eBusiness Weekly
In three days time Zimbabweans go to the polls to elect the President and Parliament that will lead the country for the next five years as we continue climbing out of an economic morass into sunnier climes and the councilors who will be expected to provide local services.As we and others have already noted, there are no significant ideological differences between the parties, or at least between the five or six parties likely to head the polls. Details are lacking in some manifestoes and manifestoes are lacking for some candidates, but generally there appears to be a consensus that the private sector economy has to be the engine for growth, that investment has to be encouraged, and that the Government needs to ensure that doing business is made as easy as possible and that essential infrastructure continues to be upgraded.
Everyone now agrees that there must be zero tolerance of corruption and that even with criminal reform space can still be found in our jails for the corrupt.
But whoever wins will face the two major problems: We import more than we export and the Government needs to spend more than we pay in taxes.
It is very important to understand that there is no magic wand that will solve either constraint overnight and certainly no billions in foreign aid. But both problems can be managed with expert care and both will eventually be solved by the same force. We have to grow ourselves out of the swamp.
To kill any expectations of aid packages, we, like many poorer countries, will still get some help for health and education, but that is about it. What little aid money is still floating around these days goes to the total disasters, countries almost wiped out in a war and countries that have been wrecked by earthquake and flood. We are not on either list.
In the past eight months since the change of Government in late November last year a serious start has been made. Imports have dramatically switched from being largely consumer driven to largely production driven.
This follows a determined effort to get local business moving. A policy of import substitution, up to certain limits, is a tried and tested way of generating growth quickly and creating a lot of jobs in a few months.
But it is a bit like a big company looking at cost control. It is an essential process to return a firm to profitability but there is only so much gain possible. In the end a growing company has to grow the top line, the revenue, to continue that growth and continue to become a bigger and more profitable concern. In the national context this means growing our exports.
Here there is a delay between the start of the process, and again the last eight months has seen a lot of progress in starts, and the start of the projects that will ensure a decent flow of hard currency into Zimbabwe. A new mine takes a couple of years to move from starting the hole in the ground to becoming a productive taxpayer. Even in agriculture, there usually is a year between figuring out a new policy that will help farmers grow more stuff and grow the right stuff and the day when the trains and trucks start hauling that new export over the border.
We mention mining and agriculture because like most of Africa Zimbabwe is reliant on exporting primary products. Even the most sophisticated manufacturing economies in Africa – South Africa and Egypt – are still more reliant on resource-based exports.
We just need to think of the total disaster we would face without gold and tobacco. And we are starting to climb upwards because we are now mining more gold and tobacco production has hit a new record, finally overtaking the 2000 previous high-tide mark.
Platinum has become an essential big block of expert earnings and lower world prices paradoxically help our investment drive.
It is cheaper, thanks to our geology, to mine the metal here than almost anywhere else in the world. What was needed was a decent mining investment policy and that is another gain in the last few months which has seen a really big new entrant. Lithium is a potential serious export, and again a decent mining policy has seen serious investment that will reasonably soon see another jump in exports.
Mining investment has another gain. The industry is notoriously labour intensive, which means jobs. Agricultural growth has a serious extra benefit in spreading wealth in a country like Zimbabwe where there are so many single-family farms. This is how Botswana has largely spread its diamond wealth, by investment in infrastructure that makes it a lot easier and cheaper for Batswana farmers to produce export-quality beef and get it to market. And that in turn gave Botswana a second large export. The new road network also made it easier for tourists, and so a third source of export earnings and jobs.
It is this economic growth that will solve the second problem, the budget deficit. There are a lot of ignorant people who keep saying that the Government needs to slash the State payroll. Yes efficiency can make some savings but we need to remember that most people on that State payroll actually perform essential services. Easily the largest block of State employees are teachers and lecturers. Other very big blocks are health workers, police officers, agriculture research and extension staff, those essential officers who issue ID cards, birth certificates and passports, the defence forces (which are slowly contracting), and the justice system. These are all on the “must keep” list of just about every politician and citizen. And many would like more staff in these categories.
There is talk, and sometimes action, to combine ministries or even eliminate some. But it must be remembered that most of those units on the “can go” lists are tiny. Certain socially essential functions of a Government are to co-ordinate and generate policy, which may well need the person doing this to have a seat at the top table but whose staff might just be an office suite of research workers.
So once again the only real solution to getting better schools, by hiring more teachers rather than firing the ones we have, is to have more tax revenue. That applies to having better hospitals and clinics, to having more people who can do something about children begging, to having rods fixed and so on.
No Government can raise taxes, so we need the other solution, more taxpayers. And that means more companies paying tax on profits, more people with jobs that generate PAYE, more farmers (and those with better jobs or new jobs) buying more goods and services and so paying more VAT.
It seems rather obvious, but a 25 percent growth in the economy, obtainable in just three years if you think about it, means a 25 percent growth in tax revenue and that could eliminate the budget deficit, give the finance minister more cash to buy capital goods and equipment and even have something left over for what we hope will be merit-based increases in civil service pay to attract and retain the expertise we need there.
So while there are no magic wands, there is an agenda that whoever wins has to follow.
