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Dr Gift Mugano
Zimbabwe’s universal problem at this juncture can be summarised as lack of competitiveness. So defined is the problem is that we need to up our game especially now in the face of strengthening United States Dollar against major currencies which include the South African Rand.

The Rand, since 2011, has depreciated by more than 100 percent. This situation has made imports extremely cheap.

In layman terms, it means that our importing retailers can now buy double the quantities of the same good for the same amount used in 2011.

This, coupled with deteriorating microeconomic factors like lack of reliable electricity and high cost drivers, makes it very difficult for local companies to both supply local market and export.

Government is making frantic efforts to address national competitiveness. To this end, Government is finalizing the development of the national competitiveness report which will act as a dashboard in flagging areas of competitiveness challenges and calling for dialogue to collectively address the problematic areas.

In the same vein, through the Office of the President and Cabinet, Government is working on a 100 day Rapid Results Agenda which, by 21 December 2015, aims to address the following areas affecting national competitiveness:

• Starting a business;

• Property registration and construction permits;

• Protecting Investors and enforcing contracts;

• Getting credit and restoring insolvency;

• Paying taxes and trading across borders

In addition to this, there are other frantic efforts which are underway such as branding Zimbabwe campaign led by the Ministry of Tourism, establishment of the National Competitiveness Commission by the Ministry of Industry and Commerce, Electricity and Solar Energy generation programmes led by the Ministry of Energy and Power Development, debt clearing efforts led by the Ministry of Finance and Economic Development and road rehabilitation programmes led by the Ministry of Transport, etc.

This is very clear that we are heading somewhere. However, without concerted effort from non state actors the war against uncompetitiveness is difficult to win.

At this juncture it is important to bring in the role of non state actors such as academia, private sector and development partners in addressing national competitiveness.

To buttress the importance of the Non State Actors, Global Competitiveness Report (GCR) shows that Zimbabwe scored badly in the category of access to finance, innovation, business sophistication, labour market efficiency and goods market efficient.

These specific thematic areas falls largely in the constituency of non state actors.

About 25 percent of the surveyed companies indicated that lack of finance was a major challenge bedevilling the local industry.

The limited access to finance reflects the severe liquidity conditions in the economy.

Following the adoption of the multiple currency system in 2009, the Reserve Bank lost the ability to implement monetary policy apart from its peg to international currencies.

Moreover, the banking deposits are mainly demand deposits, which are transitory in nature, and thus limit credit creation by banks.

The low-income levels obtaining in the country has also reduced the propensity to save resulting in a narrow deposit base.

The high demand for loans has pushed up interest rates and as such, the cost of borrowing is now very high.

Although the country has been able to access offshore credit lines to ease the financing challenges, these have been mainly short term as opposed to the much-preferred long-term financing. The perceived country risk has also resulted in high interest rates compared to other countries in the region.

The high cost of finance negatively affects competitiveness among local firms.

Addressing access to finance requires concerted efforts from both Government and private sector. Government is doing its part in addressing the debt problem.

However, the financial sector is mum on how it is planning to bank the informal sector which will then unlock funding for the productive sector.

With respect to goods market efficiency, the Zimbabwean goods market is perceived to be inefficient as a result of the liquidity challenges and low aggregate demand in the economy.

A country’s goods market is considered to be efficient when it can produce the right mix of products and services given their particular supply-and-demand conditions, as well as to ensure that these goods can be most effectively traded in the economy.

Healthy market competition, both domestic and foreign, is important in driving market efficiency.

This requires a great deal business commitment to address productivity through the establishment of clusters and value chain initiatives.

With respect to the labour market efficiency, the country’s overall labour market efficiency ranking improved marginally to 137 in the 2014-15 GCR report from 140 a year earlier.

Zimbabwe does well at utilizing women in the labour force. It also scores well on professional management.

The constitution of Zimbabwe provides quotas for women’s representation in the legislature and the country encourages participation of women in decision-making positions in the public and private sector.

But Zimbabwe ranks in the bottom 3 in terms of hiring and firing practices, flexibility of wage determination and pay and productivity indicators.

The Government is currently revising its labour laws to make them more flexible to allow for productivity-based remuneration as well as to facilitate hiring and firing in line with developments in the respective companies.

Competitiveness means increases in productivity reflected in increased wage levels and more job opportunities.

This means moving beyond a “zero-sum” mentality between employers and workers.

It means finding improving the efficiency and flexibility of the labour market and reducing barriers to hiring or to enabling workers to move from one job or industry to another.

The flexibility of labour markets is important to shift workers from one economic activity to another rapidly and at low cost, and to allow for wage fluctuations without much social disruption.

When it is very hard and costly to let workers go, firms are reluctant to hire.

Improving labour legislation, regulation and practices can be done in such a way as to increase the number and quality of jobs, something that will be of interest to both trade unions and employer associations.

On financial market development, Zimbabwe faces challenges in financial market development including access to finance, high cost of funds and the absence of venture capital.

As a result, the country’s rank fell slightly from 109 to 112 in 2014-15. While the banking sector is generally safe and sound, there has been an increase in banking sector vulnerabilities including an increase in non-performing loans to about 16 percent in December 2014.

Credit creation is also limited due to the narrow deposit base and is predominantly composed of demand deposits.

As a result, banks are unable to offer longer-term loans to enable the private sector to invest in new technology and equipment in order to enhance productivity and competitiveness.

The Zimbabwe Stock Exchange (ZSE) has been generally stagnant due to liquidity challenges in the economy.

Trading on the bourse has been largely subdued. In addressing these challenges, it requires the financial sector to deal with microeconomic issues related to the bank charges, provision of favourable interest rates aimed at attracting savings and streamlining account opening requirements to take into account peculiar situation of the informal sector.

On technological readiness, Zimbabwe improved 3 ranks on technological readiness from 112 to 109 in 2013-14.

Technological readiness measures the agility with which an economy adopts existing technologies to enhance the productivity of its industries.

Progress has been made in the mobile broadband subscriptions front with the installation of the undersea cable linking Zimbabwe to the global network and the introduction of the optic fibre connection to all major cities and towns.

Internet speed is ranked poorly but ongoing development in the rolling out of innovative links by private players in the ICT sector is set to improve internet speed and lower the cost of the service.

In terms of FDI and technology transfer, Zimbabwe ranked 133 out of 144 in the 2014-15 GCI report showing that Zimbabwe has not been adopting new technologies fast enough.

Although Government has to create an enabling environment to attract FDIs which brings in new technologies, private sector has a role to play in investing in new technology in the face of globalisation.

Business Sophistication, Zimbabwe is generally poorly rated in terms of business sophistication.

The country moved 4 ranks in the negative on the business sophistication pillar, landing at 130 in 2014-15 from 126 in the 2013-14 GCI report.

Most indicators in the category of business sophistication are not well developed.

For instance, the breadth of the production value chains is very narrow and industrial clusters are not developed and the country’s competitive advantage is not well defined.

Local supplies of raw materials are also a challenge due to the low agriculture throughput.

This is where we are losing it. If business come together and collaborate in business linkages within the respective value chain, we will be able to circulate some of the money we are ignorantly spending in procuring toothpicks!

Our problem if one looks at it radically is not a liquidity problem issue but an issue of wrong priorities.

How would one expect to see a country complaining of liquidity problems when it can spare close to $10 billion in imports which is more than twice its exports?

Yes, the obvious argument is that we are importing because we have low productivity.

Business linkages can raise productivity as bridging finance is source within the value chain.

With respect to innovativeness, the innovation pillar for Zimbabwe improved by 2 ranks from 127 in the 2013-14 GCI report to 125 in the 2014-15 report.

The biggest improvement in rank emanated from the indicator on the availability of scientist and engineers. Zimbabwe is renowned for training highly skilled scientists and engineers from its tertiary colleges and universities, although many of them leave the country to seek employment abroad.

There is evidence of little industry-research collaboration.

As such, it is difficult for the country to make breakthroughs in terms of new innovations.

This calls for academia to engage the private sector in both collaboration in research and in curriculum development aimed at filling the fundamental void in latest developments in the field of science.

It is clear that issues to do access to finance, innovation, business sophistication, labour market efficiency and goods market efficient largely falls in the ambit of non state actors.

As Government is doing its part, it is important that non state actors players their part in addressing these specific areas and where necessary, dialogue is important especially when dealing with specific policy issues.

What is clear is that without non state actors’ participation, no matter how much effort Government puts to address national competitiveness the impact is not significant.

 Dr Mugano is Economic Advisor, Author and Expert in International Trade and Competitiveness. Feedback: [email protected], cell: +263 772 541 209