There is need to place productivity as main context

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Chris Chenga
Globally, where the most optimistic stories are told, the world economy has been experiencing anaemic growth at best! At the polar end, the worst scenarios over the last decade have been cases of debt overhangs and bleak economic outlooks. Even the once decorated BRICS (exclude China) have not been as booming as advertised.

The Goldman Sach’s economist Jim O’Neill who first coined the acronym unceremoniously closed out the four nation focused investment fund.

Indeed most commentary will place great emphasis on the global recession being induced by financial malpractice.

But, is that really the cause for this sustained global slump?

In closer regions, for instance, the once flattering Africa Rising narrative has also simmered down. Surely, there must be something amiss from predominant economic perspectives?

There is a need to place productivity as the main context on which economic prescriptions are deliberated.

After all, in most regions of the world it is productivity that is the common deficit. This productivity deficit is easier to reference as fact in other regions, not as much in sub-Sahara Africa, with Zimbabwe included.

You will find that in Western advanced economies, prominent business leaders such as Byron Wein, Larry Fink, Ray Dalio, amongst many others, have begun to verse their market commentaries within a productivity context.

This is particularly encouraging coming from revered financial minds. Status-quo had shifted to an order where — those who direct the flow of money significantly control dominant business and economic understanding. Such is the nature of how financial intellectuals had superseded economic intellectuals — the era of austerity is a case in point.

As financial leaders carry on to verse their commentary along a productivity context, greater appreciation will revert back to the business and economic fundamentals that are credited for the economic growth which preceded the calamity of the great recession.

References to productivity metrics such as worker output, real wage growth, technology penetration, are becoming much more frequent.

This is leading to more precise prognoses of what needs to be done to get the world economy to tangible, potent  economic growth (and return profit for the financially vested as well).

Yet, this intellectual and oratory revolution remains confined to the western hemisphere.

In sub-Sahara Africa, and Zimbabwe, we are yet to put productivity as the main context of economic concern.

Understandably, governance motivated by political rhetoric has an emphasis on socio-economic transformation aimed at structurally creating opportunities for once marginalised demographics.

However, no visible transformation can occur without a consciousness to productivity!

Consider our interpretation of most monetary and fiscal instruments. In the monetary discipline currency exchange rates, inflation, and interest rates are all subject to a productivity context.

Currency exchange rates are simply market determined equilibriums based on the comparative productivity fundamentals which are managed by sovereign central banks behind respective currencies.

For instance, commentaries that suggest bond notes being mispriced to the USD are basically proffering that the comparative productivity of the Zimbabwean economy as managed by the RBZ, cannot sustain level parity to productivity fundamentals as managed by the US Federal Reserve.

Inflation is simple tracking between the volume of money supply in an economy and the productivity of goods and services of which that money supply inspires.

Hyperinflation as experienced in our case, was when too much money supply did not inspire productivity of goods and services, hence that money lost its value.

Interest rates, which frequently face pressure to hold upwards in Zimbabwe, are a market determined cost of credit based on that average use of the credit in an economy to inspire productivity.

The persistent upward movement of interest rates in Zimbabwe, often forcing central bank intervention, is indicative that average productivity from credit hardly improves.

These metrics tell us is a lot more about productivity than we generically acknowledge. It is to our own disadvantage that we do not interpret them as such.

Even within the fiscal discipline, tax breaks such as for capital equipment are directed at getting companies to acquire enhanced productivity, at relatively lower investment costs than without such exemptions. Indeed, we often times perceive these metrics as abstract to productivity.

Yet, productivity is at the core of these metrics. This alludes to a commonplace flaw in our productivity interpretation. Capacity utilisation cannot be benchmarked to a stagnant reference.

For instance, machinery and equipment at the start of the year does not comparatively keep parity to competition. So when we say that capacity utilisation was at 42 percent over three years — that specific machinery and equipment had a capacity that did not change, however new machinery and equipment operating in a similar industry may have been acquired to a capacity of greater productivity.

Thus, we could inquire further into more accurate capacity metrics with terminal indices such as a Producer Price Index.

Only through enhanced productivity can Zimbabwe resolve most of its economic challenges. By addressing employment within a context of creating more productive taxpayers, we can then increase savings.

A significant deficit at this point is one of savings. Without increased productivity this savings outlook will not change. It is savings that will finance infrastructure investment, and also finance social service provision.

Thus, often versed in terms of a lack of foreign investment or multilateral credit lines, the initially challenge to be faced within our economy is that of minimal local savings to depend on.

A last thought would be that of recent equity market perceptions. Indeed perceived as a safe alternative for investors wary of bank accounts and other classes of liquidity, trends on the ZSE have become less of a productivity imperative than one of safety. An equity market should not be conducted in that manner.

Earnings due to higher margins or greater market share must be the focal point of equity investment. This bolsters real, potent, sustainable economic growth.

Without such a productivity imperative on equity markets, economic growth becomes superficial and misleading, such as what the ZSE has been in recent quarters.

Our economic understanding should become founded on a productivity imperative, and matters of economic well being must be referenced to a productivity context!

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