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It is a predominant narrative in Zimbabwe to worry about the ongoing liquidity crisis. Supposedly, there is not enough finance within the formal economy, both as a means of its transaction function and in terms of vitalising firms’ balance sheets.

The notion in itself is credible, but we must be prudent and find specific clarity in finance’s effective utility within our specific macro-economic context. We would like to warn of the limitations that finance itself has in solving Zimbabwe’s economic woes in the long term.

Initially, it is important to understand that Zimbabwe’s continued problems have arguably been exacerbated by a lack of industrial competitiveness. Industrial competitiveness is a two pronged approach.

It is categorised into the comparative advantage of a specific means of industry, and then the effective use of finance to enhance the productivity competitiveness of that identified industry. Unfortunately, the former has become overlooked in Zimbabwe, causing an over-emphasis on the effective use of finance only.

Lessons can be learnt from a historical anecdote of how Zimbabwe’s first ever industry was developed. The tobacco industry was the first industry in Zimbabwe. It has been very important to the economy of Zimbabwe for close to a century now. According to an account by historian Peter Baxter, its inception can be credited to one Mashonaland agriculturalist called GW Oldum.

As Baxter’s account goes, during the time after Rhodes’s death, the deceased left a white settler society unsure of how to create sustainable industrial base for the development of a country. Mining had not taken off as had been hoped. Oldum was curious as to whether agriculture could be an effective cornerstone for industrial development. Following a lead that tobacco might be a desirable cash crop, Oldum took a trip to the United States where he meant to study the growing and marketing of tobacco. After a year’s study in the US, Oldum brought back the Virginia leaf.

He realised that if planted along the central watershed region of what was then Rhodesia, the Virginia leaf would have a comparative edge on other tobacco found in the African region at that time. After subsequent years of improved growing, processing, and market organising of tobacco, the crop did manage to be a significant industrial nucleus for the development of the country’s economy — it still is today.

At this very moment in Zimbabwe however, we have plenty of industries struggling to stay viable. And as extreme critics have labelled it, Zimbabwe is going through a period of de-industrialisation. An astute observation would be to notice that substantial financing and cumulative shareholding penetration by foreigners has become a desirable trend for many of our suffering industrial players.

Responsive to this chosen discretion by our industrialists, it has become incumbent on government to spearhead the search for foreign financial investment into the country. Within these fast paced foreign-indigenous exchanges and predominant government discourse, I advise that we draw a step back and ask two fundamental questions: To what extent can foreign finance resuscitate industries struggling to remain viable? Is the over emphasis to resuscitate non-viable industries overshadowing the need to develop entirely new industries?

Consistent with the chosen historical narrative, it has been frequently argued that the current Zimbabwean economy has retained and to an extent, has prolonged a Rhodesian UDI model. In agreement with this argument, one can deduce that at this juncture viability for some industries is really no longer a reality.

Some industries may have lost their comparative advantage. An over emphasis of financing such industry could be clouding the need for entirely new industrial development.

Perhaps then, in both our foreign-indigenous exchanges and predominant government discourse, the Zimbabwean economy must start to not only look for foreign finance, but to venture into seeking new industrial development ideas altogether! That means Zimbabwe must start again to reflect on the potential comparative advantages that certain industries offer our economy.

A quick perusal of recent foreign investment deals will reveal that we are not consciously seeking out anything new in terms of industrial conception. For instance, while his investments are definitely a welcome event, Dangote is leading with cement. The Tanzanian firm acquiring Blue Ribbon is supposedly just bringing in finance, no new means of food processing technology.

Moreover, while mega-deals with the Chinese and Russians are meant to bolster our infrastructural base, these deals still lack new industrial means of economy which are meant to derive the long term benefit from having such an infrastructural set-up.

Zimbabwe desperately requires new industrial means of economy to look forward to in the long term, and such industry will have to harness comparative advantage in our economy.

Very few observers and analysts have spotted an important detail missing in Zimbabwe with regards to our foreign-indigenous exchanges. As evident in the Blue Ribbon case for example or even further established within the Telecel shareholding saga, Zimbabwe tends to play finance and not strike for technological transfer. That is an inadequate design. Instead, we must be pursuing technology transfer that justifies the financial investment.

There is a subtle but profound difference, and both the aforementioned deals seemingly miss this point. Admittedly, Zimbabwe does have a formalised liquidity and capitalisation shortfall, but finance is useless without it being invested in the necessary technology to harness a comparative advantage.

Thus, while our industrialists and government are seeking finance to recapitalise balance sheets and utilise the transaction function of money, it is hard to improve productivity competitiveness of an industry that lacks any potential comparative advantage. That is the limitation of finance within our macro-economic context.

This is a lesson we can revert back to Oldum. Rhodesia at the time was full of liquidity and equity shareholding through the British South Africa Company. Yet, there was still no industry to show for all this financial backbone.

Even if Zimbabwe gets ample finance now, we would be in similar predicament. Before finance reached its full utility, Oldum initially had to identify industry with a comparative advantage.

He did so by finding that the Virginia leaf planted in the USA would be just as effective if grown on the specific soil found on the central watershed region of Zimbabwe (technology transfer).

Only after this industrial conception and identifying of comparative advantage was finance used as a means to enhance the productivity competitiveness of a local tobacco industry.

Oldum’s exploits remain one of the best foreign-indigenous exchanges in this land’s history, and it is still a model to be admired.

What we can also learn and find optimism from Oldum’s story is that to develop a new industry in a country, it actually does not have to be new the world over. That industry may already be out there somewhere else.

Some of our modern businessmen have done this before. The dawn of wireless telecommunication technology can be highlighted as one of the more recent industrial adoptions in Zimbabwe. For near two decades now, our economy has strived from this industrial development.

Assuming your understanding that finance has its limitations within our dire macro-economic context, perhaps then we should encourage that in our foreign-indigenous exchanges we place adequate emphasis in seeking out new industrial ideas as well.

Ideas that are meant to exploit potential comparative advantage which we can ride on for some time to come. – Wires.