It is widespread belief that once Zimbabwe is able to access more finance then our economy will be well positioned for takeoff!
The ongoing liquidity crisis seems to serve as credible evidence to this notion. Supposedly, there is not enough finance within the formal economy and without too much interrogation, when this finance is availed at competitive rates then we shall find ourselves along an unquestioned growth trajectory.
However, we must be prudent and find specific clarity in finance’s effective utility within our specific macro-economic context.
Thus, I’d like to warn of the limitations that finance itself has in solving Zimbabwe’s competitiveness woes in the long term.
Initially, as widely acknowledged Zimbabwe’s continued economic challenges have centred on our lack of industrial competitiveness.
Industrial competitiveness is a two pronged approach. It is categorised into the comparative advantage of a specific means of industry, and then the effective use of finance to enhance the productivity competitiveness of that identified industry.
Unfortunately, the former has become overlooked in Zimbabwe, causing an over-emphasis on the effective use of finance only.
Lessons can be learnt from a historical anecdote of how Zimbabwe’s first modern industry was developed; the tobacco industry. Its inception can be credited to an agriculturalist called G.W Oldum.
Oldum took a trip to the United States where he meant to study the growing and marketing of tobacco. After a year’s study in the US, Oldum brought back the Virginia leaf.
He realised that if planted along the central watershed region of Zimbabwe, the Virginia leaf would have a comparative edge on other tobacco found in the African region at that time. After subsequent years of improved growing, processing, and market organizing of tobacco, the crop did manage to be a significant industrial nucleus for the development of the country’s economy – it still is today.
At this very moment in Zimbabwe however, we have plenty of industries struggling to stay viable.
An astute observation would be to notice that substantial financing and cumulative shareholding penetration by foreigners has become a desirable trend for many of our suffering industrial players.
Responsive to this chosen discretion by our industrialists, it has become incumbent on government to spearhead the search for foreign financial investment into the country.
Within this foreign finance frenzy, I advise that we draw a step back and ask two fundamental questions:
To what extent can foreign finance resuscitate industries struggling to remain viable? Is there an over emphasis to resuscitate non-viable industries overshadowing the need to develop entirely new industries?
It has been frequently argued that the current Zimbabwean economy has retained and to an extent prolonged an adopted colonial industrial design.
In my agreement with this argument, one can deduce that at this juncture competitive viability for some industries may no longer be a reality.
Some industries may have lost their comparative advantage. An over emphasis of financing such industry could be clouding the need to seek out new industries of comparative advantage!
Perhaps then, in focusing on the need for finance, we may have undermined the need for emphasis on industrial creation.
Zimbabwean industry must not overly focus on finance alone, but venture into seeking new industrial development ideas!
That means Zimbabwe must start again to reflect on the potential comparative advantages that certain industries offer our economy.
What can we develop as industry that we have a comparative advantage to other economies? As our industrialists and government are seeking finance to recapitalise industry, they must the wary that it is difficult to improve productivity competitiveness in industries that have no comparative advantage.
This is a lesson we can revert to Oldum.
Rhodesia at the time had ample liquidity and imperial financing from the UK; yet, there was still no industry to show for all this financial backbone.
Oldum first had to find a comparative advantage that could be developed into a new industry. Only after this industrial conception and identifying of comparative advantage was finance used as a means to enhance the productivity competitiveness of a local tobacco industry.
As finance has its limitations within our macro-economic context, as a nation we should encourage discourse on exactly how we can start new industries and not simply hope for finance to resuscitate the old.
We have been a copy economy for a long time now with most of our more recent industries being ideas of foreign conception.
We have also been fortunate beneficiaries of global mega trends such as the internet and telecommunications technology.
However, Zimbabwe has very few industrial conceptions in recent decades that we can claim as being of our own imagination and creativity!
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