The Long Read: How to fix and rebuild Zimbabwe

The Long Read: How to fix and rebuild Zimbabwe

By Kuzi Mutonga and Isaac Jonas

Zimbabwe is going through an unprecedented phase of both political and economic volatility. The economy has virtually collapsed with the majority of its citizens currently unemployed (published statistics have national unemployment rate at over 86%).

Most of the unemployed lot are the graduates from the country’s colleges and universities who have turned to buying and selling basic products such as cellphone airtime on the streets in order to survive. The challenge though, has been some concerned citizens’ views have been nominally taken in a binary fashion – if one speaks out, it is either one is for the government or against the government.

This article attempts to answer three key questions the authors think are pertinent to take Zimbabwe forward in a non-politically binary fashion.

The three key questions are what does the future Zimbabweans want look like, what do we need as Zimbabweans to get there, and thirdly, how long might it take to get there.

As a matter of fact, democracy thrives on constructive criticism hence there is need for citizens to robustly think and discuss above emotions by merely labeling each other based on political proclivity.

Zimbabwe has weathered several crises of great proportions in the past, ranging from the protracted struggle for political and economic freedom to withstanding a world record hyperinflation. In spite of all these painful experiences, many citizens remain divided on ideological grounds.

From an economist’s vantage point, there are many fundamental lessons that can be extrapolated from the Zimbabwean story.

First, it is time for Zimbabweans to collectively revisit the cardinal principles of our economic and socio-political systems with a view to re-envision a better future for our nation. The world has fast become a digitalized village.

Zimbabwe cannot afford to continue to steal away the dreams of the present and the future generations for whatever reason. To achieve some of the aforementioned goals, citizens need to think and act beyond individual and or party lines perhaps by first taking full responsibility for our own economic problems before blaming anybody from East, West or South.

Ownership and admission of past mistakes could provide a critical take off point. Zimbabwe is mostly a Zimbabwean problem and even though citizens may not necessarily agree on how to fix their own national problems there is need for a modicum of tolerance to discerning voices which are health for our democracy.

The path to prosperity is not necessarily an immediate one. The path may take longer than one election cycle to fix (5+ years). The first port of call could start by engaging in meaningful dialogue devoid of preemptive binary labeling and politically leaning inclinations.

It goes by stating that Zimbabwe is and should always be bigger than any political party, big and or small. Kick starting an honest apolitical conversation can be a first step in our efforts to rebuild our country person by person for the betterment and sake of our future.

The backbone of any functional economy relies on the co-existence and growth of firms seeking to maximize profit (and by extension, minimize their costs).

Profitable firms tend to provide more potential job opportunities, which are a critical ingredient to combating the excessively high level of unemployment in Zimbabwe. In order for firms to generate and grow revenues consistently, however, there are both supply side and demand side dynamics that affect their bottom line. On the other end, the gaps left out by inefficiencies could be closed down by contingent stakeholders of the economy like the churches, non-governmental organizations and universities for the country’s social good.

Let’s take the example of a firm like ZISCO Steel (ZISCO). On its supply side, ZISCO uses inputs such as steel, metal machinery, electricity and specialized labor in order to manufacture steel beams, which then serve as intermediate inputs for companies like mining corporations who undertake construction projects that require the usage of steel.

The economy works like a simple machine: “One company’s expenditure is another company’s income”.

Without the continued growth of firms, it is impossible for the economy to grow or take off from the economic morass. This is one of the challenges Zimbabwe faces and that needs to be addressed by applying the right incentives across the country’s economic drivers.

The productive use of land, labor, technology and capital are the tools the various economic and political players across the country can leverage on to ensure the continued growth of the economy.

Although Zimbabwe may have a lot of arable land, it is not being used productively across the country. There are also misplaced priorities on government spending and political bickering which send the wrong signals across the country.

Taking farming as another example, the banks are not lending out money to farmers as there is a cash crunch. By the way, banks constitute depositors’ money and as long as there is limited or no confidence across the banking sector and the depositors withdraw all their money instantly-banks will remain on the verge of collapse.

The respective authorities should ascertain the ‘real barons’ who externalize large sums of money to offshore accounts against the banking laws of the country and bring them to book without fear and or favor.

\The ordinary citizens are mostly the victims of the vagaries inflicted by corporations and individuals externalizing large sums of money against the banking laws of the country. Foreign direct investment can only flow into Zimbabwe as long as there is effective rule of law.

However, on the current trend in the banking sector of the country investors remain unwilling to invest owing to the country’s inconsistency in government policy. Zimbabwe’s risky profile is just too high. Why? This is another question Zimbabweans should be asking ourselves.

Similarly, on the demand side, consumers need rising incomes in order to be able to buy more goods and services and save money to smooth out their consumption patterns. Jobs originating from growing firms and various other sectors of the economy facilitate rising incomes which are critical for the country to get back on an upward economic trajectory.

Much of Zimbabwe’s future prosperity is contingent upon the effective implementation of policies that stimulate the private sector and various sectors as the informal sector, which are key drivers of the economic engine. The Zimbabwean informal sector has grown so big that there is need to explore on ways to effectively streamline and tap into the revenues from this sector. There are some key statistics in the paragraphs below.

One might wonder, “What policies are required specifically?”. To achieve more competitive markets that offer more basic goods and services of higher quality and lower price to the population, basic tenets such as: the enforcement of contracts (rule of law), anti-trust laws (prevention of monopolies) and government as a neutral referee must hold. This ultimately provides a conducive environment for firms to operate efficiently.

As citizens, it is important to demand and collectively responsibly partake nothing less than complete accountability and consistency from our government for its policies as well as ourselves toward businesses. The country cannot prosper unless some of these basic elements remain in place.

The economy however, cannot always maintain a perfect state of equilibrium. Like a machine, there are peak and off-peak periods called “booms” and “busts” which form part of business cycles (where demand and consumption grow and fall).

The key to growth is in managing these forces. The Reserve Bank of Zimbabwe (RBZ) exists to ensure monetary policy is geared towards stimulating consumption via the setting of interest rates (low interest rates, make it easier for banks to borrow and provide liquidity to citizens and businesses). The same applies to the rate of inflation (which determines the price level).

As a country on a multiple currency system that excludes its own currency, the RBZ is limited in its ability to control prices within Zimbabwe. This is of particular concern given the low disposable incomes of the population. Rising prices put undue pressure on families and force trade offs in consumption that lead to decreased demand across all sectors of the economy. In the long-run, this points toward the eventual reintroduction of the local currency in the future. The local currency should be sufficiently backed by gold and could potentially induce more stability in the price level with time.

The authors’ views regarding the reintroduction of the local currency are that, for a country to adequately respond to unexpected shocks in the economy, at the appropriate time, there is need to re-introduce the local currency.

Some citizens (including policy makers) might debate on the best time to introduce the local currency but the answer should effectively gravitate closer to a point where the economy’s productivity has reached fairly high levels of about 80%. The current situation indicates a far lower level of productivity which makes is hard to build confidence regarding the reintroduction of the local currency.

Most importantly however, none of the aforementioned suggestions can succeed without consistency in government policy. The public sector has a critical role to play in tackling issues such as fiscal policy, income inequality and education reform, both of which form the basic fabric of the Zimbabwean society.

Below are some popular economic indicators for Zimbabwe for 2016 to give a specific picture of the economic performance.

Source: “Zimbabwe Trade Statistics | WITS.” Accessed September 2, 2016. http://wits.worldbank.org/CountryProfile/en/ZWE.
Source: “Zimbabwe Trade Statistics | WITS.” Accessed September 2, 2016. http://wits.worldbank.org/CountryProfile/en/ZWE.

Let’s examine the issue of fiscal policy, first. Zimbabwe currently has a trade deficit of about US$ 6 Billion (as our imports exceed our exports). The misplaced priorities have resulted in the further accumulation of significant debts both domestically and externally.

These debts will eventually need to be repaid plus interest and hence postponing them is irresponsibly passing on odious debt to the future generation. To make matters worse, the domestic debt is tied up with an inefficient tax collection system which further juxtapose an albatross on the Zimbabwean economy’s neck.

Additionally, the government is facing challenges to raise money to pay civil servant salaries, nor to make the required investment expenditures to improve roads and other local infrastructure yet the same government spends millions of tax payer’s money for example, on luxurious cars for the ministers when there are cheaper options to avail the same items. All these misplaced priorities need to be stopped sooner rather than later.

Way Forward

First, the epicenter of the Zimbabwean economic challenges manifests from the binary politics of exclusion which mostly stems out from an ideologically divergent vantage point.

The political exclusion has consequently spread on to the inconsistent socio-economic policies. Emotions or short cuts will not essentially force the worsening economic conditions to disappear overnight.

The government needs to rationalize the staggering and fairly unjustified expenditure on recurrent activities like buying top of the range cars for government officials when there are cheaper cars that serve equally the same purpose of transportation from point K to point Z.

There also needs to be a reallocation of the finitely available resources to re-focus on digitizing and standardizing informational flows. So long the country relies on paper records for tax collection, it easily creates more loopholes for rent seeking behavior which is retrogressive for the country. The loopholes from tax leakages are irresponsibly costly to the taxes payers’ money.

In this 21st Century, almost all tax paying citizens have access to a mobile phone, so partnering with a telecommunications giant like Econet to create an e-Payment platform for tax collection that auto generates reminders to clients could be one way to create a more innovative approach to engage citizens whilst also minimizing costs. The informal sector is now arguably one of the key pillars driving the Zimbabwean economy.

There is also need to wholly digitalize both the informal and formal sectors of the economy to ensure a more delectable trail of all financial transactions across the country. A classic example could be regularizing the informal sector through complete digitalization the government revenue services toward a client unique traceable trail number like the introduction of a Social Insurance Number (SIN).

The SIN was created in 1964 in Canada to serve as a client account number in the administration of the Canada Pension Plan and Canada’s varied employment insurance programs. Even though there may be limited unrecorded financial transactions to the revenue authorities, this could serve as an incentive in the right directions.

All those citizens of businesses who would be caught on the wrong side with regards to their taxes should be punitively punished without fear or favor. While there maybe similarities and differences between Canada and Zimbabwe’s revenue system owing to the different levels of economic integration, a SIN could be a good starting point to digitalize revenue collection for the government and to maximize sector wide efficiencies.

Secondly, government authorities must improve the functionality of both the secondary and tertiary education. The late Nelson Mandela once said that “education is the most powerful tool [one] can use to change the world”.

At its core, 21st education skills are a fundamental truism. Education is meant to liberate the mind and expose students to alternate ways of thinking. However, in order for Zimbabwe’s economy to move forward, there needs to be more emphasis on functional literacy to help bridge the skills gap between the labor market and the unemployed youth who are increasingly becoming agitated by the worsening economic collapse.

By aligning and linking educational attainment to “priority sectors” (sectors with large growth potential and ripe for investment), this could increase the probability of young people finding jobs in their areas of expertise. The country also needs to equip young people with more technological skills to better prepare them for a world run by “smart technology”, programming and automation.

Lastly, with economic growth comes the need to manage social mobility. Globally, there has been a rising income inequality which in turn have consequently increased social tensions.

Equalizing incomes is a process that takes time but there is need to provide a more equitable macroeconomic environment to incentivize those who work harder and sometimes smartly. Zimbabwe needs to also build a country future where the region of birth doesn’t predetermine one’s economic opportunities for the entirety of one’s life.

Anyone who is willing to work hard and equally smartly, should be afforded access to a quality education and an opportunity to obtain meaningful employment, create own business venture and hence not only live a dream but also the realities of their dreams. (Khuluma Afrika)




This article has been co-authored two Zimbabwean consultants for KLI Africa Consulting based in Canada. Kuzi Mutonga and Isaac Jonas who are both economics graduates from the University of British Columbia(UBC), Canada. Both have written the article in their personal capacities and hence the views expressed in the article do not necessarily represent the organizations they are affiliated to. Comments and feedback reach out to them via;

Isaac Jonas: Email:isaac@kliafricaconsulting.com I Personal website: http://isaac-jonas.com/

Kuzi Mutonga: kuzi@kliafricaconsulting.com

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