greater economic growth, productivity, and welfare. Despite these advantages, low- and middle-income nations’ economic growth and welfare has begun to lag behind high-income nations’ growth, while Covid-19 highlighted the risks of the interconnected nature of economies. With GVCs and liberalised trade causing specialised countries to depend heavily on sustained global trade, the pandemic has highlighted an existing debate regarding whether the advantages of liberalised trade are worth its risks.

For those advocating against liberalised trade, there are three primary arguments First, liberalised trade allowed Covid-19 to result in higher trade costs for nations due to delays in receiving intermediate products they required for production from their partners. Second, the interconnectedness of nations with free-trade agreements placed countries at risk for spill-over effects if disruptions occurred in trade partners’ economies.

This shock propagation was observed during 2020, with production slowing in certain regions due to manufacturing closures in a trade partner’s nation. Third, through reshoring, manufacturing countries could reduce their reliance on other countries’ manufacturing and reduce spill-over effects while increasing their ability to absorb shocks. With rising factor costs in low- and middle-income countries, automation of production, trade disputes, and Covid-19, many regions have considered implementing more protectionist trade policies.

Although protectionist policies would encourage diversification of production, which is encouraged for SDG8, there are costs to these actions. In modelling a country engaged in liberalised trade and one that is closed, the nation attempting self-reliance had lower average wages and economic activity. As each country has specific comparative advantages, transitioning to a self-reliant model was unachievable and highly economically inefficient.

In addition to the costs for the protectionist nation, these policies disproportionately impacted low-income nations who rely more heavily on trade given their specialisation. Given these impacts, and the importance of liberalised trade for SDG8, countries are urged to diversify trade partners and production areas but should avoid protectionist policies.

Mandeya is an economist. These weekly New Horizon articles published in the Zimbabwe Independent are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society (ZES) and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). —  kadenge.zes@gmail.com and mobile No. +263 772 382 852.

Progress towards SDG8 remains necessary, indicating government action is required. This action should strengthen Zimbabwe`s free-trade arrangements, support Zimbabwean businesses, long-run economic growth and productivity, improve Zimbabwe’s preparedness for shocks, and support global trade.

Provide direct funds to firms completing R&D in the renewable energy, automation of auto-manufacturing, and agricultural and mining and technology sectors. Within auto-manufacturing, increasing automation would protect this industry from future disruptions including physical distancing.

These technological advancements would also increase Zimbabwe`s capitalisation on the expanding technology sector. For agriculture, R&D should focus on developing automated processes and protection against droughts which impact Zimbabwe agricultural output in a recurrent manner.

This option improves Zimbabwe`s productivity, long-run economic growth and welfare, while supporting trade partners by producing sought after goods. To support SMEs this option would direct funds to all-sized firms and support foreign partnerships to encourage FDI.

To ensure full employment is supported by this option, those displaced by technological advancements should be provided subsidies that support their re-training. This re-training could support working with the new technologies in enhancing productivity across all the key sectors of the economy in tandem with global trends as dictated by the information era.

This would allow Zimbabwe to advance towards the SDG8 through improving conditions of doing business, investing in R&D within sectors where Zimbabwe has a comparative advantage.

Such steps would result in increased productivity, support long-run economic growth, and produce valuable goods for current and future trade partners.

Through maintaining a liberalised trade approach, this option also ensures Zimbabwe is supporting GVCs and global trade, which supports achieving SDG8 and increased welfare globally.

Although these economic benefits will require greater investment in the short-run, they will achieve sustained long-run economic growth.

CONCLUSION

Zimbabwe`s achievement of the 2030 SDG8 remains impeded due to lagging productivity, economic growth, and the impacts of Covid-19. To achieve SDG8 and support Zimbabwe’s global trade, the government should focus on securing strong trade partnerships and invest in its comparative advantage sectors.

This action should provide targeted grants for firms completing R&D to promote value addition and automation within the manufacturing, agricultural and mining sectors.

Overall, sustained government action is still required in improving the business environment by reducing regulatory costs, improving policy consistency and strengthening institutions.

Also critical are the eradication of corruption and more protection of property rights, particularly with respect to agricultural land to ensure that Zimbabwe is on course to attain SDG8.

Mandeya is an Economist at Salvo Consultancy.

 

  • These weekly New Horizon articles are published in the Zimbabwe Independent and they are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society (ZED) and past president of the Chartered Governance &   & Accountancy Institute in Zimbabwe. (CGI Zim). Email: kadenge.zes@gmail.com and Mobile No  +263 772 382 852..

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