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Dr Gift Mugano

Zimbabweans are at cross roads. Economic indicators shows that our economy is in a bad state. One fellow asked me what needs to be done to get the economy going. My answer was simple. This country needs political will, unity and genuine patriotism for it to move forward. As you can see, I didn’t mention that we need capital. Money is not a problem but political will, unity and patriotism. I repeat.Today Zimbabwe’s economy is mirrored with a number of economic challenges chief among them inter alia include low productivity in the real sector, ballooning trade deficit, low savings, dwindling fiscal space, subdued foreign direct investments (FDIs), deteriorating infrastructure, unsustainable national debt and high cost drivers.

For starters, investment and domestic savings which peaked in 2010 to 21,7 percent and 5,9 percent, respectively and later went on a sustained decline to 12,5 percent and -17 percent of gross domestic product (GDP) in 2015, respectively.

In the same vein, our bank deposits are 0,28 percent of GDP while in South Africa they are in the range of 59percent.

The sluggish growth is mainly on account of a number of factors, chief among them being limited financial resources to support growth-enhancing social and infrastructure investment, low industrial capacity utilisation, and depressed domestic demand.

External lines of credit remain largely subdued due to the country’s low credit rating on account of the high debt overhang (US$8,4 billion), and lending-sanctions by international financial institutions, on account of high external payment arrears (81percent of the total debt).

In addition, the external sector remains in a precarious position, with a current account deficit of 27,4 percent of GDP, against the Southern African Development Community (SADC) macro-economic convergence target of less than 9percent of GDP.

With respect to the cost of doing business, compared to the Sub Saharan Africa region, Zimbabwe’s ease of trading across borders is costly and time consuming. It takes close to 2 months to export from Zimbabwe and close to 2,5 months to import to Zimbabwe while the average for Sub Saharan Africa for both importing and exporting is around one month.

With respect to the productivity of the real sector (agriculture, mining and manufacturing, in particular), Zimbabwe is lowly ranked amongst major players in Africa like South Africa, Zambia, Kenya and Mauritius.

Recent International Labour Organisation shows that productivity per Zimbabwean worker on average is $3 262 while in South Africa, Zambia, Mauritius and Kenya is $44 422, $8 937, $42 229 and $6 515, respectively.

The numbers gets even uglier for Zimbabwe when one looks at productivity per work in the agricultural sector which comes to around $422 per worker.

Labour productivity is a core indicator of several economic indicators as it offers a dynamic measure of economic growth, competitiveness, and living standards within an economy.

On an annual basis, Zimbabwe is experienced a negative percentage growth in labour productivity annual growth (-0,82 percent) in 2015 while Kenya, Mauritius, Zambia and South Africa witnessed labour productivity growth rates of 2,8 percent, 3,2 percent, 3,6 percent and 0,85 percent, respectively.

Yes we have our obvious problems affecting productivity especially in the agricultural sector but to be quite frank I don’t think that it will be fair to admit that our current position is justified by our circumstances.

Together, we can undo these circumstances. We don’t need to guard our farmers as they produce as in the Smith regime.

Dealing with climate change, access to markets and finance is a much simple task in a peaceful country. All what is required is political will, unity and patriotism.

With respect to trade deficits, Zimbabwe had a sustainable trade deficit of around $3 billion per month since dollarisation.

This means that cumulatively, our trade deficits have reached a staggering figure of around $24 billion. This is almost $27 billion which is required to finance the Zimbabwe Agenda for

Sustainable Socio-Economic Transformation (Zim-Asset).

In my opening paragraphs, I indicated that Smith had to clandestinely export goods to the UK, Europe, the Americas and Asia via South Africa. We don’t have to do that.

We have to first look at the import bill first and see which imports we can substitute with locally produced goods. My observation is that

Government is one of the key importers.

So, if Government can say cut all its car imports and press its orders with our local car assembling companies like Quest and Willowvale Motor Industries is it a difficult thing to do? Is it too much to ask if our Ministers are going to drive Triton Mitsubishi and Mazda BT50 manufactured locally?

Our national debt together with dwindling fiscal space requires us to deal with issues like financial discipline and total elimination of corruption both in public and private sectors. This doesn’t not require money to address it but political will, unity and patriotism.

The mysterious $15 billion which disappeared in Chiadzwa is one such tragedy which will be forever be remembered in our history since the same amount could have cleared our debts and left a good figure to support our national budget.

Deteriorating infrastructures line roads, transport (especially air and rail), energy, water and information communication technologies requires our concerted efforts in rehabilitation and new constructions.

I have indicated that Smith took only three months to build a 120 km railway line from Rutenga to Beit Bridge. How many years do we need to build a new railway line which connect Harare and Chitungwiza?

How many years do we need to rehabilitate all our power stations, remove the old machinery put under Smith regime and install new equipment which cope with the demands of the modern day? How many years do we need to deal with problems at Air Zimbabwe and National Railways of Zimbabwe?

Savings are a critical enabler for investment and economic growth. The problem we have at hand is that we are experiencing negative savings — we are dissaving.

This is compounded by the fact that bank deposits are very low, that is, 0.28percent of GDP. The questions is who should be the key player in rectifying this problem?

The banks are the culprits here. It is open secret that without savings and bank deposits the going concern of the banks is threatened.

Actually, in the recent Global Competitiveness Report, the Zimbabwe’s financial sector’s soundness was ranked at 135 out of 144 countries. This is not a surprise. How do you expect a bank to be sound if it has no savings and bank deposits? This is why the banks must be worried more than anyone else.

In as much as we all know that savings are a function of income, in Zimbabwe, banks’ multiple charges have become a serious threat to any effort to boost savings.

Now the question is how long does the banks need to smell the coffee and cut bank charges and most importantly provide incentives for households and economic agents to save the little they have?

In as much as it is difficult to exhaust all our problems in this issue what is clear in my view is that in times like these we need to deal with issues which does not require money but we need to carefully look at things which requires us to reprioritise our limited resources in a productive manner, remain united in dealing with our national challenges and always avoid crocodile tears.

Together we make Zimbabwe great!

UDUGU!

Dr Mugano is an Economic Advisor, Author and Expert in Trade and Competitiveness. He is a Research Associate of Nelson Mandela Metropolitan University. Feedback: +263 772 541 209 or [email protected]