/Zimbabwe: Why the Economy Is Broken – What the Private Sector Can Do

Zimbabwe: Why the Economy Is Broken – What the Private Sector Can Do

Government has weakened itself by creating monopolies and appointing Zanu-PF officials in key positions in government departments and parastatals. The decision to do so was more political than professional.

However, government does not own every business entity in the country. A larger percentage of the economy is in the hands of the private sector, which can play a critical role in improving the political and economic situation in Zimbabwe.

The private sector can be divided into agriculture, mining and manufacturing industries, commerce, service sectors, tourism and information and technology, arts and crafts.

Each of these require specialist attention, which cannot be fully covered in a short article.An evident weakness of the private sector has been its divorce from government since the country’s independence in 1980.

Under the Smith regime, government and the private sector were tightly linked, with government providing support for the private sector, and the private sector supporting government policies and programmes.

This has not been so after Independence, as the Lancaster Independence Agreement carefully gave political control to the government and economic control to the private sector, which was then predominantly controlled by whites. Where government has given support to industries and farmers, it has mainly been because of political reasons than or business or economic basis.

Both white and black businesspeople have a tendency to externalise most of their foreign currency earnings, instead of saving and investing in Zimbabwe.

There are many reasons for this anti-national tendency and these have to be addressed in detail.

The large Zimbabwean diaspora does not necessarily invest in their own country, but instead invest in South Africa or Botswana. They do not deposit foreign currency into Zimbabwean banks, but deposit hundreds of thousands in banks outside the country. They prefer to travel by bus to Botswana and South Africa every month to withdraw the money in United States dollars.

Over the last four decades there has been some ownership movement such that a small number of black indigenous people have done well economically, but it can still be said that ownership remains largely in the hands of foreign companies and the white minority.

ZDERA is a direct attack on the Fast Track Land Resettlement Programme which began in 2001, but land has not been fully transferred to Africans as the “Offer Letters” have not yet been replaced by secure leasehold tenure as agreed by Parliament in 1992. There is still urgent need to adjust agricultural land ownership to suit the different types of owners and farmers.

Zimbabwe has retained the two inherited agricultural land ownership systems, the traditional “subsistence” system now known as the A1, and the commercial farming system now known as the A2.

Over the past two decades, the A1s have proved to be successful (See studies by Ian Scoones, Nelson Marongwe, et al., 2010, and Joseph Hanlon, Jeanette Manjengwa and Teresa Smart, 2013) whilst A2s have had a checkered development pattern. Neither systems have received much state funding or technical assistance. A1 farmers were able to depend on their personal and family savings, knowledge and experience, whilst A2 were seriously short of funds, knowhow and experience.

Work has been done on the different categories of land owners and users: it will be important to ensure that the different categories are well catered for and supported, as their needs can be vastly different.

My 2018 article on “Land Ownership and Costs” outlines eight potential ways of categorising land ownership including women, former farm workers, holders of agricultural qualifications, school leavers, very poor and destitute people, local lnhabitants, land for investors and local government.

Many well-known and highly qualified economists have expressed the need for Zimbabwe’s manufacturing industries to be modernised and transformed.Tony Hawkins, for example, addressed this in his presentation to the CZI Conference in 2017 entitled Interim and Long-Term Strategies to Address Zimbabwe’s Economic Challenge.

In brief, Zimbabwe needs to look at its own priorities for the manufacturing industries, for example emphasis on smaller affordable tractors rather than on passenger cars, cornflakes and chewing gum; and Zimbabwe urgently needs to update its technologies and management systems to compete regionally and internationally.

A partnership between government, private sector and research and development institutions can bring about transformative industrial change which can create lots of worthwhile and interesting employment.

Individuals

Individuals have control of their own income and wealth, and can utilise their wealth to better their lives. By saving a part of their wages they can buy or build their own house.

They can invest in their own education or that of their children. How they spend their money can influence the growth or decay of the country’s economy.

Individuals can spend their money on goods from their own country, or they may prefer to buy goods from other countries.In the 1980s, Zimbabweans generally bought food they made. Today most goods, including basic foodstuff, are imported.

Individuals spend on consumer goods or they invest their money on land, houses, businesses, education, health, etc.How individuals utilise their money can determine whether the country’s economy grows or shrinks. In a country where lots of people spend their money on beer, that industry will prosper.

If most people save their money to build their family house, they will end up with a home. If they spend their money on the education of their children their family will benefit.

If they save part of their money every month, they will be able to do more than if they spend every cent each month.So what the individual does influences what happens in the economy.

People will do better if they work together than by working individually.The diaspora do not trust government, parastatals or banking institutions. Not surprisingly they only bring in a limited amount of money, mainly for their families or to build personal homes.

Diaspora funds coming into the country can be much more than money brought in through foreign direct investment (FDI). If we cannot utilise our own money for development we cannot expect outsiders to help us.

Conclusion: What is to be done?

Building a country is a joint effort. It entails governments working with the private sector and with the people.It entails the private sector and the people working closely with governments. How can Zimbabwe build a national consensus on what has to be done? The answers are quite straight forward, and include:

For government

  • Stop printing so much money through Treasury Bills as the government has done over the last two years since it came into power. This is the main cause of hyper-inflation which is now hitting the economy again and causing suffering and demoralisation amongst workers.
  • Replace empty rhetoric by actually improving Zesa, fuel and water supply, and basic services such as education and health. This will unite the people behind the government. We should see action rather than rhetoric.
  • Limit the percentage of forex being distributed by RBZ, and allow a greater percentage to go to banks to fund private companies and institutions.
  • In particular priorities should be identified, and money spent on each priority made public.
  • Act on corruption.

For the private sector

  • Produce first and foremost for the domestic market, whether this is food or other goods. There is no need to import food.
  • There is need to look at machinery and equipment requirements of the domestic market, particularly for small scale farmers.
  • Link the formal and informal economies so that the quality of the informal producers is improved. The two economies should work as partners rather than as competitors.
  • Both public and private training institutions should enhance and increase in-service training for both formal and informal manufacturing industries.
  • Government and private sector should work in tandem.

For individuals

  • Buy Zimbabwean goods rather than imported goods wherever possible.
  • Work together with your neighbours so that you can share knowledge, machinery and equipment.
  • Invest in house ownership and construction rather than only on consumables.
  • Link up with your diaspora relatives to improve education, health, housing, electricity and water facilities in your neighbourhood.

Chung was a secondary teacher in the townships (1963-1968); lecturer in polytechnics and university (1968-1975); teacher trainer in the liberation struggle (1976-1979) ; civil servant (1980-1987); former minister of education (1988-1993); UN civil servant (1994-2003.)These weekly New Perspectives articles are coordinated by Lovemore Kadenge, immediate past president of the Zimbabwe Economics Society (ZES).