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Minister Chinamasa

Zimbabwe’s dire economic situation is in need of radical policies, policies that work as part of a wider strategy to ignite rapid economic growth over the next five years. The solution is not to be found in fearful protectionist policies, neither is there hope in the orthodoxy of textbook economics. Our salvation is in bravely embracing the counter-intuitive realities of a fast-changing global economy. Chinamasa must accept what to many will seem like madness and strategically scrap import duties. I speak of a strategic scrapping, not a mindless overturning of the status quo.

In some instances the import tariff regime should actually be intensified. An example would be water. We are currently importing bottled water from South Africa. It is a ridiculous state of affairs.

I would very much support the introduction of prohibitive levies against imports of bottled water. I cannot imagine that anyone can make a persuasive case for hauling water from South Africa. It is clearly an industry that we have the capacity to satisfy.

However, there are a number of areas were import levies do not serve to protect local industries. Consider motor vehicles. There is no local motor industry to protect. I am told Mazda has a pathetic assembly capacity of a few hundred vehicles a year. The only reason why import duties are levied on vehicles is to generate income. This is not in itself a problem but it is important to have this fact in mind when formulating policy. It must be clear that we are imposing these import duties simply to raise money.

This admission then allows us to examine whether or not this is the best way to raise money. Another interesting area is the textiles industry. I cannot see how our manufacturers can ever compete with the Chinese. Even if we gave them everything they claim to need, this is an industry that we will not win back. The Bangladeshi sweatshops are beyond reach for our spoilt arrive-at-eight-tea-at-ten workforce. Again, import duties levied on textiles are merely an act of revenue generation.

Talk of protecting local industries is romantic but empty. There is nothing to protect. Even the British have since given up and allowed China to take over. Burtons, the suit makers, moved their operations to China many years ago.

Strategic taxation
It is tempting for any government to tax as quickly and as heavily as it can. This temptation must be resisted in favour of downstream industries. Take motor vehicles for instance. An individual can purchase a vehicle for $900 from an online Japanese car sale and land it for a little over $2000. Once the nasties at Zimra get involved, that figure can easily shoot to $5000. In some instances, the import duty is greater than the value of the car. This is problematic on a number of fronts.

The most obvious is that it is just plain simple unfair. It does not make sense that Zimra earns $1200 in revenue on import duties and the car dealer (who has done all the work) goes on to only make a paltry $600. The transaction violates every rule of equity. The less obvious but more serious problem is the bar to entry that this sort of punitive tax imposes. The majority of our people earn modest wages. This makes $5000 a considerable sum. By pushing car prices up to $5000 what we are effectively doing is excluding a considerable section of our population from participating in the Motor Vehicle Economy.

The Motor Vehicle Economy
The government can choose to make a killing at the point of entry and, in the process, prevent hundreds of thousands from joining the motor vehicle economy or it can adopt a more strategic approach. The latter will prove more profitable in the long term. Consider what happens when one buys a car. They purchase fuel, a certain amount every month. Let us say $100 worth of fuel for argument’s sake. If the car has a life span of five years that translates to $6000 worth of spending in the economy.

chisuicture6Chisumbanje would readily acknowledge the force of this argument. The more cars on the road, the more fuel stations we need, the more fuel tanker drivers, fuel attendants and so on. A vibrant Motor Vehicle Economy will create jobs. This is only just the beginning. These cars need to be washed and car washes are already popping up across our cities.

Unskilled labour is finding employment. The young mechanic finds himself busier and takes on an eager apprentice. The Nigerian chap selling car parts finds that more people are buying his spares and opens an additional shop, employing more people. The insurance companies will equally see an increase in business. Simply put, the more cars that we have the greater activity we have downstream.

My point is quite straight-forward. We need to consider strategically lifting import duties in cases were the potential downstream industries are such as can bring about greater economic activity. We cannot compromise economic growth for the passing pleasures of easy revenue. This is not to say we must scrap import duties on all vehicles; that would be absurd.

The person seeking to import a $45000 Mercedes Benz will not be entirely excluded from the Motor Vehicle Economy because of import duties. The worst that can happen is that they will purchase a cheaper vehicle. This is not the case at the bottom of the food-chain. The poorer people will likely fail to raise $5000 and will end up not joining the motor vehicle economy. If the $2000 they have at hand is then spent on a bed, a fancy television or sofas, such a purchase is unlikely to lead to significant downstream economic activity.

It would be ideal if taxes were entirely scrapped for vehicles that fit within the bottom-of-the-food-chain category. This would allow the less well off to purchase a vehicle for a little over $2000. The seeming loss of revenue will be compensated for by the increased economic activity in downstream industries.  The more cars are on our roads, the more we make from tollgates, road taxes, parking charges, driving schools and so on.

waltermzembi1Mzembi’s Disney Vision
There was not a little derision from opposition quarters following ambitious statements by Walter Mzembi in which he detailed plans for a mega complex in Victoria Falls. It is a fantasy, they mocked.

You will destroy the environment, one white ‘conservationist’ remarked in paternalistic tones. So polarised is our politics that one gets the feeling that the other side hopes the entire nation simply grinds to a halt. Let’s come back to Mzembi in a minute. Consider handbags, clothes, televisions, radios, mobiles phones and other shopping delights that are being produced at ridiculously low prices in China. In an attempt to fight back and ‘protect’ local industries, governments have imposed vicious import levies. We began by observing that in the case of Zimbabwe, the argument for protecting local industry can no longer be made for many products.

It is simply revenue generation. Once we accept that our real motive is revenue generation, we open ourselves up to more imaginative policies to raise revenue. If Government completely scraps import duties for shopping goods from China, this could potentially position Zimbabwe as the shopping capital of Africa. Mzembi’s vision can be expanded and would marry perfectly with such a status. Our money would be made from trivial assembly, breaking bulk and the downstream industries that would flow from such a policy. One will recall that many years ago, the people of Botswana would drive into

Bulawayo to shop.
The rest of the region is trapped in futile protectionist policies. This gives us quite a head start. We have the opportunity to fully open ourselves up to imports from Chinese manufacturers and to demand concessions such as local assembly plants for stoves, microwaves, furniture and so on. Instead of African shoppers flying to unfamiliar China to purchase cheap goods, Zimbabwe can quickly become the destination of choice.

Air Zimbabwe and the greedy chaps at CAAZ would not be displeased. Such a policy would immediately reverse the trade imbalance with South Africa. It would be the case of South Africans flocking to Zimbabwe to get the best value for their money. South Africa is especially vulnerable because of the power of its unions.

Labour has squeezed the government and lobbied for the imposition of heavy import duties against Chinese textiles. This presents a problem for a department store trying to bring in 1000 containers of clothes but hardly affects the individual who flies back into the country with a bag of new clothes. That individual should be flying back from Harare.

Beira high-speed rail
The Chinese would readily embrace such an opportunity and fund the construction of a high-speed rail connection linking Beira to Zimbabwe as well as highways toward the same end. It is this construction of supporting physical and policy infrastructure — to allow seamless movement of goods — that can give Zimbabwe a considerable advantage if other countries in the region later decide to embrace similar policies. This investment must not only be in physical infrastructure.

Government must push Chinese as a language and encourage thousands of our young people to learn it. China is eager to grow its soft power and will enthusiastically fund such initiatives. All this works together to create an environment in which China finds it convenient to trade with Zimbabwe.

Online shopping
If Zimbabwe quickly establishes itself as a fully committed Chinese partner in the region there are vast opportunities for our young people. Shoppers in Kenya will find it easier to simply go online to buy a few dresses and receive them via courier from Harare. Online shopping can easily become a big business.

The question is whether or not Zimbabwe is ready to forego the quick pleasures of punitive taxes to embrace a more strategic policy of economic growth through strategic partnerships. Many fear China’s cheap manufactures, this fear is misplaced. Those who quickly embrace and exploit the opportunities presented by China’s manufacturing power will enjoy considerable economic benefits. The crumbs that fall from the master’s trillion-dollar table can feed a small nation.

Immigration
There is a visceral dislike of immigrants that I find troubling. Nigerians are not a problem. Those who violate our laws must be dealt with as we do with other criminals. If it is the case that they are engaging in socially repugnant activities, such as marrying locals merely for immigration purposes, then laws must simply be tightened to frustrate such activity.

It cannot be the case that we shut foreigners out because of a few bad apples. Overall, I find immigration quite beneficial. For one, it places a demand on services leading to greater economic activity. The more foreigners we have, the greater the need for international schools. The greater the need for housing and flights connecting to different nations. We ought to embrace immigration and make it easy to come to Zimbabwe. Entirely scrapping the visa for Africans will do us no harm.

What we simply need are law enforcement measures to keep track of who is here. Zimbabwe must be the place where it is easy to fly in, open a bank account, do some shopping and fly back out. Policies must work in concert. It cannot be the case that you are trying to make Zimbabwe the shopping capital of Africa but at the same time be imposing an onerous visa regime.

agriculture2Agriculture and Mining
Zimbabwe has the highest mineral wealth per capita in the world. We have the world’s largest diamond reserves, second largest platinum reserves and over 40 exploitable minerals. If our minerals are properly leveraged, this has the capacity to give Zimbabwean citizens great wealth. One cannot manufacture diamonds, platinum or gold. You either have the resource or you don’t.

The question is whether or not we can build a framework in which these minerals provide the greatest benefit to locals. Thus far we have failed. There has been encouraging talk about contract mining where government simply hires expertise to extract the mineral at a cost. Whatever framework we end up adopting, our minerals alone have the capacity to generate wealth to sustain our people. The problem is we have not come up with an effective way to leverage them.

0 000arthur_mutambara_2009Mr President, where is Arthur Mutambara?
I routinely make fun of Mutambara’s bombastic and sadly rather adolescent style of delivery. I will say it again: the man lacks social intelligence.
However, he is supremely competent at policy level and has an ability to synthesise large amounts of information and to generate coherent Government policy.

One cannot question the wisdom of the President (actually we can) in excluding him, but I would have imagined he would have made an excellent choice for senior minister of state without portfolio.

Mutambara is quite a useful intellectual mercenary and I hope a place can be found for him. He is an asset, albeit an irritatingly juvenile one.

Ndatenda, ndini muchembere wenyu Amai Jukwa.

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