Zimbabwe: Zim Problems a Result of Political Toxicity - Binha

interview

CEO Africa Roundtable will soon host African chief executives, bankers and investors in March this year, as part of their programme of action in 2020. Business reporter Kudzai Kuwaza (KK) spoke to CEO Africa Roundtable chairperson Oswell Binha (OB) on this issue, as well as the organisation's investment drive, the economic outlook and the political gridlock in Zimbabwe, among others. Below are excerpts:

KK: What is your programme of action as CEO Africa Roundtable?

OB: As CEO Africa Roundtable, we always pride ourselves as a platform that brings together CEOs from the diverse sectors of our economy within and beyond Zimbabwe to interact, connect and transact. For 2020, we have put together an ambitious programme that seeks to expose our constituency to global opportunities and these include high-level conferences, trade and investment missions, executive development programmes and policy dialogues.

Allow me to also highlight that The CEO Roundtable will host international gathering for African CEOs, bankers and investors, board chairpersons and entrepreneurs from March 18-21, 2020, in Victoria Falls, Zimbabwe, under the theme, Industry 4.0: What's in it for Africa? We are expecting to host a total of 450 delegates. This is coming at a time when technological change is transforming the global business like never before, increasing competition, shifting customers' tastes and requirements. The globalisation of markets and the changing demographic trends are drastically altering how companies operate in almost every region and industry in the world. CEO Africa Roundtable 2020 aims to assist CEOs and senior executives in different sectors to harness converging technologies in order to create an inclusive CEO who is prepared for the future. This is an opportunity to create smart and modern African CEOs.

In keeping with the aims of the CEO Africa Roundtable, the new edition will enable participants to attend a number of conferences featuring top-level debates on how to foster conditions favourable to the strategic development of the continent's leading businesses. Alongside these discussions, we will also see the introduction of new Deal Rooms. This innovative meeting format, which has proved especially popular with participants, offers CEOs and investors the opportunity to identify new partners and share their experiences and good practices in the sector of activity.

KK: You have sent delegations to scout for investment in Zimbabwe. Can you tell us more about this?

OB: This is one of our key functions and, accordingly, we have done several of these missions before to destinations such as US, Zambia, the Netherlands and Mozambique. We are of the conviction that unless they are private sector leaders with the fortitude to engage and negotiate business deals, real inward investment into the productive sectors will remain elusive. We are happy with the progress we have registered so far and our members are seized with processing some of the transactional arrangements out of these missions.

The investment and trade missions are wholly a private sector initiative, sought to enhance access to economic development and business opportunities for the delegations through expanded networks, trade and investment arrangements, joint venture partnerships and access to key technologies.

More importantly, the missions also sought to sell the country as a mature investment destination and engage the Zimbabwean Diaspora. This is informed by a realisation that, after decades of consistent political experimentation and sluggish development, Zimbabwe is at the cusp of potential growth take-off on the bedrock of new national thinking. This potential cannot be realised without a dynamic private sector with the fortitude to engage and re-engage business partners across the world to foster entrepreneurship, build strategic business partnerships and crowd-in private investment.

KK: What challenges have your delegations faced during their investment scouting trips?

OB: While we acknowledge the weaknesses of internal public-private dialogue, absence of convergence and consensus on a number of economic issues, one naturally has to defend the country regardless of its internal and external weaknesses. Zimbabwe has undergone negative country appraisals for several decades now. It is considered to be a high-risk investment destination, thus unsuitable for investment.

The perception that foreigners are ignorant about the country is misplaced. Global and regional investors engage in elaborate due diligence processes before embracing any foreign delegation. One has to equip themselves to provide factual and correct appraisal of the identified opportunities

Investors make a competent comparative analysis of different investment destinations. Zimbabwe competes very well on all fronts, save for observance of the rule of law, property rights and national policy inconsistencies. Government representation on our delegation for some destinations is low.

Majority of bankable public projects are affected by red tape and sometimes are structured to meet government's desire to meet their social service needs rather than making economic sense. Investors struggle to permeate government red tape to engage in their own due diligence of some of identified public opportunities.

Ease of doing business is key including commitment to prioritisation of repatriation of dividends and profits as a key confidence-boosting factor. The reality is that Zimbabwe is notorious for breaking commitments and changing goal posts on a number of bilateral and multilateral agreements undermining its own credibility. Trust is never bought but earned. Lastly, investors believe that private sector players are more dependable on providing them with facts and independent opinion, leading to investors making informed investment choices and decisions.

KK: What are your expectations in 2020 with regards to the performance of the country's economy?

OB: I am extremely concerned that the country may gravitate from gradual decline to sudden collapse. While all economic indicators point northwards, we do see the state's body language as very composed with no signs of urgency in resolving the constraints productive sectors are experiencing. The risk of high company mortality rate is high in 2020. I anticipate that the economy shall remain rocky, with increased volatility, uncertainty, complexity and ambiguity.

The role and decision making by the chief executives shall continue to be a critical cog in navigating this toxic business environment to keep companies afloat. They have no luxury of procrastinating decisions. Their preoccupation, sadly, is in investing their expertise in managing business survival rather business growth.

Industry is caught up in a squeeze of declining domestic demand and escalating costs, critical skills flight, lack of disposable incomes, crippling energy crisis, flip flops in policy regime and increasing costs of key enablers. While the government appears to attend to these negative economic problems as an afterthought, industry continues to grapple with a monetary regime and fiscal structure that change by the stroke of a pen, with exchange rate depreciation driving an upward cost spiral.

To reverse these, government must deal with:

l Business confidence-building measures and indicators, largely on macro-economic stabilisation efforts. Paying lip service to the currency conundrum will continue to drive the country to an economic precipice. Business has not fully embraced the use of local money alone. Existence of an interbank market in its various architecture exacerbates market distortions. Disparities between the interbank and the willing-buyer willing-seller platform drives pricing disparities hence its being inflationary;

l Reduce a bloated civil service gobbling over 80% of the national budget in employment costs and conditions of service;

l Furthermore, civil servants must choose either to engage in productive agriculture or to be gainfully employed in government. Both agriculture productivity and efficiency in state institutions suffer because of conflict of interest. The majority of civil servants own the best productive land in the country.

There is a nexus between economic efficiency and financial accountability as well as reporting. Stopping resource and induce increased performance is catalyst to state incremental performance. The auditor-general has made incriminating audit findings in a number of state institutions and the expectation that the law would take its course is legitimate. It is a confidence-building measure. Furthermore, genuine corruption elimination processes will increase confidence in the economy. Cartels, perceived or real, must be destroyed. Rule of law is a key ingredient in attracting foreign direct investment. All the key arms of the state must not be misunderstood to be promoting threats to security of property, expropriation and theft. Collective state accountability is instrumental in providing leadership to a culture decent work and honest living among citizens.

OB: The country's capacity utilisation has shrunk from around 57% in 2011 to below 40% currently. What is needed to breathe life into this sector?

KK: The recent phenomenon of uncontrolled and unstructured informalisation of the economy continues to militate against all collective efforts to increasing production. If you cannot measure it, you cannot manage it. We are creating a catastrophic dual-enclave economy, alongside an underground economy whilst superintending over the death of an integrated, structured formal economy. The role of organised business in our economy has been decimated.

It therefore points to an expected drastic reduction in capacity utilisation in 2020. The CEO Africa Roundtable is currently undertaking an evaluation of how many companies have failed to open shop by January 2020. Company operations affected to near-closure by the 18-hour load shedding, absence of key enablers, hyperinflation and low aggregate demand are increasing with some opting to institute care and maintenance to reduce operational costs.

Large-scale gold producers have gradually gone extinct. The introduction of the new taxation regime in the new finance instrument, which came into effect in January 2020, will force exporters to close shop. Exporters are already grappling with surrender requirements of up to 55% in some sectors, government has gone ahead to invoke payment of taxes and other statutory obligations in foreign currency, wiping away the remainder of the exporters export proceeds.

OB: How important is it that the political gridlock between President Emmerson Mnangagwa and opposition MDC leader Nelson Chamisa be resolved in the interests of the economy?

KK: As a student of Business, Peace, Leadership and Governance, I strongly believe Zimbabwe's perennial problems have never been economic. The problems are a clear manifestation of institutionalised power politics. The country boasts of a large endowment of competitive economic ingredients. If these ingredients are sustainably exploited our economy would grow hundredfold. All economic sectors have potential for double digit growth.

Progressive economies develop on the back of a progressive political culture whose tenets are founded on constructive political competition. Political competition is healthy where there is free choice, constructive debates on national issue, competition on superiority of progressive ideas, respect for the citizenry and the citizenry aspirations, the national constitution.

OB: Stockbroking firm Morgan & Co Research has urged Zimbabwe to join the Rand Monetary Union to resolve the prevailing currency volatility. Is this a view you subscribe to?

KK: Zimbabwe's problems are not monetary. The country has a huge production gap which presents South Africa with an easy opportunity to expand its market. We have a weak financial management architecture which has potential to make any currency unsuitable. It is a structural problem.

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