The Sunday Mail
Vision 2030
Allen Choruma
It is becoming crystal clear that the Zimbabwean economy does not require “tinkering”.
In fact, it needs “fundamental and wholesale political and macroeconomic reforms”, if the objectives of Vision 2030 are to be achieved.
Unless Government takes the bull by the horns and address economic challenges being currently experienced in the country, Vision 2030 can turn into a pipe-dream, a destination so close, yet in reality so far away.
According to the World Bank “Doing Business Report, 2018”, “evidence shows that economic crisis creates a stronger motivation for reform”.
The economic distress we are currently experiencing present Government with an opportunity to go back to the drawing board, review the Transitional Stabilisation Programme (TSP), fiscal and monetary policies and come up with wholesale economic reform policies to arrest the current economic slide.
Without comprehensive reforms to catalyse private sector investment, the mantra “Zimbabwe is open for business” will not bear much fruit.
Open for business
Zimbabwe is on an overdrive mission to woo both domestic and foreign investors to drive the economy.
But “open for business” calls for a comprehensive change from the business-as-usual approach to creating a conducive environment for attracting investment, supported by an unwavering political will to bring about political and socio-economic transformation in Zimbabwe.
Investment inflows into the country cannot happen overnight.
The local investment climate has to be overhauled to ensure that Zimbabwe is competitive enough as a market to attract both domestic and foreign direct investment.
“The narrative ‘open for business’ means that Zimbabwe is ready and willing to embrace a paradigm shift to attract investors, both local and foreign, for the total transformation of the economy in respect of increased production, jobs, exports, fiscal space and access to capital and foreign finance.
“Improvements in these economic variables will greatly benefit the monetary environment and, in doing so, enhancing financial stability and confidence within the national economy.” (Reserve Bank Governor Dr John Mangudya in his 2018 First-Quarter Monetary Policy Statement).
Ease of doing business
As the Reserve Bank governor correctly points out, “open for business” means Zimbabwe should not only be ready, but have the political will to embrace a paradigm shift to attract investors.
“Open for business” cannot bear fruit if it is not followed by improvement in the “ease of doing business”.
Zimbabwe cannot be open for business if it is difficult to do business in the country.
The 2018 World Bank Doing Business Report shows that Zimbabwe is at the tail end of “ease of doing business” rankings.
Zimbabwe ranks 159 out of 190 countries.
The top ten African countries in terms of “ease of doing business” are: Mauritius, Rwanda, Morocco, Kenya, Tunisia, South Africa, Botswana, Zambia, Djibouti and Lesotho.
Bureaucracy, cumbersome and excessive regulatory requirements (known to stifle entrepreneurial endeavours), absence of a one-stop shop for investors, policy inconsistency (flip-flopping), corruption and others affect the ease of doing business.
The ease of doing business is also looked at in tandem with other broader macroeconomic factors such as the following: growth factors (size of economy), infrastructure development (for example, reliable energy sources), inflation (rate of inflation), liquidity factors (access to capital from banks), risk factors (interest rate and exchange rate fluctuations, price stability), business environment (trade openness), exchange rates and controls (currency stability, ease of repatriation of profits offshore) and so on.
In an economy where it is difficult to do business, investors are naturally spooked.
It is known in economics that capital is sensitive, it shies away from investment destinations where it feels insecure.
In such instances, the economy forfeits potential investors, as well as corresponding capital investment for job creation and, hence, opportunity to reduce high levels of poverty.
Corruption
Corruption impinges the ease of doing business.
Empirical evidence shows that corruption increases the premium of doing business by about 10 percent to 15 percent.
Corruption drives away foreign direct investment (FDI) as investors focus on investing in other regions perceived as having lower incidences of corruption and where they feel their capital is secure.
Corruption has, therefore, partly contributed to the country’s low rankings in the “ease of doing business”. It is only through concerted national efforts in fighting corruption that the country will make “ease of doing business” necessary to stimulate both domestic investment and FDI.
Open-ended
Open for business should not be open-ended.
The country should not be opened up to all sorts of investors.
Government should have clear goals and guidelines on how the “open for business” policy will work out, including spelling out who should and should not be welcomed to invest in Zimbabwe.
Speaking at the commemoration of the Africa Anti-Corruption Day in Harare on July 19 last year, the Democratic Republic of Congo Ambassador to Zimbabwe, Mawampanga Mwana Nanga, advised Zimbabwe to thoroughly vet the quality of foreign investors coming into the country as it opens its doors to the world.
“We cannot do without investors, but we have to be cautious as to whom we do business with as some of the foreign investors are ‘dodgy, corrupt and dirty’,” he said.
Former Botswana president Ian Khama, also made the same observation.
“When I talk about investors, I am not talking about fly-by-nights. I am not talking about one person coming in and employing one person and possibly moving into space that should be occupied by Zimbabwean entrepreneurs,” he said while addressing the CZI Business Forum on “Foreign Investment” in Bulawayo on September 29 2018.
“I am talking about people, investors who will come in and genuinely add value to your economy and allow your economy to grow, who will contribute to employment creation. Every government is responsible for finding ways of creating employment for its people and not creating employment for outsiders.”
This simply shows us that the “open for business” drive should not be open-ended.
Zimbabwe should come up with conditions that ensure FDI investment dovetails with the drive for inclusive development, indigenisation of the economy, employment creation, poverty alleviation and so on.
In other words, “open for business” means that investment, especially FDI, should be in the best interests of Zimbabwe and its people as envisioned under Vision 2030.
Allen Choruma can be contacted on e-mail: [email protected]
