Private enterprise must drive recovery

ECONOMIC freedom seems to be eluding the whole of Africa. Reading the book - Why National Fail - by Daron Acemoglu and James A Robinson, leaves one with sadness in that, despite Africa having some of the world’s largest natural resources, we remain locked in a cycle of poverty. Most of it has to do with our history of course, but we in Africa, have also been responsible for creating the continuing inequalities through apathy, mismanagement and corruption. We therefore cannot continue to blame the past.

Africa’s rise, which is being punted by international media, is unfortunately not distributive, but is a consumption-driven boom that will merely result in Africa’s bourgeoning middle class consuming more goods from Europe, China and the USA. Africa is failing to manufacture and consume its own products and thus is unable to create sustainable higher incomes for its people.

In our case in Zimbabwe, it is evident that there is now an urgent agenda of transforming the structure of the economy to industrialise and create inclusive growth while becoming less dependent on imports and create an (upper) middle income economy by 2030.

In the Zimbabwe we want to create, we must understand that it is only when we have succeeded in creating a vibrant local economy underpinned by free enterprise that we can begin to achieve our social developmental objectives. A vibrant private sector is a critical success factor must therefore be looked at and treated as a source of future revenue and growth. The private sector is not an enemy of the State but rather a partner and the engine and furnace of future growth.

The first thing we need to do is to expunge all legislation, policies, practices and institutions which limit free enterprise and economic freedom. We must then increase especially the level of domestic investments. This will mean that we have to reduce the costs of maintaining a huge government bureaucracy and spend more in capital formation to create future productive capacity.

We must make it easy and less costly to do business and also pay special attention to how we incentivise a savings culture. The role of our government must be to create the infrastructure that allows business to prosper while creating a safety net for those that need help. All these issues were adequately mentioned as important by the President in his inaugural speech on the 26th of August and that is encouraging. Implementation and accountability will be key.

Political leadership will of course be critical. We now have a lean government that is geared to deliver. We now have a new paradigm at State house which seeks to create equity through a fair practice and efficient regulation of the economy to allow innovation and private investment without limit.

The efficient collection and allocation of resources by a government in a transparent manner is critical. This means that we are all accountable for the use of public funds and resources. Without this in place, we cannot lead by example. We have seen how lack of accountability leads to discretionary policy measures which have tended to derail growth. The new economic order seeks to reverse these and ensure effective and accountable governance both at national and local levels, especially in the allocation and use of scarce public resources.

We must also see better regulation of the financial services industry. A well regulated and vibrant financial services industry has far reaching consequences on the success of the privet sector. I have no doubt that our new Minister of Finance, Dr Mthuli Ncube, is adequately aware of what needs to be done.

Every country must protect its industry from foreign competition in order to allow the emergence of a strong local industrial sector. However, this protection must not result in the protection of high production costs and inefficiencies, but must nurture our industrial sector which can grow the necessary capacity to ultimately face international competition. After all that is how developed countries became industrialised.

We currently have a business sector that has too many monopolies, high prices and old technologies. In addition our competition regulatory environment is archaic and leads to market distortions and inefficiencies that do not serve the economy and the consumer. This has to change.

The question of which sector we must incentivise and for what reasons requires special attention. I do not believe in the old argument of a natural or inherited comparative advantage of nations. Rather, I believe that innovation and entrepreneurship can create new ideas and technologies that result in a market advantages.

This advantage must be encouraged by the protection of private property, specifically intellectual capital, as was the case during England’s Industrial Revolution.

Where private property and innovative ideas are protected by law, societies tend to be more innovative and are able to invest in new ideas knowing that they will benefit. The funding of research and development becomes important and must therefore be encouraged through incentives to private sector.

In conclusion, if we are to create a vibrant private business sector in Zimbabwe it is imperative that we go through;

A recovery phase - where we invest in the infrastructure, create new accountable public institutions with a new value system, revive the productive base of the country and attract both domestics and foreign direct investment. We will also have to build new hope for a better future.

A growth phase - where we focus on those economic sectors that can deliver growth in the short to medium term these being a stable financial sector, tourism, energy, mining and agriculture. The private sector, and not government, must be at the fore front.

A consolidation phase - where we spread economic growth to the rest of the economy and create sustainability through a fully employed vibrant middle class and the creation domestic savings and investments. This will allow the achievement of our vision.

Underlying all this must be a clean and accountable government, the respect of human rights, the rule of law and an inclusive culture where all Zimbabweans participate in creation of a new ethos that says that “Zimbabwe belongs to all who live in it.”

Zimbabwe Will Rise!

Vincent Musewe is an economist and economic development policy advisor. You may contact him on vtmusewe@gmail.com.