Entrepreneurship won’t help Zimbabwe

Chris Chenga Open Economy
I don’t really agree that entrepreneurship is the solution to Zimbabwe’s economic troubles. At least not entrepreneurship alone.
A constant message delivered in policy and media is the importance of getting youth involved in entrepreneurial ventures and activities. Affirmative Action Group representatives and the Zimbabwe Youth Council have all shared this concern publicly.
On the ground, there are countless entrepreneurial workshops going in all regions. The notion that our economy simply needs more entrepreneurship is incorrect.

If this were true, would CABS youth loans have a 72% default rate? If you look at more established enterprises, according to the ZCTU, 75 companies closed in the last quarter of 2013.

Even if it’s not total shutdown, well-financed and relatively better-placed firms like Steward Bank are still forced to retrench 40% of their workforce. Let’s step back and ask: are we as a nation just bad at business or perhaps there are other determinants at play?
Small to large scale, every enterprise relies on the macro-economic environment.

The best entrepreneurs will tell you that just as important as your product and operational competencies is the macro-economic environment.

Many proponents of increased entrepreneurship are overlooking the fact that we need co-operation between entrepreneurship and state support. Do not get me wrong, entrepreneurship is indeed an essential part of economic recovery.

This is an argument about impact. Without state support in the macro-economic environment, the entrepreneurial effect is diminished.
The economy is not suffering because of any entrepreneurial deficiency. We are just not giving entrepreneurship its best shot in terms of the environment we expect them to be operating in.

In considering the macro-economic environment, I am referring to elements such as industry regulation, monetary policy like money supply and bank interest rates, workforce availability, public infrastructure, consumer income levels and so on.

If we do not avail these things in a manner favourable to business, then it is unlikely our entrepreneurs will succeed.
If it is possible, we need to offer better public infrastructure. Business cannot reach optimal production without power. Efficiency is reliant on logistic execution, a task made harder by damaged and unsafe roads. Deferred maintenance and replacement of our public infrastructure is crippling our economy.

If entrepreneurs are to play a part in easing unemployment, it is only fair that we offer them a competent, healthy and functional workforce. Just last year alone it is said more than a million children could not afford to go to school. In the last two years, we have seen disappointing O-Level results with an average pass rate of 20%. Enterprise cannot be competitive when we have a poorly skilled workforce.  In similar respect, most of the population cannot afford health care costs.

Our greatest macro-economic challenge is in the country’s monetary supply. Entrepreneurs nationwide will tell you that the economy has no credit at all. Only about $2 billion of hard currency is circulating.

A population with more than 50% being under the age of 35, can only offer youth a revolving fund of $15 million. Without credit, how are our entrepreneurs supposed to acquire inputs, pay employees or make investments to grow their businesses? Expansion is heavily capital dependent.

Investors hate uncertainty! Let me say it again. Investors hate uncertainty. If we are consistently changing our mind on ownership policy, and do not win investors’ trust, we are distancing entrepreneurs’ access to capital inflows. If we do eventually access those capital inflows, without a stable macro-environment, cost of capital will be at a premium.

Entrepreneurship by itself is already arguably the toughest venture in any economy. We have done considerably well in fostering the right mindset, and tutoring the youth on the skills and competency they need to be entrepreneurs. However, that is not enough support.
We have only made the entrepreneur, but we are yet to create the macro-environment that gives him the best chance to succeed.

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  • scombination

    good article….lovely read