Zim’s chicken, egg conundrum

10 Jun, 2022 - 00:06 0 Views
Zim’s chicken, egg conundrum Clifford Shambare

eBusiness Weekly

Clifford Shambare

In the last part of this piece we ended with a question; what starts first, a manufacturing firm or a trained artisan? The best answer to this question is both should start concurrently since, for one to start a manufacturing plant, they need workers, the most important of which are artisans to operate and maintain the machinery therein.

But a manufacturing system needs people at all levels; from bottom (general workers and artisans) to top managers and directors.

Zimbabwe has plenty of general workers and those in the service sector but it lacks artisans. At the same time the quality of its management cannot be determined with any degree of certainty.

This assertion can generate its own debate, but let me explain myself here.

You see, under condition of adversity such as ours, management needs to be courageous, tenacious and innovative. But the Zimbabwean one is fixated on blaming the government even in cases where they should also contribute meaningfully to the solution.

One of these areas is monetary policy. Here let us consider the aspects of interest rates, inflation, investment and production. Let us use a developed economy such as the US as an example.

In that country, if inflation begins to raise its ugly head, the Fed increases the interest rate, at the same time checking money supply, to discourage spending.

If the opposite becomes true it lowers the interest rate, at the same time increasing money supply—also referred to as Quantitative Easing—to stimulate spending.

The latter strategy enables manufacturers to increase production. This part of the strategy naturally involves the industry leaders, particularly those in the manufacturing sector.

But in Zimbabwe these strategies do not work under current conditions; but why? First of all, the manufacturing sector should be vibrant but in this country, this cannot be said to be the case.

If you ask the industrialist why he is in such a predicament, the first thing he will do is to blame the government on several fronts. For example, its profligacy and failure to manage money supply.

The other fault he attributes to government is a restrictive Ease of Doing Business policy. And yet the other one is the introduction into the economy, of a local currency — a currency that he is trashing — wishing (it) away.

Now, let us also consider the industrialist’s weaknesses and/or failures in this case, for it would not be realistic to treat him like a saint. But the first thing to appreciate here is that, in this matter, the banker is on the industrialist’s side as will be demonstrated later in this discourse.

The industrialist insists on importing everything, including raw materials — some of which can be easily produced locally — into the country. But this strategy — for lack of a better expression—costs a lot of money, most, if not all of it, in foreign currency.

So, he works in conjunction with the local banker in putting large sums of the local currency into the street to buy foreign currency — most of it in US dollars. This action has the effect of reducing the value of the former’s value.

But here is another chicken and egg conundrum — a paradox; what would he do if the local currency were not available here?

So is the Government bad for creating a currency he is using to buy a currency he would not be able access since he is not producing goods for export to enable him to access same?

At this stage, it becomes easier to appreciate the creation of functional systems in the economy, at the same time coordinating their operations. This condition speaks to co-operation between the Government and the private sector — a condition that the latter seems to be bent on resisting.

The position of the private sector here is informed by its desire to have FDI in the economy. This is why the local industrialist is always pestering the Government to allow its easy entry into the country.

This is also the reason why the other section of the Zimbabwean population is clamouring for FDI. But there is a whole lot of challenges lying under this strategy.

One of the most critical disadvantages of excessive dependence on FDI is its tendency to stifle the development of local industries.

This explains why economies such as the USA and China hawkisly scrutinise the nature, strategies and aims of foreign businesses while they operate within their borders.

If this were not the case these top two economies would be number one and two on the Ease of Doing Business scale.

A locally owned economic system is vital for a sustainable economic growth and development. Without it your economy is virtually someone else’s.

So here is another chicken and egg conundrum. What starts first, your local economy or a foreign one? And so, given this logic, which of the two should you prioritise?

In order to make any headway in this era Zimbabwe needs to prioritise the use of scarce [foreign] funds. So splashing money on luxuries such as luxury cars is definitely not the way to go.

And here the Government should lead the way. If you think this is difficult to do, consider the Japanese case.

But black Zimbabweans are fixated on status. As soon as they make any substantial amount of money they want to show off with expensive clothing brands, luxury cars and mansions.

This is what is refer to as the nauve riche mentality. But in this respect, whites are different. Even though they may have the said luxuries, they first focus on creating a source of sustainable wealth for themselves. Naturally, this is a productive system.

So, in order for this piece to be useful, we have to propose solutions to our economic challenges. Some of these propositions can be found in many of my articles in this paper. But revision is never a bad idea, so here goes:

Deal decisively with corruption. This matter needs no further elaboration.

Resuscitate local industry by improving on the raw material supply system. Here we have the agriculture and mining industries to consider since they are the major suppliers of raw materials to the manufacturing industry.

As far as the mining industry is concerned, currently there is too much emphasis to mining for export with not much value addition being carried out. Here we have the steel industry, the platinum and chromium minerals which although we cannot carry through to the finished product stage — we can nevertheless, refine locally.

Maybe one day we can start making platinum batteries and chrome based machinery spares.

So far the agriculture funding system has proved problematic. But to my mind, ours is a problem of attitudes coupled with incapacity.

And why do I make such an assertion; you may want to know? We had the Command Agriculture Programme worth a cool US$3,2 billion which the managers pilfered to nothingness without any clear explanation for the failure of same. Instead of admitting this failure so that we can correct it next time, we are now focusing our attention on partnerships that largely depend on foreign investment.

But this is faulty thinking that is fraught with risk. I shall proceed here to show why I make such an assertion.

Through the Command Agriculture Programme we demonstrated our incapacity since the latter was provided from our (financial) systems and was managed by us. So, as Joseph Stieglitz says; we (Africans) cannot manage cash.

Here it is not amiss to asset that we also cannot manage systems. Not only that — we cannot create systems that function.

This situation has serious implications for us as Zimbabweans. The partnerships that we are clamouring for are structured in such a way that we only provide land to the venture. But our attitude to this land so far, has proven to be quite dubious and nonchalant.

Some of us have not been to the farms allocated them for the past two decades or so. Some of them go there from time to time but do very little — even tilling a limited area there.

Some of us are literally renting out the land to those who can work it successfully. The latter comprise white former farmers, a sprinkling of foreign investors, and local Zimbabweans.

Now we want FDI on a much larger scale. This means that with such attitudes and behaviours, in due course, we will be edged out of the agriculture industry. But once that happens a number negativities will crop up with time.

The first one of these is loss of control of the economy. The second one is the inability to produce food — a situation that can expose us to sabotage.

The other area that needs immediate attention is technological development. However, one cannot say there are no efforts being made here. There are but still, challenges remain.

Now let us tease them here. Firstly, local industrialists have not bought the idea. The reasons for their attitude is a matter of conjecture. Politics may be involved here. (see above).

Incapacity is another reason. Then there is the matter of discord within the system(s) — a condition that stems from the duality of the ownership of the economy.

The other reason for the apparent failure of the technological development strategy is the approach being used here. This is an approach that emphasises the use of gadgets without starting from the basics.
For example, if you cannot operate a simple job shop, you cannot go very far.

In order to appreciate this assertion better, consider a commercial farm. Here one needs to carry out simple repair and maintenance work using basic tools — that is, spanners, pliers, screw drivers, cutting discs, and so forth.

Ultimately, one finds the African being a consumer and not a creator of technology.

Whatever, the case may be, there is no doubt that all these reasons apply, one way or the other.

Another area that needs to be considered is that of investment. But again, this is not easy since Zimbabweans are now in a short term mode where getting a loaf of bread is the main objective of many people.

Be that as it may, there still a need to address such a vital matter. In the past I have proposed selling the idea of the C-Trade to the people through some sort of campaigns and circuses in the towns and the countryside.

For example, approaching the several tobacco auction floors during the tobacco selling season will produce wonders.

There, it will be fairly easy to sell shares in the region of even a couple of dollars per farmer.

Here imagine that an amount 240 million kilogrammes of tobacco is harvested, cured and sold every year. At an average of US$2,50 per kg this tobacco is worth US$600 million.

Let us suppose that farmers get US$200 million as profit and that 10 percent is used to buy shares. This gives us US$20 million worth of investment.

This is an amount that can expand quite few firms or found new ones. Now, imagine doing this with a few more crops and see what this action can do to the economy.

However, what actually happens in Zimbabwe are elitist gatherings where financial managers of companies, bankers and company directors gather in posh venues where they discuss financial policy away from the public. The result is an economy that remains constrained and small.

But in the developed economies everyone has always been involved in such matters, one way or the other. This way the public can influence such phenomena as investment, interest rates and inflation. That is why their economies are stable and substantial in the current era.

In order to see this logic better consider that the rate of investment per capita in that realm is roughly US$6 600. So for a country such as the USA with a population of 330 million this works out at 11,1 percent of GDP of that country of US$18 trillion.

For Zimbabwe with a GDP of US$15 billion this would yield something like US$1,6 billion. Compare and contrast this amount with the US$ 900 million from the IMF that made everyone excited recently.

Shambare is an agriculturist cum economist and is reachable on 07749960937.

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