eBusiness Weekly
Chris Chenga
The Zimbabwean economy is not unique. The solutions needed to enable its growth do not require any innovative approach in economic management. While innovation creates solutions and outcomes that are hardly found elsewhere, innovation can also be a mistaken necessity when a country misleads itself into believing that its difficulties are unique.
Zimbabwe has a propensity for self-deceit. Besides the lack of sovereign money supply discretion as managed by an independent central bank monetary committee, and only that alone, nothing else in Zimbabwe’s economic milieu is distinct!
Oddly, when Zimbabwean policymakers and adjunct business stakeholders speak, it is as if Zimbabwe needs matchless policy strategy and structural reforms. This is just scapegoating; elevating regular problems so as to conceal what it is really a lack of discipline and political will to do the needful.
The plight of a growing informal economy is prevalent in many countries across Sub-Saharan Africa and South America. Instead of Zimbabwe perceiving this as a unique phenomenon that has created “the new economy” for the defeatists amongst us, or perceiving it as a matter that requires hard research for those of us who retain hope of resolution, there is a simple regular explanation to the bulging informalisation of the economy in Zimbabwe.
Let’s draw parallels; consider Pakistan. Its economy started to informalise as its formal business environment became more difficult due to institutional decay. The trend of informalisation in Pakistan was traceable to its declining ranking from 105 in 2012, to 147th place last year in Ease of Doing Business as per the World Bank.
Over the time period of Zimbabwe’s informalisation as well, our business environment was similarly worsening, and that is when we dropped significantly in the Ease of Doing Business rankings.
The only difference between Zimbabwe and Pakistan is that Pakistan was honest to its institutional decay, accepting that any economy with compromised institutions winds up creating an informal economy. Zimbabwe does not need to look for extraordinary causes of the informalisation of our economy as we are doing today. It is simply a continuous result of institutional decay.
Many of these institutions remain compromised to where they lack the discipline and will to do the needful. For example, the legal environment of business was seriously compromised, and the result was a highly abusive relationship with private proprietors.
Road fines became feudal, yet there was no visible correlation between hiked tax payer payments and the rehabilitation or improved quality of infrastructure. Licence fees and other regulatory costs were similar feudal, yet the culture of service from respective institutions proved duplicitous.
An informal economy is what happens when such institutional decay becomes rampant. It is not a unique incidence. Oddly, entities such as the Zimbabwe Revenue Authority (ZIMRA), Ministry of Finance, the Reserve Bank of Zimbabwe (RBZ), and tertiary academia have ventured into studies on “How to formalise an informal economy”. Some have challenged the best economic analysts and commentators to write supposed “think pieces” on similar concept.
This is all under the illusion that the growing informal economy in Zimbabwe is unique and requires diligent research toward inspiring an innovative resolution in policy or structural reform.
Regrettably, that is how far as a society we have drifted from simple explanations — decayed institutions can never hold up a formal economy — to challenging ourselves into some sort of intellectual labour to seek out innovation where there should be none. The aforementioned entities are belabouring on a scapegoat narrative, wasting time and resources.
The challenge of formalising our economy can only be achieved when discipline is incentivised within institutions. A lack of aligned incentives within institutions will retain the current decay.
Consider for instance the assets owned by certain civil servants.
They obviously point to quick wealth accumulation that can only be explained by the opportunities found in compromised procedures within public institutions.
If an individual earns more from corruption or bureaucratic loopholes, as was the case for many years in Zimbabwe, there is no incentive for that individual to reform that institution. Kickbacks or payments for doing what should be standardised procedures — say for instance in company registration or licensing — mean that individuals in institutions are more likely incentivised to make the business environment more difficult so as to raise the value of their exploitative opportunity. If registering or getting a license is easy and efficient then there is no incentive for disciplined institutions. It is really that simple.
We do not need innovative policy or structural reforms. There is simply no incentive to apply the discipline to create a competitive business environment that retains formalisation in an economy. Zimbabwe is not policy and structurally unique.
If we are unique, it is only in our propensity for self-deception.
