Zimbabwe: Job Creation Requires Right Policies

While government often gets it wrong, it is commendable that at the last Zanu PF conference and in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) document, it was recognised that any major improvement of the country's economy is contingent upon, over and above other actions, a substantial increase in the rate of employment.

The policy statements targeted at least two million of the country's unemployed being absorbed in the formal sector.

Although no authoritative statistics are available as to the extent of formal sector unemployment, such joblessness undoubtedly exceeds 80%.

The vast number of non-formal sector employees strives to survive by engaging in informal sector operations and by receiving some financial support from their employed relatives elsewhere in the region or further afield.

However, for most of them incomes are relatively minimal, which restricts their spending ability which negatively impacts on commerce and industry and other economic sectors.

Notwithstanding the ZimAsset policy statement, nothing has been said as to how government intends to achieve the objectives therein set. In any event, it is unrealistic to anticipate that the target of two million jobs can be rapidly achieved.

With a marginal rise in agricultural production there has been a slight increase in numbers employed in that sector, but this has been offset by continued retrenchments in the industrial sector.

The prospects of any significant increase in the employment rate in the short-term are non-existent and the reality is that the present economic environment unemployment will rise despite the expected growth of 3-4% in the economy.

The employment prospects can only be achieved if there are major changes to government policies. The changes include, among others, converting Zimbabwe to an attractive investment destination.

There is almost worldwide interest in investing in Zimbabwe, for there is great recognition of the magnitude of Zimbabwe's existing and future potential.

Almost without exception, potential investors are unwilling to commit their funding and their technological assets and skills, patents and trademarks and access to their markets in the absence of comprehensive investment security. Tragically, that investment security is almost totally non-existent in Zimbabwe.

First and foremost, among the investment deterrents is the manner in which Zimbabwe persists in pursuing economic indigenisation. As stated previously in this column, indigenisation must be pursued energetically to eliminate the racial prejudices and constraints of most of the 20th Century, but this must be done in the right way.

Expropriation of the investments of the non-indigenous and racial minorities is economically destructive and an unjust pursuit of racial discrimination (undoubtedly perceived as revenge for that which prevailed in the last century).

This is especially so when there is neither assured fair compensation for the expropriated business equities, nor when any such compensation will be paid, potentially only over many years and funded from the expropriated businesses.

Worse still, the mandatorily forfeited ownership is at least 50% of the ventures, resulting in the deprived owners having no control or authority over their former wholly-owned enterprises. The result is that potential foreign investors would be unwilling to invest in such circumstances.

Instead, indigenisation should be pursued in three key ways. First, existing businesses and new investments should be required to ensure that not less than 26% (as opposed to 51%) be held by indigenous investors selected by the current business owners and the new investors on terms and conditions agreed between them.

Concurrently, despite government's impecunious circumstances, a loan-funding institution such as the former Small Enterprises Development Corporation must be formed to enable aspiring small-scale entrepreneurs to establish new ventures.

In addition, high school syllabi should be extended to include initial development of selected small enterprise business skills and financial management. Both local authority regulations and national legislation should accommodate small-scale enterprises and facilitate transition of ventures from the informal to the formal sectors.

Pursuit of such policies would remove the key barrier to attract foreign and domestic investment.

Other measures also critical include significant realistic revision of many direct and indirect taxation statutes. Mining royalties are prohibitively high, especially so in respect of gold and platinum when compared to those payable in other countries particularly at a time when world mineral prices have significantly declined, impacting adversely on mining earnings.

Other taxes requiring review include import duties, which should be raised on goods which compete with similar local products while duty should be reduced on essential products whose manufacturing inputs are not available locally.

The magnitude of some withholding taxes should also be addressed on payments such as technological management fees, patent and trade mark royalties, among others.

Another critical issue to be addressed is that of the provision of reliable utility and allied services, including energy, water and rail services. Government does not have the resources to rehabilitate infrastructures and to effect considerable development and enhancement of the utility service providers.

Therefore, despite its abhorrence at losing control of such parastatals, government should vigorously pursue partial or total privatisation thereof. There are numerous potential investors willing to acquire stakes in these parastatals.

Yet one other area that needs to be addressed is the revision of Zimbabwe's labour law which is excessively pro-labour. With strong emphasis from government, labour must be motivated that employers can rarely afford the wages it demands.

While most employees do not earn sufficiently to meet all their essential needs, it is better to earn too little than to be unemployed.

Thus if government pursues policies conducive to the attraction of investment, mainly from beyond Zimbabwe's borders, many of the presently collapsed or near-collapsed industries would be revived. The mining sector would expand as would commerce and tourism.

Many new employment opportunities would develop also if the right measures are pursued to facilitate small and medium enterprises to be established.

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