ECONOMIC RECOVERY EFFORTS: DIASPORA THE FORGOTTEN GROUP
The past decade did a great deal in chasing away professionals, entrepreueners, farmers to mention just a few. As the economic and political environment deteriorated these were forced to settle in lands as far away as UK, USA and South Africa among other countries. However as the economic went into tailspin from 2003 till 2009, it became evident that these expatriates were instrumental to some degree in sustaining the faltering economy. It had been widely predicted back then that the whole country would simply collapse by 2005 as hyperinflation took its toll on the economy and the worsening poverty levels meant the country was on a path towards a full blown conflict. That did not exactly happen because by 2005 the economy was still struggling and it continued struggling until 2009 and many reasons have been proffered for this. However two factors seemed to have standout among the various propositions made, namely the informal sector of the economy and the impact of diaspora remittances during that period. Many people who lost jobs during this period were absorbed by the informal sector whose activities included cross border trading among others. This enabled families to survive during this difficult period. However it is Diaspora remittances back to Zimbabwe during that period which made people suddenly aware of the importance of this forgotten group. Millions of dollars were sent to families back in Zimbabwe thus helping to stem mass starvation and just keep things going. Efforts were then made by the government to harness these remittances but these efforts largely failed because for a long time the government seemed to misunderstand this economically important group. We may all remember the central bank’s homelink program, remittance program made to lure the Diasporas to channel their remittances through government channels and of course this did not succeed. Nonetheless the Diaspora still did sent money back through what was commonly known as the black market and indeed today a lot of people do acknowledge the critical role the Diaspora played in ensuring families back home were fed and that the general economy did not collapse. However since the start of the coalition government this group seems to have been forgotten as efforts to resuscitate the economy now seem to ignore them. It’s not clear if the consultation process which gave birth to the new economic blueprint actually reached out to the Diaspora though the final document does talk of Diaspora re engagement. As mentioned past efforts to use remittances by these to cushion the government from foreign currency shortages failed primarily because the government insisted on an exchange rate which sensationally overvalued the Zimdollar. During that period despite threats the black market was the preferred way of sending money home as the Diaspora avoided the homelink channel which was controlled by the government. Of course since we now use foreign currency as our own, money is now being sent through normal channels. However the diaspora could potentially do more for the economy if the government really listens to their concerns. The economy which has not received significant financial aid is currently in the midst of a gripping liquidity crisis yet we have the Diaspora which could potentially be sitting on a huge cash pile. The Mid Term Plan talks of Diaspora re-engagement an effort which if done sincerely could potentially avail to the economy the much needed liquidity injection. At the centre of the diaspora’s concern or anger is their apparent continued disenfranchisement especially when it comes to the country’s plebiscites. To them participation in economic revival efforts has to be reciprocated with participation or representation in national issues or events and currently that does not appear to be the case as reforms carried so far does not address this. Secondly the Diaspora just like a foreign investor expect or prefer a business environment in which the rights of property holders are respected, a stable socio-political environment and a degree of certainty in government actions. If anyone in the Diaspora decides to invest, his investment should be accorded its due protection regardless of the investor’s background, colour or creed. Just like the constitution which is non-discriminatory, likewise policies or laws promulgated should reflect this, giving the same treatment to investments made by anyone who is a citizen of this country. If the government comes through on these then it is guaranteed that the Diaspora will certainly come forward to assist in reviving the economy.
Tuesday, 26 July 2011
corruption
OPEN MEDIA AND ROBUST PARLIAMENT KEY IN FIGHTING CORRUPTION
It’s been a little over 2 years since the establishment of the coalition government and there is controversy about its successes or the lack thereof. While there seems to be consensus on the government’s performance on the economic front, the human rights and democracy scorecards seem to paint a different picture. Anyhow this coalition government may have created what is turning out to be masterstroke, the commissioning of the Zimbabwe Media Commission and the subsequent issuing of licences to private media groups. There is no doubt this has created greater space for human rights defenders and democracy activists as they are gaining increased exposure locally. And to really hammer this point down corrupt politicians are now feeling the heat and are now resorting to threats of lawsuits in their attempts to cow the private media. However the media could potentially play another very important role; that is exposing corruption and now with an increasingly robust parliament we could really turn the tide against corruption. For years debate around the economy’s decline has been around restrictive measures or ‘sanctions’ and the role of corruption and maladministration has been understated. The independent media could help to correct this by exposing corrupt activities and explaining how such activities destroy the economy in the longer term. In fact this is apparently the norm elsewhere in democracies where the media plays a critical role in exposing corruption everywhere and we should do well to learn from this. The current phone hacking storm in the UK was exposed courtesy of the robust media and such exposure has resulted the Commons or parliament there instituting investigations into the whole saga which has even roped in the prime minister. There have been arrests and resignations in the wake of this controversy clearly underlying the importance of robust and independent media in a functioning democracy. In fact not far from Zimbabwe, a few years a powerful politician Toni Yengeni in SA was sentenced to prison after he was exposed in corruption just like Schabir Shaik a former key enabler of the SA’s president and this all happened because the media and parliament played such an important role in exposing and tackling such illegal activities. This brings us to our own situation which encouragingly is showing signs that we could be moving towards the same. Over the last few months parliament has become more courageous with members of both houses now becoming bolder in their business. For instance the a minister is currently facing contempt of parliament charges because he lied under oath, parliamentarians are condemning security leaders for meddling in politics and actually demanding these face the house. We may still be a long way before we reach the level of South Africa but certainly these soldiers are starting to feel the pressure and all this was unthinkable just 3 years ago. It is in this context that I think the fight against corruption can be stepped up and the sanctions mantra would really lose ground as evidence of pilferage, corruption and theft of state property is laid bare. What is probably now needed is a whistle blowing initiative which will then provide the lead to media organisations in exposing all shady activities. For years there was a sense that corrupt individuals were getting away without paying the penalty because there was no exposure of their misdeeds. In cases were these were exposed little or no action was taken because there simply was no oversight, the parliament was dead. At least that has changed now. What has not changed at least for now is the actual conviction of those exposed to deter further corruption. That however does not negate what is already happening on this front because as experience has shown once powerful people have been exposed their colleagues will be pressured to relieve them of their duties. After the Willowgate scandal rocked the country several years ago those implicated were eventually relieved from their positions. This particular case helps to drive this point that exposure is often the catalyst required to cause arrests or inquiries. Therefore the media needs to be encouraged to continue exposing then action will be taken no matter how belatedly.
It’s been a little over 2 years since the establishment of the coalition government and there is controversy about its successes or the lack thereof. While there seems to be consensus on the government’s performance on the economic front, the human rights and democracy scorecards seem to paint a different picture. Anyhow this coalition government may have created what is turning out to be masterstroke, the commissioning of the Zimbabwe Media Commission and the subsequent issuing of licences to private media groups. There is no doubt this has created greater space for human rights defenders and democracy activists as they are gaining increased exposure locally. And to really hammer this point down corrupt politicians are now feeling the heat and are now resorting to threats of lawsuits in their attempts to cow the private media. However the media could potentially play another very important role; that is exposing corruption and now with an increasingly robust parliament we could really turn the tide against corruption. For years debate around the economy’s decline has been around restrictive measures or ‘sanctions’ and the role of corruption and maladministration has been understated. The independent media could help to correct this by exposing corrupt activities and explaining how such activities destroy the economy in the longer term. In fact this is apparently the norm elsewhere in democracies where the media plays a critical role in exposing corruption everywhere and we should do well to learn from this. The current phone hacking storm in the UK was exposed courtesy of the robust media and such exposure has resulted the Commons or parliament there instituting investigations into the whole saga which has even roped in the prime minister. There have been arrests and resignations in the wake of this controversy clearly underlying the importance of robust and independent media in a functioning democracy. In fact not far from Zimbabwe, a few years a powerful politician Toni Yengeni in SA was sentenced to prison after he was exposed in corruption just like Schabir Shaik a former key enabler of the SA’s president and this all happened because the media and parliament played such an important role in exposing and tackling such illegal activities. This brings us to our own situation which encouragingly is showing signs that we could be moving towards the same. Over the last few months parliament has become more courageous with members of both houses now becoming bolder in their business. For instance the a minister is currently facing contempt of parliament charges because he lied under oath, parliamentarians are condemning security leaders for meddling in politics and actually demanding these face the house. We may still be a long way before we reach the level of South Africa but certainly these soldiers are starting to feel the pressure and all this was unthinkable just 3 years ago. It is in this context that I think the fight against corruption can be stepped up and the sanctions mantra would really lose ground as evidence of pilferage, corruption and theft of state property is laid bare. What is probably now needed is a whistle blowing initiative which will then provide the lead to media organisations in exposing all shady activities. For years there was a sense that corrupt individuals were getting away without paying the penalty because there was no exposure of their misdeeds. In cases were these were exposed little or no action was taken because there simply was no oversight, the parliament was dead. At least that has changed now. What has not changed at least for now is the actual conviction of those exposed to deter further corruption. That however does not negate what is already happening on this front because as experience has shown once powerful people have been exposed their colleagues will be pressured to relieve them of their duties. After the Willowgate scandal rocked the country several years ago those implicated were eventually relieved from their positions. This particular case helps to drive this point that exposure is often the catalyst required to cause arrests or inquiries. Therefore the media needs to be encouraged to continue exposing then action will be taken no matter how belatedly.
savings
POLICIES FAVOURING SAVINGS KEY TO IMPROVING LIQUIDITY
As banks grapple with the liquidity problems, a significant portion of the population remains unbanked or continue to shun the banking system preferring instead to their monies home for ‘safe keeping’. This non-banking culture in turn starves banks of the vital resources or the savings from which advances or loans are often made. Now the question for some time now has been; how do you encourage a culture of savings in environment where there are factors that militate against this? Is it possible to get people flowing in numbers to banks when they are still traumatised by losses incurred during the period of hyperinflation and the collapsing Zimdollar? Evidently there is no easy answer because these questions actually reveal a bigger problem, the lack of confidence in the financial system. During the hyperinflation period banks just like every other business had to constantly increase charges or fees of their banking services to cover for the ever ballooning administrative costs. What was perhaps absurd was the lack of similar zeal to protect their clients’ monies from the ravages of inflation by correspondingly increasing interest earned by these. The result was the loss of value in nominal terms of client deposits and the loss in value in real terms as interest earned if any, was simply too little when compared with the rate of inflation. Naturally this forced the banking public to find or devise ways to cushion themselves from inflation and not surprisingly foreign currency was the most suitable option even though laws at the time prohibited citizens from holding this without approval. Of course now we have what is termed the multi-currency system which is essentially dollarization of the economy, with inflation out of sight and yet even now we still have a sizeable number of transactions taking place outside the banking system. There are obvious risks in transacting in cash and banks continue to promote the use of alternative such as debit cards but clearly there has been some resistance to this message. There are possibly legitimate reasons for this and the major one from the perspective of most clients, the bank charges or fees. There is no doubt this issue played a role in driving people away from banks in the last decade and continues to repel potential clients from returning to some banks. Most people are still poorly paid and according to the consumer watchdog most families survive well below the poverty threshold which is around $500 per month. Therefore people under these sort of conditions people would do everything to minimise costs and certainly very high banks charges relative meagre incomes is certainly a big no no. From these people’s perspective it makes more sense to keep their meagre savings outside banks than to incur high bank charges when they maintain their savings in banks. The other issue keeping people from using the banking system has nothing to do with banks themselves but rather government policy. Conflicting statements continue to come from government officials about the tenure of the multi-currency system we are using. Only some weeks back the central bank chief called for the return of the so called gold backed Zimdollar because the current regime was impeding the central bank from fully discharging its duties as the country’s monetary authorities. However the return or the talk of the return of the Zimdollar always creates anxieties for most suffered heavily in the last decade before the volatile Zimdollar eventually collapsed. What they thought was their money in banks was simply at the stroke of a pen deemed worthless and many people are still traumatised by this. Of course the treasury has assured people and businesses that the present currency regime will remain in place at least throughout the duration of the Mid Term Plan. However it is such inconsistent announcements which help to fuel many conspiracies around this issue and certainly makes it very difficult to fully restore confidence in the banking system. One of the conspiracy theories is that government wants to return us to the worthless Zimdollar and it is just waiting for the right moment when enough deposits or banking would have been made then it will just announce the return of the Zimdollar and seize all foreign currency. Well this may seem far-fetched but this all comes from the confusion coming from authorities and such confusion helps to create uncertainty which then exacerbates the problems banks are facing. The savings which according to the country’s economic plan for the next 4 years must reach 20% of GDP by 2015 will never be achieved if this uncertainty and lack of confidence in the financial system is allowed to continue. Yet such levels of savings will in normal circumstances help to drive local investment something equally vital if aspirations of a $100 billion economy by 2040 are to be realised. Most importantly local investment is now paramount as foreign direct investment has not been coming hence the need to encourage savings through actually lowering fees or charges to customers. However the government has the biggest responsibility in sorting the mess in the financial system it can do this by having a clear and consistent policy regarding the currency regime and united-ly assure the population about this. Meaning authorities will have to refrain from issuing statements that might otherwise spook people.
Terence Zimwara is an economic analyst contact him tem2ra@yahoo.com temra-temra.blogspot.com
As banks grapple with the liquidity problems, a significant portion of the population remains unbanked or continue to shun the banking system preferring instead to their monies home for ‘safe keeping’. This non-banking culture in turn starves banks of the vital resources or the savings from which advances or loans are often made. Now the question for some time now has been; how do you encourage a culture of savings in environment where there are factors that militate against this? Is it possible to get people flowing in numbers to banks when they are still traumatised by losses incurred during the period of hyperinflation and the collapsing Zimdollar? Evidently there is no easy answer because these questions actually reveal a bigger problem, the lack of confidence in the financial system. During the hyperinflation period banks just like every other business had to constantly increase charges or fees of their banking services to cover for the ever ballooning administrative costs. What was perhaps absurd was the lack of similar zeal to protect their clients’ monies from the ravages of inflation by correspondingly increasing interest earned by these. The result was the loss of value in nominal terms of client deposits and the loss in value in real terms as interest earned if any, was simply too little when compared with the rate of inflation. Naturally this forced the banking public to find or devise ways to cushion themselves from inflation and not surprisingly foreign currency was the most suitable option even though laws at the time prohibited citizens from holding this without approval. Of course now we have what is termed the multi-currency system which is essentially dollarization of the economy, with inflation out of sight and yet even now we still have a sizeable number of transactions taking place outside the banking system. There are obvious risks in transacting in cash and banks continue to promote the use of alternative such as debit cards but clearly there has been some resistance to this message. There are possibly legitimate reasons for this and the major one from the perspective of most clients, the bank charges or fees. There is no doubt this issue played a role in driving people away from banks in the last decade and continues to repel potential clients from returning to some banks. Most people are still poorly paid and according to the consumer watchdog most families survive well below the poverty threshold which is around $500 per month. Therefore people under these sort of conditions people would do everything to minimise costs and certainly very high banks charges relative meagre incomes is certainly a big no no. From these people’s perspective it makes more sense to keep their meagre savings outside banks than to incur high bank charges when they maintain their savings in banks. The other issue keeping people from using the banking system has nothing to do with banks themselves but rather government policy. Conflicting statements continue to come from government officials about the tenure of the multi-currency system we are using. Only some weeks back the central bank chief called for the return of the so called gold backed Zimdollar because the current regime was impeding the central bank from fully discharging its duties as the country’s monetary authorities. However the return or the talk of the return of the Zimdollar always creates anxieties for most suffered heavily in the last decade before the volatile Zimdollar eventually collapsed. What they thought was their money in banks was simply at the stroke of a pen deemed worthless and many people are still traumatised by this. Of course the treasury has assured people and businesses that the present currency regime will remain in place at least throughout the duration of the Mid Term Plan. However it is such inconsistent announcements which help to fuel many conspiracies around this issue and certainly makes it very difficult to fully restore confidence in the banking system. One of the conspiracy theories is that government wants to return us to the worthless Zimdollar and it is just waiting for the right moment when enough deposits or banking would have been made then it will just announce the return of the Zimdollar and seize all foreign currency. Well this may seem far-fetched but this all comes from the confusion coming from authorities and such confusion helps to create uncertainty which then exacerbates the problems banks are facing. The savings which according to the country’s economic plan for the next 4 years must reach 20% of GDP by 2015 will never be achieved if this uncertainty and lack of confidence in the financial system is allowed to continue. Yet such levels of savings will in normal circumstances help to drive local investment something equally vital if aspirations of a $100 billion economy by 2040 are to be realised. Most importantly local investment is now paramount as foreign direct investment has not been coming hence the need to encourage savings through actually lowering fees or charges to customers. However the government has the biggest responsibility in sorting the mess in the financial system it can do this by having a clear and consistent policy regarding the currency regime and united-ly assure the population about this. Meaning authorities will have to refrain from issuing statements that might otherwise spook people.
Terence Zimwara is an economic analyst contact him tem2ra@yahoo.com temra-temra.blogspot.com
Wednesday, 13 July 2011
1
WHY THE 51% INDEGINISATION IS FLAWED
Since the start of the year and on the 25th of March debate has raged about the current indigenisation effort supported by some inside this coalition government calling for the seizure of controlling stake in established businesses particularly mining ostensibly to empower the previously disadvantage blacks. However this proposal is flawed for many reasons but its main problem is that it does help this cause but actually negates it since forcibly taking companies or nationalisation does not change the character of the current status quo but only replaces it with a politically correct colour- black. In fact this whole effort could just be a ruse and racist attempt by the cabal of the previous regime to force through the acquisition massive amounts of wealth for next to nothing. It is imperative to note that in fact there is no dispute about the need to indigenise but it is finding the middle ground that has been proving to be difficult and causing much consternation inside the country. Persons supporting this controversial law often claim that white or foreign owned companies are reluctant to incorporate blacks into the mainstream economy, that this will be the best approach to answer the negative stereotype of the black man in the eyes of other races. In addition they claim since the resources, particularly minerals in the case of mining companies, belong to the indigenous people hence they should not be asked to pay for anything so goes the argument. It is instructive to note that most of the reasons proffered always seem to lack sound economic reasons, reasons which should normally carry the day if the program is to be approved objectively. It is much akin to the controversial land reform program; a program carried in out nearly similar circumstances where the sudden desire to empower the landless blacks overrode all genuine economic concerns about the likely consequences. To this day the economy has not fully recovered from this disastrous decision and one would hope that the experience of this process should at least help leaders to come to sound a decision despite political differences. There is also an absurd assertion that the resources particularly minerals already belong to locals by virtue of being underneath our territory and indeed some seem to think that this actually makes sense. However it is one thing to know that you have these minerals and it is totally a different matter to extract them and that is why a country like DRC for instance has the most sought minerals but is still poor yet countries like Japan and South Korea are without much natural resource endowments yet count as some the richest nations in the world. The latter two have the technology, expertise and most importantly the capital to harness these resources and this is where this indigenisation drive should be aiming at building on skills, technology and knowledge transfer. Proponents of this controversial law often charge that those who oppose this particularly the black critics often suffer from an inferiority complex and just want to perpetuate the depiction of the black man as an employee or slave of the superior white. However this all subterfuge designed to camouflage the growing list of blacks who have made it in their respective fields, Strive Masiyiwa a very successful entrepreuener in the telecommunication industry, Mutumwa Mawere, the bankers from the early 2000s and these have dominated fields previously dominated by foreign owned companies. One other significant change that has occurred though rarely noticed is the incorporation of blacks in senior management structures and their now common appointment to boards of directors. In fact this is one way empowerment has been known to be successful elsewhere. In fact most foreign owned companies now actually employ locals to the most powerful posts in their companies and naturally this process actually helps to bridge the knowledge and skills gap one key aspect towards fully empowerment .In fact the South African broad based economic empowerment (BBEE) model actually sets out to achieve this among other things and this speaks quite a lot about how much has been achieved so far though no one seems to think this is an achievement. However this may not be entirely surprising when one notices the unclear stance on this indigenisation vis- a- vis the sale of controlling stake in Ziscosteel to an Indian firm Essar yet the laws appear to indicate that this is unlawful thus creating this theatre of confusion. It appears greed and politics are at play in this because unprofitable entities are being sold to foreign companies yet profitable companies are under pressure to cede controlling stake to blacks and with no apparent obligation to pay for the stake. However opposition to this drive both inside the government and outside seemed to have to put brakes on this drive though this issue continues to be a major source of uncertainty hence negatively affecting the economy’s recovery. Empowerment has to be gradual if it is achieve its objectives.
Since the start of the year and on the 25th of March debate has raged about the current indigenisation effort supported by some inside this coalition government calling for the seizure of controlling stake in established businesses particularly mining ostensibly to empower the previously disadvantage blacks. However this proposal is flawed for many reasons but its main problem is that it does help this cause but actually negates it since forcibly taking companies or nationalisation does not change the character of the current status quo but only replaces it with a politically correct colour- black. In fact this whole effort could just be a ruse and racist attempt by the cabal of the previous regime to force through the acquisition massive amounts of wealth for next to nothing. It is imperative to note that in fact there is no dispute about the need to indigenise but it is finding the middle ground that has been proving to be difficult and causing much consternation inside the country. Persons supporting this controversial law often claim that white or foreign owned companies are reluctant to incorporate blacks into the mainstream economy, that this will be the best approach to answer the negative stereotype of the black man in the eyes of other races. In addition they claim since the resources, particularly minerals in the case of mining companies, belong to the indigenous people hence they should not be asked to pay for anything so goes the argument. It is instructive to note that most of the reasons proffered always seem to lack sound economic reasons, reasons which should normally carry the day if the program is to be approved objectively. It is much akin to the controversial land reform program; a program carried in out nearly similar circumstances where the sudden desire to empower the landless blacks overrode all genuine economic concerns about the likely consequences. To this day the economy has not fully recovered from this disastrous decision and one would hope that the experience of this process should at least help leaders to come to sound a decision despite political differences. There is also an absurd assertion that the resources particularly minerals already belong to locals by virtue of being underneath our territory and indeed some seem to think that this actually makes sense. However it is one thing to know that you have these minerals and it is totally a different matter to extract them and that is why a country like DRC for instance has the most sought minerals but is still poor yet countries like Japan and South Korea are without much natural resource endowments yet count as some the richest nations in the world. The latter two have the technology, expertise and most importantly the capital to harness these resources and this is where this indigenisation drive should be aiming at building on skills, technology and knowledge transfer. Proponents of this controversial law often charge that those who oppose this particularly the black critics often suffer from an inferiority complex and just want to perpetuate the depiction of the black man as an employee or slave of the superior white. However this all subterfuge designed to camouflage the growing list of blacks who have made it in their respective fields, Strive Masiyiwa a very successful entrepreuener in the telecommunication industry, Mutumwa Mawere, the bankers from the early 2000s and these have dominated fields previously dominated by foreign owned companies. One other significant change that has occurred though rarely noticed is the incorporation of blacks in senior management structures and their now common appointment to boards of directors. In fact this is one way empowerment has been known to be successful elsewhere. In fact most foreign owned companies now actually employ locals to the most powerful posts in their companies and naturally this process actually helps to bridge the knowledge and skills gap one key aspect towards fully empowerment .In fact the South African broad based economic empowerment (BBEE) model actually sets out to achieve this among other things and this speaks quite a lot about how much has been achieved so far though no one seems to think this is an achievement. However this may not be entirely surprising when one notices the unclear stance on this indigenisation vis- a- vis the sale of controlling stake in Ziscosteel to an Indian firm Essar yet the laws appear to indicate that this is unlawful thus creating this theatre of confusion. It appears greed and politics are at play in this because unprofitable entities are being sold to foreign companies yet profitable companies are under pressure to cede controlling stake to blacks and with no apparent obligation to pay for the stake. However opposition to this drive both inside the government and outside seemed to have to put brakes on this drive though this issue continues to be a major source of uncertainty hence negatively affecting the economy’s recovery. Empowerment has to be gradual if it is achieve its objectives.
Friday, 8 July 2011
mid term plan
THE MEDIUM TERM PLAN: TOO AMBITIOUS OR PRAGMATIC
The 7th of July marks the start of a new era in the country’s attempt at eradicating poverty, meeting the millennium development goals (MDGs) as well as economic prosperity and the event marking the launch of the Medium Term Plan on thisday was quite colourful. While the success of the program will be subjected to a lot of debate, the major milestone this MTP has achieved so far is its broad based approach which essentially entailed that every known stakeholder had to contribute in some way to the final draft and indeed contributions seemed to have emanated from the entire spectrum of the Zimbabweans. This is quite a departure from the norm where such documents were produced behind the scenes and then foisted on everyone. There are many reasons why past economic development and transformation programs have failed and one reason could be ignorance and the lack of ownership of the document by the businesses, labour and indeed by Zimbabweans. By choosing to go this route, the government is essentially laying the foundation for the success of not only this plan but indeed all the plans that will be made in the future as we move towards our ambitious goal of achieving a $100 billion economy by 2030. When something is home grown and when there is a sense of ownership of the plan then invariably the refrain changes from ‘their policies do not always work’ to ‘What did we do wrong and how can we correct that’. When people are part of the crafting process and when indeed their input is encompassed in the final plan, then naturally they will work hard to ensure that at least their part of the plan is a success and this will culminate in the entire plan succeeding as every stakeholder works hard to succeed. Of course it has been remarked quite often that we seem to be adept at crafting intelligent and genius plans but we often come short on implementation and frankly those casting aspersions on the plan are doing so based on past experience. The Prime minister made a similar observation that there had been similar plans in the past which have largely failed however he acknowledged the way process has been done this time was mightily different hence he gave his thumbs up to the plan. Now the question has to be answered, willit really work in the context of the present environment and the answer will be both yes and no. Now this MTP could potentially work especially if the macro- economic environment where the economy has been dollarized and the treasury’s prudent management of the fiscus remain in place. That is the major concern of business leaders, policy consistency in the face of a very turbulent, unpredictable and volatile political environment. Who is going to guarantee the continuous use of the policy framework in the event of a political change especially as the governing parties follow distinctively different ideologies and have different approaches towards management of the economy and that the next election might result in one party grabbing hold of the entire reins of power. That is of course one question which the politicians themselves cannot really answer even if they endeavour to. The other question concerns the actual implementation of the plan, who exactly is going to whip the responsible ministers into line especially in light of the fact that cabinet is still polarised ministers adhere to party lines in decision making and implementation. However to be fair on the coalition government the STERP phase 1 and 2 the predecessors to this MTP, had notable successes particularly in turning around the inflation problem. In fact since the start of this administration inflation has averaged rates under 5%while the growth has been positive since, hovering above 6% and this year it is expected to peak at 9.3%. This has happened despite the uncertainty surrounding the indigenisation program and the talk of impending election among other unsettling pronouncements made government officials though this is all yet to see the light of day. If the government can guarantee a level of certainty as well as clarity regarding these issues and if the regional bloc SADC maintains its robust approach towards the country’s on-going reforms then there is a good chance that the sort environment conducive for the success of the MTP will prevail. However one has to acknowledge the resilience and hope that characterised most Zimbabweans during the period when the economy underwent its worst run of sustained decline between 2000 and 2009. During this period people did not take drastic measures like taking up arms to remedy the situation but maintained hope that a peaceful solution remained a possibility despite the worst provocations they faced hence their being labelled docile. However that docility helped to avoid war and now we are at peace and actually planning ahead. The bottom line is that it is never going to be easy but if we really work hard despite the odds then there is a good chance this plan will similarly succeed.
Thursday, 7 July 2011
protectinism
PROTECTIONISM VERSUS COMPETITION
This is the paradox we face as we struggle to return the economy to normalcy. We have on one hand a very weak industry still smarting from a decade of recession whose results still linger: low capacity utilisation, absence of credit lines and the liquidity crunch which is fast turning out to be a national crisis. Obviously few companies operating under such conditions would trade at near optimum or efficient levels and this often culminates in these companies’ products or merchandise failing to compete against more efficiently produced rival products. Naturally rival products or imports often have better attributes than our locally produced ones and this is in addition to the actual price variance between the imported stuff and the locally produced. Now when world embraced globalisation as the next frontier in efforts to rid the world of poverty few would have predicted the massive problems that would soon follow. In theory globalisation was supposed to benefit consumers without hurting jobs since it was premised on the theory of comparative advantage where a country would direct its resources towards producing goods which it could make more cheaply than others. Sadly however this has not been the case because the large economies have continued to dominate world trade to any extend that most economies particularly developing ones have become virtually retail outlets. It has become far more profitable to import and sell than to produce and this is particularly true in the Zimbabwean economy. The food, clothing, electrical goods industries etc are so dominated by SA and Asian products than local products since manufacturers here cannot compete with these and this situation has of course led to industrialists asking for help from government (through imposition of duty among other measures) and the launch of various initiatives such as the ‘Buy Zimbabwe’ to counter the dominance of imported stuff. It is important to note that all these efforts are just euphemism to justify what is essentially a call for protection or protectionism as it is known in economics and the question is ‘Can protectionism be justified in any circumstance?’ As alluded to earlier most leaders embraced globalisation in good faith hoping that this would narrow incomes gaps between communities and groups and that everyone (all members of the World trade Organisation) would abide by the fair trade rules. Free trade areas have since been established throughout the world from EU free trade area in Europe, NAFTA in North America, APEC in Asia and COMESA free trade in Africa to mention just a few and there is a few more in the pipeline like the envisaged SADC free trade in Southern Africa. However a few years down the line the situation is quite sad because quite a number of economies have apparently been overrun by major economies who have utilised a range of tools ranging from unfair subsidies to manipulating currencies all with the intend of gaining an unfair advantage over rival traders. The World Trade Organisation the institution charged with steering the ship of globalisation forward has not been able to effectively adjudicate cases of unfair trade practices by members; we may all recall the inconclusive Doha round of talks. The massive subsidies offered to farmers in the developed economies that give their farmers an unfair advantage, while China now the world’s second largest economy is accused of manipulating its currency so as to make its exports cheaper and thus unfairly prejudicing other competing economies. Now for Zimbabwean producers in addition to facing our own unique challenges they have to put up with this messy world trade situation and quite clearly some kind of kind of balancing act may be merited. To illustrate we may have to look at the textile industry which is under siege from cheap Asia imports for instance. Now for years Zimbabwean women and housewives in particular have been informally involved in the textile industry where they have been producing custom made clothes for everyone men, women and children. They would purchase their material from local manufacturers and their final product would always compete favourably with major clothing manufacturers here. However over the last few years there has been deluge of very cheap Asian imports on the market, in fact these imports are so cheap that sometimes they are even cheaper than the uncut cloth making it impossible for the Zimbabwean woman to produce and compete hence she has been driven out. Obviously the imported stuff it could be argued may have been produced by a manufacturer producing efficiently (economies of scale) but the whole thing stinks when you note and quite fairly so that these Asian producers import their lint mostly from here and much of Africa. The cost build-up of a product in the case of an Asian producer has to be higher in comparison to those of a local producer who faces no significant freight costs and low wages for instance but when a landed denim trouser from China costs several times less the cost of producing one here, then it would be absurd for anyone to simply attribute this to efficiency and not doing anything to protect local producers from this misnomer. We are a major lint producer yet apparently our lint is actually expensive relative to an imported finished product and this quite a bizarre circumstance in economics and really points to other factors at play. In fact Zimbabwe is not alone in this, a number of textile factories across Africa are suffering the same problem where the so called free trade has opened floodgates to these ‘cheap’ imports though I believe it’s actually dumping and now most clothing retailers are simply opting for these cheap ones in place of local ones. Thousands of jobs have been lost already and thousands more are under threat just because we have to abide by these free trade agreements no matter how flawed and skewed they are. Zimbabwe just like many African countries suffer from very high unemployment rates and the fact that open trade appears to be exacerbating the problem is a serious indictment of these free trade agreements. For Zimbabwe the situation is even worse because during the past decade when the recession caused a near collapse of the economy, the economy has been dominated by imports everywhere from foodstuffs to clothes, industrial products virtually everything. However the economy has been slowly recovering hence there is need to provide space for local producers to recover fully especially in the face of unfair competition from cheap imports. This could potentially be the boost needed to help these attain former production levels.
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This is the paradox we face as we struggle to return the economy to normalcy. We have on one hand a very weak industry still smarting from a decade of recession whose results still linger: low capacity utilisation, absence of credit lines and the liquidity crunch which is fast turning out to be a national crisis. Obviously few companies operating under such conditions would trade at near optimum or efficient levels and this often culminates in these companies’ products or merchandise failing to compete against more efficiently produced rival products. Naturally rival products or imports often have better attributes than our locally produced ones and this is in addition to the actual price variance between the imported stuff and the locally produced. Now when world embraced globalisation as the next frontier in efforts to rid the world of poverty few would have predicted the massive problems that would soon follow. In theory globalisation was supposed to benefit consumers without hurting jobs since it was premised on the theory of comparative advantage where a country would direct its resources towards producing goods which it could make more cheaply than others. Sadly however this has not been the case because the large economies have continued to dominate world trade to any extend that most economies particularly developing ones have become virtually retail outlets. It has become far more profitable to import and sell than to produce and this is particularly true in the Zimbabwean economy. The food, clothing, electrical goods industries etc are so dominated by SA and Asian products than local products since manufacturers here cannot compete with these and this situation has of course led to industrialists asking for help from government (through imposition of duty among other measures) and the launch of various initiatives such as the ‘Buy Zimbabwe’ to counter the dominance of imported stuff. It is important to note that all these efforts are just euphemism to justify what is essentially a call for protection or protectionism as it is known in economics and the question is ‘Can protectionism be justified in any circumstance?’ As alluded to earlier most leaders embraced globalisation in good faith hoping that this would narrow incomes gaps between communities and groups and that everyone (all members of the World trade Organisation) would abide by the fair trade rules. Free trade areas have since been established throughout the world from EU free trade area in Europe, NAFTA in North America, APEC in Asia and COMESA free trade in Africa to mention just a few and there is a few more in the pipeline like the envisaged SADC free trade in Southern Africa. However a few years down the line the situation is quite sad because quite a number of economies have apparently been overrun by major economies who have utilised a range of tools ranging from unfair subsidies to manipulating currencies all with the intend of gaining an unfair advantage over rival traders. The World Trade Organisation the institution charged with steering the ship of globalisation forward has not been able to effectively adjudicate cases of unfair trade practices by members; we may all recall the inconclusive Doha round of talks. The massive subsidies offered to farmers in the developed economies that give their farmers an unfair advantage, while China now the world’s second largest economy is accused of manipulating its currency so as to make its exports cheaper and thus unfairly prejudicing other competing economies. Now for Zimbabwean producers in addition to facing our own unique challenges they have to put up with this messy world trade situation and quite clearly some kind of kind of balancing act may be merited. To illustrate we may have to look at the textile industry which is under siege from cheap Asia imports for instance. Now for years Zimbabwean women and housewives in particular have been informally involved in the textile industry where they have been producing custom made clothes for everyone men, women and children. They would purchase their material from local manufacturers and their final product would always compete favourably with major clothing manufacturers here. However over the last few years there has been deluge of very cheap Asian imports on the market, in fact these imports are so cheap that sometimes they are even cheaper than the uncut cloth making it impossible for the Zimbabwean woman to produce and compete hence she has been driven out. Obviously the imported stuff it could be argued may have been produced by a manufacturer producing efficiently (economies of scale) but the whole thing stinks when you note and quite fairly so that these Asian producers import their lint mostly from here and much of Africa. The cost build-up of a product in the case of an Asian producer has to be higher in comparison to those of a local producer who faces no significant freight costs and low wages for instance but when a landed denim trouser from China costs several times less the cost of producing one here, then it would be absurd for anyone to simply attribute this to efficiency and not doing anything to protect local producers from this misnomer. We are a major lint producer yet apparently our lint is actually expensive relative to an imported finished product and this quite a bizarre circumstance in economics and really points to other factors at play. In fact Zimbabwe is not alone in this, a number of textile factories across Africa are suffering the same problem where the so called free trade has opened floodgates to these ‘cheap’ imports though I believe it’s actually dumping and now most clothing retailers are simply opting for these cheap ones in place of local ones. Thousands of jobs have been lost already and thousands more are under threat just because we have to abide by these free trade agreements no matter how flawed and skewed they are. Zimbabwe just like many African countries suffer from very high unemployment rates and the fact that open trade appears to be exacerbating the problem is a serious indictment of these free trade agreements. For Zimbabwe the situation is even worse because during the past decade when the recession caused a near collapse of the economy, the economy has been dominated by imports everywhere from foodstuffs to clothes, industrial products virtually everything. However the economy has been slowly recovering hence there is need to provide space for local producers to recover fully especially in the face of unfair competition from cheap imports. This could potentially be the boost needed to help these attain former production levels.
Feedback tem2ra@yahoo.com temra-temra.blogspot.com
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