28 April 2017

Zimbabwe: Zim's Economic Recovery Imperatives

opinion

Professor Erik Reinert in his book titled How Rich Countries Got Rich and Why Poor Countries Stay Poor argued it will only be when an economy adopts strategies to deliberately industrialise through manufacturing that it can begin to achieve increasing marginal returns to create employment and sustainable higher incomes.

Reinert's argument suggests we should therefore slowly move away from resource-based revenues because they give diminishing marginal returns and move towards rapid industrialisation to achieve our developmental objectives.

There is no shortage of ideas out there with regard to how Zimbabwe can get out of this rut.

However, we have to come together as a nation and rally ourselves around a compelling inclusive national development strategy at whose centre must be localised developmental initiatives which benefit our people first.

Indigenisation will not create the necessary economic momentum because it is not a creative process, but rather a policy based on taking ownership of already existing and somewhat old enterprises.

We must look outside indigenisation to better and broader local economic empowerment strategies and if necessary protect our economy to allow sustainable capacity building and revival.

Rich countries became rich through industrialisation and the promotion of vibrant local business while protecting their industries from foreign competition to allow themselves to build the necessary momentum and capacity. We must do the same.

In one of his Appendices in the book, Reinert includes Phillip von Hornigk's "Nine Points on How to Emulate Rich Countries" written in 1684, well before Adam Smith in 1930. Hornigk is the author of a book which outlined Austria's strategy in 1684 which resulted in the greatest increase in Austria's wealth over 100 years.

I have just extracted the relevant points and attempted to be as brief as possible, while paraphrasing and consolidating those issues raised by Hornigk:

The first point he raised is that any country should inspect its soils with greatest care, not to leave any agricultural possibilities of a single corner or clod of earth unconsidered. Every useful form of plant under the sun should be experimented with and considered for adaption to the country.

Agriculture remains the cornerstone of our economic revival, hence we must do all we can to restore a vibrant market-driven agricultural sector with minimal government interference.

We must also increase our research capabilities so that we come up with new methods and products.

Secondly, Hornigk says no trouble or expense should be spared to find gold or silver and keep it.

Gold and silver, once in the country, whether from own mines or obtained by industry from other countries, are under no circumstances to be taken out for any purpose. They should never be converted into any use which destroys them.

We must therefore invest in more exploration and re-examine the bottlenecks which continue to stifle minerals production. Zimbabwe can achieve the production of 100 tonnes of gold per annum compared to the current 25 tonnes. However, we must do all we can to increase our gold reserves by dealing with leakages and if we can, avoid the need to convert all of it into cash and build our own reserves.

The third point he raises is that all commodities found in the country, which cannot be used in their natural state should be worked up within the country since payment for manufacturing generally exceeds the value of raw materials by two, three, 10, 20 or even hundred-fold and the neglect of this is an abomination to prudent management. In carrying out this, there is need for citizens to cultivate the raw materials and working them up. Therefore, people should be turned by all possible means from idleness to remunerative professions instructed and encouraged in all kinds of inventions -- arts and trades and if necessary, instructors should be brought in from foreign lands for this.

This basically means we must create employment and stifle the importation of finished products, but add value locally.

Fourth; the inhabitants of the country should make every effort to get along with their domestic products to confine their luxuries to these alone and to do without foreign products as far as possible. If necessary, such foreign products should be exchanged for other wares and not for gold or silver. Our government must lead here and the imminent introduction of sectorial-based local content policy is a move in the right direction. I however think that industry and not government needs to lead the effort. We must aggressively promote the "Buy Zimbabwe" philosophy.

Fifth; such foreign imports should be obtained in their unfinished form and worked up within the country, thus earning the wages of manufacturing there.

Except for important considerations, no importation should be allowed under any circumstances of commodities of which there is a sufficient supply of suitable quality at home.

In these matters, neither sympathy nor compassion should be shown to foreigners, kinsfolk, allies or enemies. All friendship ceases when it involves my own weakness and ruin. And this holds good even if domestic products are of poor quality or even higher priced. For it would be better to pay for an article two dollars, which remain in the country than only one which goes out.

Lastly, opportunities should be sought night and day to sell the country's superfluous goods to these foreigners in manufactured form for gold and silver if possible and their consumption must be sort in the farthest ends of the earth and developed in every possible way.

Regional integration is therefore key. The Sadc and Comesa markets for example, have a total of 600 million consumers who can buy our goods and services. We are also strategically placed in the centre of the region.

Now if this is not economic theory and practice simplified, I do not know what is.

I have always argued that to come up with economic policies is a simple matter; for its principles are universal and proven. What matters is the value system of leadership and the ability to implement, manage and allocate resources prudently.

It is the ability of skilled technicians, prudent accountants, ethical lawyers, experienced engineers and disciplined administrators, industrious farmers, good miners and creative entrepreneurs all of which we have in abundance, both locally and in the diaspora, which can unlock our potential. Ours is to merely harness their skills and create the necessary space for them to do what they do best.

A compelling inclusive national vision which accepts the above principles as sacrosanct, combined with competent management and an alignment of consistent government and well-thought out policies can truly unlock our full potential as a country, improve our quality of life and create wealth for ourselves and generations to come.

Musewe is an independent economist.

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