Digitalisation implications on macro-economic stability(2)
Digitalisation could enable the government to meet its economic ambitions as set out in the National Development Strategy (NDS1) (2021-2025) and help in the realisation of Vision 2030. Below is a list of examples of some key areas where positive implications could be immediately felt and cascade to societal levels.
Modernisation of agric, agro-industries
According to the Food and Agriculture Organisation (FAO), the agricultural sector is a vital sector of the Zimbabwean economy. Currently, it is providing employment and income for 60-70% of the population, supplying 60% of the raw materials required by the industrial sector, contributing about 30% to export earnings and approximately 20% to GDP. In the entire Sub-Saharan Africa (SSA), the food system is projected to add more jobs than the rest of the economy between 2010 and 2025.
Farm labour and income is important especially in Zimbabwe where on-farm activities represent almost 70% of all rural income. Hence, harnessing new farming technologies will transform this sector for the good of the economy. For instance, there are now mobile and web technologies for agriculture where farmers can get advice, weather information, and financial tips at a click of a button. Technology is used in soil data analysis to help farmers in applying an optimum amount of fertiliser or irrigation water. Further, information on competitive pricing, monitored crop information, disease prevention tips and disaster mitigation support can transform agriculture to improve incomes, production, and demand.
In the new world of changing climatic conditions, farmers can utilise data-driven precision farming technologies for productivity optimisation and waste reduction. Zimbabwe is struggling with frequent ElNino-induced droughts which are affecting crop yield leading to food insecurity. For instance, in 2019 and 2020, the country harvested less than half of its annual maize staple requirement of two million tonnes. The country’s agriculture is heavily dependent on rains as it has only 10% of irrigable land. It is high time the country, through the fiscal budgets, embraced digital revolution such as cloud seeding and hydroponics. While the agriculture sector has been receiving one of the highest budget votes over the years, little has been spent in revitalising agricultural technologies. As such, the persistent food insecurity piles pressure on the fiscus as the country will be forced to borrow to import food and this has destabilising effects on the economy.
Employment, skills and production
According to the International Labour Organisation (ILO), about 60% of youth in Sub-Saharan Africa are unemployed. Statistics also show that the youth have the highest unemployment rate among the age groups in the labour force in Zimbabwe notwithstanding that the youth constitutes about 67% of the total population. The youths are considered as one of the most critical resources a country can have to elevate its socio-economic development. However, due to high unemployment, the youth are now indulging in regressive activities like substance abuse, early marriages, and participation in political violence.
To harness the potential of the youth, there is a need for the government to facilitate technology penetration and use since the youths are generally considered as the most technology fascinated group. Investing in critical digital infrastructure and skills for innovation and technology use will become a catalyst for employment creation and an engine for economic growth. For instance, Digital Revolution is creating new roles like search engine optimisation managers. It is also resulting in the creation of new types of organisations like cloud computing providers as well as new sectors of the economy like digital security and data science.
All these result in new cost-effective ways of production that will transform the Zimbabwe industry which still relies on old technologies. This is causing the industrial production costs to be too high thereby rendering domestic firms uncompetitive regionally. Also, citizens are being affected by the high prices of goods and services. However, at an average of 0,2% of total 2022 budget, government spending on the youth remains too low. The rising inflation is making technology expensive for the unemployed youths.
Financial services and investment
Increased financial services from the digital revolution impact economic growth through inclusive financing for women, youth, rural, urban populations, and other vulnerable groups no matter where they are located. This is enabling the unbanked populations to enter formality through retail electronic payment platforms. Elsewhere the digital revolution is enabling entrepreneurs and businesses to rethink business models that are more impactful, sustainable, and connected to the other sectors of the economy. This transforms product designs and business models including the government migrating to online platforms to efficiently and effectively provide direly needed public services to all corners of the country as it eliminates the barriers being caused by physical distance.
Fighting inequality
Spreading access to technology can empower the poor with access to information, job opportunities, and services that improve their living standards. Digitalisation can enhance economic justice — artificial intelligence, blockchain technologies, and the internet of things can enhance opportunities for data gathering and analysis for more targeted and effective poverty reduction strategies. Already we are seeing the transformational power of formal financial services through mobile phones. Mobile money wallets like Econet’s Ecocash and Net One’s One Money reach underserved communities including women.
These financial services allow citizens to save in secure instruments to enlarge their asset base. This is critical in the fight against rising poverty and inequalities especially between the rural dwellers and their urban counterparts. For this reason, we are calling for the abolishment of regressive taxes like the proposed US$50 cellular tax being proposed in the 2022 national budget as it will decimate the gains the country has made to date.
Improve healthcare
Zimbabwe faces severe health challenges worsened by the coronavirus pandemic, limited physical infrastructure, and a lack of qualified and motivated professionals. However, some of these challenges may be easily resolved through increased digitalisation as it can improve medical data and service delivery. For example, using technology to report medicine stocks, tracking and monitoring stocks can reduce leakages and provide services efficiently. Rwanda has become the first country on the continent to use drones in the healthcare sector to deliver blood transfusions to remote areas. Digitalisation also improves disaster response as it facilitates quick sharing of information, checking of symptoms, and communicating under quarantine conditions. Nevertheless, the slow adoption of technology in healthcare in Zimbabwe is a cause for concern. The health budget of 14,9% of the total 2022 national budget is largely consumed by recurrent expenditures such as wages and salaries. Most public hospitals are facing acute shortages of medical equipment to treat chronic illnesses like cancer while manual systems are still in place in the distribution of medical drugs. This was evidenced by the 2019 OAG report on the failure of officials to dispose of expired drugs.
Improved finance management
Digitalisation presents opportunities for improving public finance management. As the government depends on taxes for revenue, the adoption of digitalisation can, by improving reporting of transactions and collection of taxes, increase the revenue base. This will also bring efficiency in public spending through targeted social assistance which reduces inclusion and exclusion errors. The use of digital technologies can improve public debt management as the government will be able to track the performance as well as the maturity of all borrowed funds.
Consequently, this will avert scenarios where debt becomes unsustainable as is the case for Zimbabwe. The latest statistics show total public debt at US$13,7 billion (over 90% of GDP) with external arrears taking the larger share of US$13,2 billion.
The same digital technologies can be used to curb the huge Illicit Financial Flows particularly in the extractive sector which is estimated at over US$1,5 billion per annum. It is commendable that the 2022 budget set aside ZW$146 million to operationalise the cadastre system as this will reduce conflicts which are emanating from the double allocation of mining claims and will allow the government to effectively implement its “Use-it or Lose-it” policy.
E-commerce
E-commerce is beneficial for both consumers and companies. As for consumers, it results in improved access to a variety of products and services being charged at lower prices. This ultimately boosts consumer spending in particular and aggregate demand (GDP) in general. For companies, e-commerce provides business opportunities as well as access to new markets – domestic and external. Empirical evidence indicates that those companies that engage in e-commerce export 50% more than those that do not, relying on their skilled labour and capacity to innovate. This translates to more exports, more forex to support struggling local currency and improve service delivery hence benefiting the majority of citizens.
Zhou is the executive director at Zimbabwe Coalition On Debt and Development (ZIMCODD), a socio-economic justice movement. These weekly New Horizon articles are are coordinated by Lovemore Kadenge, independent consultant, past president of ZES and past president of the Institute of Chartered Secretaries and Administrators in Zimbabwe now under a new name Chartered Governance and Accountancy Institute in Zimbabwe (CGI Zimbabwe). — kadenge.zes@ gmail.com or mobile +263 772 382 852