There are high expectations of economic improvement in Zimbabwe, and while everyone needs to continually remind President Mnangagwa and his new team to be announced soon that this is their number one priority, we also have to think about exactly what sort of economic improvement we wish to push for.
Shortly before his inauguration, the new President put it very concisely: “Jobs, jobs, jobs”. This obviously includes a lot more formal employment – jobs in factories, in mines, in tourism and the like. But equally, this must include decent self-employment, the sort that produces the level of income that attracts the unwanted but necessary interest of Zimra.
A farming family, producing half its food and showing a profit on commercial operations of over $5 000 a year, is not going to rush to jobs such as sweeping a factory floor, neither will an urban web designer earning a decent income in her one-person business, or even a reasonably talented freelance hairdresser with a decent client list.
So rather than emphasising that 90 percent of Zimbabwean adults do not have formal employment and a regular monthly pay slip, we need to emphasise that probably half our families are living in serious poverty and a good chunk of the rest need extra income to move off the bottom rungs.
Yet extra jobs create more jobs in all sectors. Families with better incomes buy more goods that someone has to make; they go on holiday, so someone else gets a job; they can afford a mortgage so a bunch of people get work building a home. And so it goes. There is already talk of aid and support for Zimbabwe. But we need to remind ourselves that this is likely to be largely loans and credits. Zimbabwe’s economy is not in good shape, but we are hardly a bombed-out wreck with unburied bodies. So there will not be much free money.
We are likely to get some balance-of-payments support, which we desperately need but using that to make it easy to import cheap consumer goods will benefit almost no-one. We went through that on dollarisation and saw good chunks of industry devastated and large job losses.
Admittedly, many of those industries were smug outfits using obsolete equipment to produce sub-standard goods at high prices, but the almost nine years since then have seen a lot of re-equipping, rethinking and dramatic improvements in both quality and productivity. The stuff now spreading across our shop shelves is comparable in price and quality to imports.
So using balance-of-payments support to make it a lot easier for Zimbabwean business to import needed equipment and raw materials on demand will create jobs while using it to help cross-border traders will kill jobs. If we had our own currency, then a devaluation backed by support would work well but as we don’t we need to think of allocation controls; the present priority system is workable, but cutting payment times for priority items to a few days will raise a lot of cheers and allow the local industry to press ahead faster in the desired direction of beating imports on price and quality, not on a policy of take-it-or-leave-it.
The permanent solution is that local goods should be able to compete in regional and international markets, meaning that we actually either break-even or even have a positive balance in consumer goods. Priorities, allocations and the like can then be safely buried.
The second big rethink we need is the Government debt, the budget deficit. We are not hitting the rocks yet but the faint sound of the surf is in the air. The debt has been largely financed through Treasury Bills and allowing overhangs in the RTGS system, neither evil but they cannot be overdone. And both are short term, the RTGS massage especially so. Once the new Government gets into gear, it and the Reserve Bank are going to have to think hard about the best way of cleaning this up, putting long-term capital financing into the system and generally being as transparent as possible, following best practice.
Economic growth that stresses employment, both formal and proper self-employment, will help a lot. A couple of hundred thousand extra taxpayers will provide a nice boost to income tax and since most people who earn above near-starvation incomes spend a good chunk of the extra on stuff that is taxed, another slice of the extra income goes in VAT. Even Command Agriculture, which benefits farmers who are notoriously difficult to tax, will provide some extra revenue as those farmers buy goods and equipment. Extra tax money for running costs and a decent finance system for capital costs will ease the burdens on whoever will be Finance Minister.
A lot of President Mnangagwa’s new economic policies will obviously be putting together all the bits. Zimbabwe has resources, it has people who are educated and are willing to work hard; it is heart-breaking sometimes to see a vendor with her little pavement blanket, but no one can accuse her, as she waits for 12 hours for a couple of little sales, of being lazy.
Now we need to mobilise capital and markets. None of this is impossible, but all require putting first things first and number one on that list is, as the President noted, jobs. Fix that and a lot of other stuff falls into line almost automatically.