Home » Business » Structural Reforms and Zim-Asset [opinion]

Following four years of governing with one hand tied behind its back in the coalition Government, in 2013, President Mugabe’s Government launched an unambiguously ZANU-PF economic blueprint, Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset). Since its inauguration,

Zim-Asset has been the subject of significant debate, with the big question constantly asked being, how best can the Government implement its economic strategy to achieve sustainable economic growth?

Many answers have been proposed, but one that seems to have been deliberately avoided is the need for substantive structural reforms.

Indeed, the experience of the IMF and World Bank led structural adjustment programmes of the 1990s that brought suffering to the Zimbabwean population hasn’t been forgotten.

In addition, the political cost to ZANU-PF that came with the Bretton Woods prescriptions and the general downward pressure on the economy that were blamed on the reforms, have seen the Government resisting any suggestions for structural reforms.

Currently, the World Bank Doing Business ranks Zimbabwe 171 out of 185 countries. The international financial institution suggests that the investment environment in Zimbabwe is restrictive. The World Bank, and its sister institution, the IMF and private investors contend that the Zimbabwe Government needs to overhaul the structure of its economy.

Not only does lack of structural reforms mean that Zimbabwe is perpetually on a collision course with the IMF, the World Bank and private creditors whose money the nation urgently needs to fund Zim-Asset, but it also dampens the confidence of foreign international investors.

Unconventional as it is, Zim-Asset does not operate in a vacuum, but as part of the hydraulics, as it were, of the Zimbabwean economy, and indeed, the international economic order which dictates that certain economic terms have to be met, one of which is structural reforms.

Instituting structural reforms does not necessarily mean pandering to the neoliberal agenda. The Government can still bargain and defend what it considers to be its priorities, for example sovereignty, while selecting structural reforms that are beneficial to the country.

Thus, for this noble economic strategy to realise its potential, the Zimbabwean economy needs to be re-aligned according to the dictates of the international economic order.

In other words, Zim-Asset requires that it is instituted within an environment that will recognise and accept it, particularly for the sake of receiving financial support from the international financial and private capital markets. Without deep structural changes in Zimbabwe, simply implementing Zim-Asset is an arduous task.

Many areas require deep structural reforms in Zimbabwe. For example, currently the Government is burdened with non-performing state companies. However, the Government hardly lets old State enterprises die. What we have is a situation where the Government is perpetually bailing out failing enterprises.

The most glaring example is Zimbabwe United Passenger Company (zupco). The company, which is wholly owned by the Government, was created before independence to act as an efficient provider of public transport within the metropolitan areas.

However, the urban market has since been penetrated and taken over by private commuter companies, forcing the state enterprise to mutate. Thus, zupco is now struggling to compete with well-established private transport providers in the rural areas and has to rely on public funding for periodic bailouts.

Since the late 1990s, there has been a dramatic fall in both domestic and international investment. This has mainly been because of excessively restrictive macro-economic policies, both on the fiscal side and also on the monetary side.

Painful reforms are imperative in order to strengthen the country’s financial position, with the view to win investor confidence.

In other words, the Government needs to play its part in being more accountable for its fiscal management and also urgently needs to address corruption. Years of fiscal indiscipline, excess and corruption have resulted in the ballooning of the Government debt and budget deficits over the years.

In particular, in order to stem corruption, Government needs to institute simple measures.

For instance, all high ranking civil servants and Government officials must declare their business and financial interests.

That will make it difficult for politicians to award cosy Government contracts to firms in which they are investors.

The hope, instead, is that contracts will be awarded to the most efficient firms, which will improve the quality of public services and lower their costs. Loopholes in the Government procurement procedure, which is one of the main sources of corruption, will need to be plugged.

The nation’s public infrastructure that was meant to cater mainly for the minority white population has reached breaking point.

More than half of it reached the end of its useful life in the 1990s and Zimbabwe’s total infrastructure deficit is estimated to be close to $10 billion. These infrastructure bottlenecks are affecting export performance and the agricultural and commodities sectors. With the growing infrastructure gap, Zim-Asset will struggle to close the productivity gap.

Ordinary Zimbabweans are also paying a hefty price for this poor infrastructure. For instance, homeowners face expensive repairs when the sewer systems back up under pressure.

Workers lose wages when their assembly lines shut down because the parts they need are stuck in transit on poor roads or electricity shortages as a result of power cuts.

Thus the Government needs to institute more and better public services.

While central governments play a significant role in public infrastructure, the Government must leverage private pools of capital into infrastructure development.

Investment in infrastructure will not only create jobs and growth in the short term, but build a more competitive economy that can sustain ger growth in the future.

The closed nature of the Zimbabwean economy provides additional headwinds to economic growth. The economy needs to be opened further to promote competition in domestic market and the financial sector, which Zimbabwe remains relatively closed. Reducing the cost of doing business in Zimbabwe is very important.

Clearly, Zimbabwe is among countries which have the highest cost of doing business in the world and its trade openness is amongst the lowest in the region. For example, it is difficult to conduct business in a country with a tax system and economic policies that are fit for a closed economic model.

Re-industrialisation has been one of the major concerns that have been facing the country.

The country needs to arrest de-industrialisation as soon as possible and devise a gradual re-industrialisation strategy.

Zimbabwe needs to implement long overdue structural reforms if Zim-Asset is to make an impact on the economy.

The country needs is to be changed from the ground up. All these require substantial political capital and commitment. Without assertive action, Zim-Asset will struggle to rejuvenate the economy.

Source : The Herald

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