LET'S REFLECT ON 2017, EMBRACE 2018 WITH HOPE:
WE HAV E come to the end of 2017. As we welcome 2018, it is important to take stock of 2017 and reflect on what we must do right in that year.
No doubt, 2017 has been the most difficult year since the adoption of multiple currencies in 2009. The intention of this review is not to narrate what happened as that is in the public domain, but the root causes of the economic challenges, which ensued and pave way for debate aimed at avoiding the same in 2018. There were also positive developments we witnessed in 2017, which we must consolidate in 2018.
Likewise, we witnessed significant challenges we need to deal with in 2018 and beyond.
We witnessed a toxic political landscape, rampant corruption, liquidity crunch, constrained fiscal space and ever ballooning trade deficits.
The toxic political environment and rampant corruption, which had consumed any hope for a brighter Zimbabwe and the recovery of the economy was brought to an abrupt end following the intervention of the military to arrest a deteriorating socio- economic and political situation.
The new political dispensation has undoubtedly put Zimbabwe back on the world map. The process has been quite a fast track one.
As we go into 2018, we continue to cheer the new Government to keep on the momentum of ongoing reforms, both economic and political reforms.
The three evils of liquidity crunch, constrained fiscal space and trade deficits are a symptom of a fundamental problem, that is, low productivity.
Without elaborating on the t hree devils, we noted serious liquidity challenges, which manifested to the public in the form of long queues at banks and delays in external payment for the corporate sector.
The budget deficit and domestic debt continued to rear its ugly face during 2017.
Based on statistics from Ministry of Finance and Economic Development, the 2017 budget deficit accelerated to $1,4 billion by September 2017 and domestic debt reached $4,014 billion at the same time.
The budget deficit is a two– headed snake, which on one head crowds out t he private sector while on the other it narrows the fiscal space due to low productivity caused by drought of funding in the of productive sectors.
Important to note is that, the 2018 National Budget Statement pronounced radical measures to deal with budget deficits chief among them: ◆ Rationalisation of civil service through retrenchment of over 3 000 youth officers, enforcement of early retirement and the realignment of civil service work force with the reduced number of ministries; ◆ Rationalisation of civil service bill through reduction of packs going to senior civil servants, cuts in foreign trips and embassies and removal of business classes for travelling civil servants save for the presidium. ◆ Reforms aimed at increasing investments and production with a view of increasing the fiscal space. These economic reforms include amendment of the indigenisation and empowerment act, various tax reforms and incentives targeted for companies supporting local content. In terms of perennial trade deficits, the country consistently on the negative side on a yearly basis with deficits of $4 billion, $2,6 billion, $5 billion, $3,6 billion, $4,2 billion, $3,3 billion, $3,3 billion and $3 billion for the years 2009, 2010, 2011, 2012, 2013, 2014, 2015 and 2016, respectively.
The cumulative figure of trade deficits up to 2015 is totalled $29 billion, which is ironically enough to fund the requirements in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIM ASSET).
Our goal should be always to raise national productivity so that we address liquidity problems, create f iscal space and reduce trade deficits.
In raising national productivity, we have to work on short term, medium term and long term strategies.
With respect to short term measures, the rains are here, in as much as some of the necessary requirement like fertilisers are not in place, we have to work around the clock using whatever magic is available to ensure that we have a good harvest.
Still on the short term measures, we need to identify anchor companies, which are at the centre of the value chains like National Foods, Delta Corporation and Seedco and provide production oriented incentives to automatically trigger production across the value chain.
On the medium to long term strategies, we have to work on attracting foreign direct investment (FDI) to propel the economy. Work on attracting FDIs has been ongoing, that is doing business reforms and debt clearing strategy.
The doing business reforms are one of the key achievements we registered as a nation in 2017. For readers’ interests, Zimbabwe, since the turn of the new millennium, has been lowly ranked by the World Bank on its ease of doing business rankings.
To address regulatory, transactional and administrative burden affecting the business environment for the local and foreign investors, the Government of Zimbabwe, led by the Office of the President and Cabinet initiated the process of implementing the Ease of Doing Business (EDB) Reforms.
The EDB reforms started in September 2015 with the following thematic areas being constituted: ◆ Starting a Business and Pro
tecting Minority Investors; ◆ Enforcing Contracts and
Resolving Insolvency; ◆ Getting Credit; ◆ Paying Taxes and Trading
Across Borders; and ◆ Construction Permits and
Registering Property.
The reforms are being implemented using the Rapid Results Approach (RRA) over a period of 100 days, targeting administrative and legislative reforms. Legislative reform is targeting the Companies Act and ancillary legislation. Administrative reforms are centred on reforming the procedural, time and cost elements of the doing business.
To date, 13 legislative reforms, which cover the Deeds Registry Act, small claims, commercial court, high court, estate administration Act, Insolvency Act, Movable Property Security Interest Bill, Reserve Bank Bill, Companies Act, Shop Licensing Act, Manpower Development Act, National Social Security Authority Act and Regional and Country Planning Act.
Based on the progress report presented by the chairpersons of the working team on the EDB, most of these legislative reforms have been approved by Cabinet Committee On Legislation and were due to be tabled for Parliament consideration.
Of concern t hough is t he snail’s pace in the finalisation of the legislative reforms. To date, only four out of thirteen reforms have been legislated. This must change in 2018.
In addition to the legislative reforms, the RRA process is also targeting simplifying of business processes.
For example, when compared to other countries like Rwanda, the time taken to start a business in Zimbabwe was unjustifiably too long. It used to take 90 days to fulfil nine procedures to start a new business.
All these procedures have been eliminated with the implementation of the EDB reforms.
A classic example is t he requirement to advertise twice for shop licence notice; t his would cumulatively take 55 days. However, with the implementation of the EDB reforms these requirements have also disappeared.
Summary of some of the targets in days/ hours that have been achieved as a result of the reforms are as follows: ◆ Number of days to start a business have been reduced from 90 to 30 days; ◆ Construction Permits, the days have been reduced from 448 days to 120 days as highlighted; ◆ Property Registration now takes 14 days from 36 days; and ◆ Time taken to pay taxes was reduced from 242 hours to 160 hours. These achievements didn’t come easy.
It took a bold move by the Office of the President and Cabinet (OPC) to lead in this process.
This process is very inclusive as it covers all the relevant stakeholders in these thematic areas.
The work done by these stakeholders and the OPC in this very short period of time must be applauded.
Certainly, the work on doing business reforms is a continuous process. As we continue to work very hard as team Zimba- bwe, there is need to take note of these notable developments and motivate ourselves that something is happening and have some kind of assurance that we can build on what we are doing today to make Zimbabwe great.
As we go into 2018, there is a lot of work ahead, for example, expeditious approval of legislative reforms by the Parliament, strict implementation plan (on paper and practically) and a robust communication strategy.
Once the legislative process has been completed and the bill has been assented into law, the devils would lie now in implementation process.
Every piece of law is only useful if it is implemented.
Successful implementation of the legal framework requires communication ( I will come back to this aspect), reconfiguration of institutions (whether coordinating or implementing institutions) and resourcing them, stamping out corruption and enforcing the framework on governance.
Communication knowledge is power.
A robust and well-resourced communication framework is needed to educate the masses on these ongoing reforms. Here there are no short cuts. Generally, the communication strategy, is often overlooked even in donor programmes yet it is the key to changing people’s life through knowledge.
In 2018, we certainly need to work hard in communicating these reforms.
For world ranking purposes, Zimbabwe risks not improving its position on the World Bank Doing Business rankings if reforms are not well communicated.
This is so because when the World Bank carries its survey, it asks businesses especially SMEs on how the reforms have reduced their cost of doing business.
The SMEs can substantiate the benefits if they know previous and current laws to know how their business has been impacted.
This can only happen if and only if effective communication mechanism is put in place and is well funded.
Georgia made remarkable progress in reforms, but took a good five years to feel the impact due to lack of an effective communication strategy!
The same applies to the impact of reforms on productivity. Both local and international investors will not invest in the domestic economy if there are not aware of the new incentives, which will come with these reforms.
Together we make Zimbabwe Great!
Asante Sana
Dr Mugano is an Economic Advisor, Author and Expert in Trade and Competitiveness Strategy. He is a Registrar at Zimbabwe Ezekiel Guti University and Research Associate of Nelson Mandela Metropolitan University. Feedback: +263 772 541 209 or gmugano@gmail.com.