eBusiness Weekly
— Modern investment is actually towards labour replacement
Chris Chenga —
It is very rare to hear any prospective investor inquire on the job creation potential of an investment proposition; stocks, mutual funds, a new factory, or any other portfolio. It is only out of courtesy for such investors to hope that their assets create some derived form of employment, but jobs themselves are not really the investment impetus. Investors seek bottom line profit; returns on their investment.
As many governments world over are jostling to attract foreign direct investment, they promise to their citizens that this will bring jobs. Zimbabwe is no exception. The difficulty is that governments often let go of the onus to balance job creation with the investment return impetus of foreign direct investors. Companies enter markets that only make bottom line sense. Let more offer a nuanced perspective.
To the greater extent, it is governments that are responsible for ensuring that the possible margin of expense items for companies in an economy are relatively competitive to other markets. Such a perspective is beneficial for governments because the margins of expense items are significantly an inheritance of the market of operation.
This is not to diminish the responsibility for companies to be efficient in their own expense management, but what companies to set up in our markets would be doing, is in fact competing with one another in the management of the margins possible in the respective environment of operation. Now, labour has traditionally been a larger share of expense items, taking up the greater margin of profits.
Thus, governments luring investment of offices, plants and factories should actually do so with the hopes that labour costs do not eat up much from the bottom line. Investors do not enter a market with the intention to carry large labour costs. Actually, competition in this technology age, called the 4th industrial revolution, has raised the emphasis for capital investments which save greater expense margins to alternative to labour costs.
This is where governments should take heed to understand that job creation is increasingly diverging with investment interests. Consider the banking industry for instance. Just yesterday, Bob Diamond Founder and CEO of Atlas Capital, reasserted his intent to increase investment on the continent. In his entire monologue, however, at no point did his words suggest that investment returns would be derived from broad employment.
Actually, he indicated the opposite. The financial sector as a whole is shifting towards reducing its cost-returns ratios by fiercely competing in large capital investment in technology. This is how the battle for margins is carried out today. European bankers would be coming to the continent to transfer modern technology platforms in a once labour composed industry of financial service delivery.
This means less brick and mortar branches with human interface and labour costs, towards more utility of fintech such as blockchain and other capital alternatives. This is the structural reality of competitive investment in the sector. It gives clarity to the nuanced perspective that governments hoping to attract foreign investment are increasingly no longer jostling for jobs, but rather competing for capital investment that is the marginal alternative to labour.
What does this mean for governance? Perhaps in this modern form of economics, governments must no longer place an emphasis on merely attracting FDI, because in its new form FDI is looking to markets that have a lower labour composition of margins. Governments should outright consciously accept that they are now competing for technology that reduces the need for labour. Subsequent to that cognitive presence, governments must focus their national strategy on responsive measures to the diminishing needs of labour.
So for instance, in the financial sector, deliberations must be held on what avenues of employment mobility exist for such a workforce? Instead of promising mass financial sector employment, Governments must take leadership in crafting workforce mobility. This could be through research on transfer of skills, industrial projections on where financial sector labour can find greater utility in the future, or more immediately, skills development to make the labour force more compatible with modern fintech.
The same can be applied to other sectors in which Zimbabwe is expecting employment such as agriculture. Greater yields and lower input costs make for competitive agricultural sectors; and the margins globally for commodities are competitive. Where a tractor and harvester initially meant to do work that was at the edge of physically possibility, modern industrial technology is actually towards replacing the work that is conceivably human possible.
Thus, as much as the nation intends to get capital investment into the sector, labour implications must be sincerely recognised. Indeed the sentiment of this presentation is not to cast gloom on the future prospects of the economy. However, global investors will not offer us voluntary veracity of the potential social implications of the investments. They only seek bottom line profit and investment returns. It is government’s responsibility to have industrial foresight and uphold its mandate of ensuring sustained employment creation.
The governments that shall lag behind will only be caught in the quandary of populist concerns as they fail to prepare their labour mobility to shifting industrial realities.
