eBusiness Weekly
Taurai Togarepi
The new administration led by President Emmerson Mnangagwa reiterated on the need to grow the economy and create jobs. This was followed by the comprehensive revision of the controversial Indigenisation policy and promise to re-engage the international community among other policies.
These policies are critical to unlock portfolio and foreign direct investment, which the country badly needs to rebuild the economy.
Looking closely at the problems the country is currently facing which include; low confidence in the banking sector, low capacity utilisation, high unemployment, low levels of investment (both at private and public sector level), high budget deficit, cash shortages etc, this calls for a comprehensive policy framework with reforms skewed towards strategies conducive for investment and increasing exports.
It is imperative to note that, over and above strategies announced by the Government, there are other ingredients that are critical to achieve sustainable growth.
These include; improving the quality of institutions in the economy, promoting exports and encourage savings as these complement the puzzle to sustainable economic growth.
A look at economies in Asia especially Taiwan, South Korea, Singapore and Hong Kong will show the importance of quality of institutions, export led growth and savings. These economies experienced rapid industrialisation over long periods and have since developed into high income nations.
What can we learn from this as a country?
Obviously, the factors of production are part of the conditions that are critical to achieve economic growth but the results differ depending on a wide array of factors. From economic theory, using the simple Keynesian model savings equals investment though this may not hold in the real world.
It is imperative as a nation to institute policies that encourage savings, which is critical for investment and ultimately economic growth.
Zimbabweans have one of the lowest savings rate in the world as most people shun the formal banking system due to high bank charges versus low interest rates on savings.
The Reserve Bank introduced savings bonds at 7 percent per annum with inflation currently at 2,97 percent (November 2017). The low uptake may be a sign of lack of confidence in the RBZ itself as an institution and uncertainty over inflation developments.
As part of the calls by the current administration to migrate to a “New Economic Order”, there is need to strengthen all the country’s institutions.
There is need for independence on the part of the central bank. The Reserve Bank of Zimbabwe in the past has been involved in quasi-fiscal operations which ordinarily should be a baby of the government. This compromises its operational independence.
In pursuing strategies to increase exports, the Government may consider exporting labour to other countries. Zimbabwe has a fair share of its graduates in various disciplines who are unemployed and can be in demand in other countries.
The country will earn hard currency and at the same time reduce poverty levels in the country.
Furthermore, it will provide a platform for skills transfer, as they will be exposed to latest technologies that may not be available locally.
The Government may deliberately institute a policy whereby all labour exports will be required to invest a certain amount of their income per annum in government bonds and use the money to finance critical projects in the country for example housing development.
Zimbabwe is moving in the right direction by adopting the strategies to achieve rapid growth through the establishment of Export Processing Zones (EPZ).
In essence, an EPZ is a critical component of an export promotion strategy. Looking at the size of Zimbabwe and that most provinces are endowed with different types of resources, there is need to revisit the implementation framework for EPZ.
Government designated Sunway City in Harare, Victoria Falls and Bulawayo as EPZs.
Borrowing from the example of China, which started with few areas designated as EPZs, then perfected and expanded the framework with time.
This gives the country an added advantage as there is no need to reinvent the wheel hence the country should start with each province as an EPZ if not the whole country.
Chipinge is endowed with bananas, tea etc., in Matabeleland it is mainly livestock and mining.
In light of this, Government may consider increasing the designated areas such that each province benefits resulting in economic growth across the country.
This means that the EPZ should be done at all levels that is State, provincial, municipal and county-level industrial parks.
Linked to the above argument, Government should promote local economic development whereby a province/district endowed with certain resources should also benefit directly from its resources.
There are provinces that produce wheat but there is no milling company in the province. Wheat is transported to Harare and the bread is manufactured in Harare then exported back to the province that would have produced the wheat.
This results in underdevelopment of some sections in the country. Government may consider instituting deliberate policies to promote provincial economies.
This will lift the standards of living in the rural areas where most of the people live under the poverty datum line.
