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Rethinking Zim’s economic priorities

THE recent economic trajectory has seen several economic debates on ways to improve the economy. Two main schools of thought have surfaced.

Firstly, the political spectrum seems to be skewed towards the primary sector as the backbone of the economy, specifically targeting the mining and agriculture sectors as the main drivers of the upper-middle-income economy by 2030. The ‘apolitical’ economists, on the other hand, are advocating for a shift towards a knowledge-based economy.

Maybe a bit of background will put everything into perspective.

The Zimbabwe economy is fragile. The Borgen Project (2021) reported that “roughly 74% of the population lives on less than US$5,50 a day and the average wage per month is US$253. Half of Zimbabwe’s over 15 million people live below the food poverty line and about 3,5 million children are chronically hungry”.

Food production has not been improving over the years despite government intervention. Of course, there have been other external factors like droughts, which have affected food production, but a cursory analysis will reveal that interventions, such as the Presidential Input Scheme are still to bear fruit.

Consumer price inflation, which seemed to be under control and depreciating for the better part of 2021, has abruptly turned and as of June 2022 was 191,6%. Month-on-month inflation increased from 5,3% in January to 31% in June 2022.

Most of the economic indicators paint a bleak picture of the country’s economic affairs. The biggest challenge now is how to navigate through these murky waters and make vision 2030 (upper-middle-income economy) a reality.

The proponents of a knowledge economy are not making wild propositions, they are basing their sentiments on the knowledge and experiences of most developed countries, whose economies are examples of the benefits of a knowledge-based economy. A case in point is the Korean economy.

According to the World Development Report of 1998/99, Ghana and the Republic of Korea started off with almost the same gross national product (GNP) in 1960. The two countries took different economic trajectories and 30 years later, the Korean GNP had risen more than six times.

The World Bank attributed half of that growth to traditional factor inputs, and the other half to “knowledge” as a factor of production. The disparity between these two countries’ economies is widely quoted as an example of the leapfrogging effect of a knowledge economy.

To assist in the transition of economies into knowledge-based economies, the World Bank developed a Knowledge Economic Index (KEI). The KEI benchmark countries based on four building blocks of the knowledge-based economy; these are:

  • Economic and institutional structures;
  • Educated and skilled labour;
  • ICT infrastructure and access; and
  • Vibrant innovation systems.

It is disheartening to note that Zimbabwe’s KEI is a paltry 2,7 in contrast to Namibia’s 4,1, Botswana’s 4,3 and South Africa’s 5,5. The KEI aggregately reflects the overall level of development of a country towards a knowledge economy.

The index is ranked out of 10 with a score close to this implying that there is relatively good development of the four knowledge economy’s building blocks, while a score close to 0 indicates relatively poor development.

It then goes without saying that Zimbabwe is lagging in terms of developing toward a knowledge economy. One then wonders where we are getting it wrong. This paper will try to explain a few areas of concern.

Educated and skilled labour

For a knowledge economy to be a reality there is a need for the availability of skilled labour and a good education system.

In the Zimbabwean case, efforts have been made to introduce STEM related subjects. This is commendable. However, strikes and confrontations between the government and teachers (among other civil servants) have made the whole exercise futile.

This affects the education sector and the development of skilled labour.

In 2018, the government announced 1% of Gross Domestic Product (GDP) commitment to research and development (R&D). This was meant to support researchers and research entities in four priority areas, namely, nanotechnology, energy, water and indigenous knowledge systems.

If the funding is managed well with the transparency and accountability, Zimbabwe will benefit from this investment as it compares with regional peers, for example, South Africa’s Gross Domestic Expenditure on R&D (GERD) is about 0,9%.

However, in the European countries, it ranges around 3% of GDP. It is also worth noting that around the same period, the Zimbabwe government established a national innovation fund to be administered by the Ministry of Higher Education, Science and Technology Development.

Human capital is another important element in the knowledge-based economy. This can be in the form of highly skilled human resources, an important building block toward a knowledge-based economy. In this regard, Zimbabwe in 2012 (due to lack of more recent data) had an equivalent of 99,52 full-time researchers per million total employment (Unesco, 2012).

This is relatively poor compared to South Africa, which had an equivalent of about 1 400 full-time researchers per million total employments in the same period.

Patents

Patents are some of the science and technology indicators, which show a country’s revolution towards a knowledge-based economy. They provide an easily quantifiable and auditable metric that reflects a nation’s output regarding innovation.

Zimbabwe’s output as far as patents are concerned is not pleasing.

According to the World Intellectual Property Organisation, in 2020, Zimbabwe made five patent applications of which four were granted. All five patent applications were by Zimbabweans based abroad.

This contrasts with South Africa’s 40 patent filings in 2020 and Kenya’s 62 patent filings within the same period. The last time patent applications were made by resident Zimbabweans was in 2016, with eight resident applications, five non-resident applications and one abroad application.

High-level recommendations

The above narrative clearly shows that Zimbabwe still lags in terms of the basic building blocks for a well-functioning knowledge-based economy. A specific framework of policy interventions is required to ensure a smooth transition from the traditional economy.

These policy interventions must be directed toward education and human capital development including reasonable remuneration packages for the human resource.

Equally important are policy interventions that promote a conducive business environment. Such an environment is a prerequisite for innovation and the establishment of businesses which thrive on ethical business operations, not on arbitrage opportunities which are not part of the core operations of the business.

A conducive business environment will enable organisations to develop strong organisations with competitive structures that will allow them to stand their ground against the competition in the AfCTA region.  However, it must be noted that there are still debates on the practicality of the knowledge economy. Academics are still divided with some characterising it as a largely theoretical concept for economic growth and wealth creation. This assertion is mainly based on the absence of a common — globally understood and accepted — framework for the knowledge-based economy and a set of measurable models and indicators for successful performance.

Notwithstanding, it remains a proven fact in developed countries, that knowledge-based economies have the potential to stimulate economic growth, provide higher wages and employment opportunities, as well as enhance a country’s competitiveness within the global environment.

But, for that to come to fruition there is need for deliberate government efforts. These include proper policies and action to stimulate innovation, investment in human capital and a highly skilled labour force and the creation of infrastructure for high-technology industries. The leapfrogging effect of a knowledge-based economy cannot be overemphasised. It is, therefore, imperative upon authorities to strive for a balance between supporting the traditional economy while taking steps to transition to a knowledge-based economy.

  • Tazvivinga is a development economist — ptazvy@gmail.com. These weekly New Perspectives articles published in the Zimbabwe Independent are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). — kadenge.zes@gmail.com or mobile: +263 772 382 852.

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