Home » Governance » Wanted – Action On the Productivity Agenda [column]

WHAT Zimbabwe’s leadership – in politics, commerce and industry – now needs is a vision and drive to attain and sustain rapid and robust economic aancement. And, adding to the mix, shrewd diplomacy and boldness to discard relic policies and beliefs that do not add value or further our developmental cause, then the route to economic success will be clear. But before examining how we can swiftly travel this route, a drift back into our recent history is necessary to build the case.

Generally the past two and half have decades have provided some tough economic experiences for many ordinary Zimbabweans. Despite a people’s remarkable display of resilience, a few experiences that stand out as unforgettable in the minds of many would include:

Economic structural adjustment programme’s belt tightening measures and the November 1997 crash of the Zimbabwean dollar.

2000-2010: hyperinflation which decimated earnings and savings collapse of banks, company closures, empty shelves in supermarkets with 2008 going into the record books as a particularly difficult year the dollarisation in 2009 which brought some stability and saw the disappearance of the Zimdollar along with citizens’ savingsbank balances.

2011 to date: Economic stagnation, persistently high unemployment rate and deflation.

It is with this background that the case for the need to pull out all the stops and get the economic engine running becomes more compelling. The solution to most of our problems lies in improving productivity in any field of endeavor, be it tourism, mining, agriculture, financial services, politics or health services. Simply put, productivity is the ratio between the output of goods and services and the input of resources used to produce them.

Now, while each of the four cluster matrices of the ZimAsset blue print (Food Security and Nutrition Social Services and Poverty Eradication Infrastructure and Utilities and Value Addition and Beneficiation) provides details of key result areas, outcomes, output and strategies, it is worth emphasizing that opportunities for improving productivity whether through creation of industry’s Centres For Excellence or the proposed National Productivity Centre or initiatives at individual company level, are plentiful. Key among them is educating and training workers in best practices and aanced techniques and technologies to improve labour productivity which is critical in achieving higher and quality output and therefore GDP growth.

What should be borne in mind is that, even with average productivity improvements, going forward agriculture’s share of employment and perhaps GDP contribution will fall as productivity improvements in other sectors of the economy take root. More job opportunities and increased GDP contribution will shift to manufacturing, services and mining sectors as the economy aances. The low-productivity and subsistence farming will pave way to high productivity agriculture – characterized by farms which are mechanized, cost-efficient and that employ agricultural best practice while investing in fertilizers, seed, stock feed, equipment and other inputs. These farms will remain viable businesses that produce quality yields for both domestic and export markets.

As can be gleaned from the history of countries such as Japan, South Korea and China, agriculture’s share of employment and GDP contribution diminished significantly while that of manufacturing and services rose sharply with increase in productivity of the latter sectors and as these countries transitioned to industrialization and urbanization. Higher productivity leads to accelerated GDP growth and therefore a higher standard of living.

Therefore the agricultural revolution as envisioned in the ZimAsset blueprint should, at best, take the shortest possible time to achieve driven by increased productivity. This rapid agricultural revolution will be buoyed by the relatively faster information flows which, for example, now make knowledge of agricultural techniques and markets for agricultural produce readily available to farmers.

Government policies should, therefore, promote the flow of finance to agriculture and not become the sector’s Achilles heel. The thinking that former white commercial farmers had to be in the farming business for nearly a century to be highly productive and therefore indigenous commercial farmers need decades to be expert farmers is flawed and backward if the glaring productivity improvement opportunities are taken into consideration.

With a forward-looking mindset and fully embracing scientific and technological aancements such as the mix of nanoscale materials science, information technology, biology, industrial technology and infrastructural technology, a potentially massive improvement in resource-productivity and therefore a step increase in wealth creation can be achieved. It should then be possible for technology-adept entrepreneurs supported by creative financiers and skilled marketers to establish businesses that exploit resource-productivity break-throughs. These businesses will grow fast but using relatively less initial capital. The end result will be an unprecedented uplifting of livelihoods. Innovation has a hand-in-glove relation with productivity as companies usually increase productivity by introducing new and improved (innovative) technology or processes. Technology is an enabler and a winner!

Labour productivity, which is GDP per worker, is mainly shaped by skill and organization of labour, physical capital intensity per worker and variation in output mix and quality. These are the variables or levers at management’s disposal in the quest for improved productivity. Organization of labour plays a prominent role in better run and high-productivity enterprises that “stick out” from the rest. It involves dividing labour into specific tasks, design of core processes, how capacity is planned and configured and motivation of labour.

As a rule, every economic sector should strive to be competitive. McKinsey Global Institute (MGI) defines a competitive sector as one in which companies improve their performance by increasing productivity through managerial, technological innovations, and offer better quality or lower-priced goods and services, thereby expanding demand for their products. And through shrewd diplomacy and government policies that are amenable to improving productivity, more foreign direct investment (FDI) can be attracted and at the same time securing export markets that create demand for local products.

How should government formulate policy? Economic policies and regulations should be formulated by first zooming in on the individual companies (going granular) and then moving to industrysector and country levels, in the process understanding the challenges faced and how to overcome them and considering how best productivity can be enhanced. Protectionism without promoting the development of local industry capabilities to be competitive is not sustainable.

Industries that are subjected to competition tend to have higher productivity than those that are forever protected, implying that public policy has a major bearing on productivity and, therefore, economic aancement. Only through relentless increases in productivity in all sectors – agriculture, services (hospitality, financial etc), mining (large scale, artisanal amp small-scale) and manufacturing – can rapid and robust economic growth and therefore a higher standard of living be achieved and sustained.

A look at how the political energy has been utilized in recent history may provide some interesting points. Perhaps the battering from sanctions for more than a decade and fighting off regime change attempts, real and imagined, in all their forms, including the recent dismissal of the dishonorable factionists, has driven government into a defensive corner that limits thinking to the basics such as sovereignty defence, total control of idle assets rhetoric and agricultural development, with beneficiation calls adding a bit of sophistication to the plight. But what has this to do with productivity, one may ask? Well if all we can get from our perennial bloated government expenditure (input) is simple rhetoric, budget deficits, and a good tobacco and maize output (thanks to the weather and of course free presidential inputs), then the productivity mission before us is no small potatoes.

As our ageing iconic President R G Mugabe aptly put it, a government ministerial post is not an opportunity to milk the state, as it appears was a preoccupation of the deposed factionists’ linchpins. Landing such a post should be an opportunity to serve the nation with distinction. What the nation therefore expects from the reconstituted cabinet and politburo is total commitment to economic development, boldness and thinking outside the box e.g. in policy formulation, attainment of or exceeding ZimAsset goals, shrewd diplomacy and garnering more FDI to create employment opportunities and, more importantly, understanding and promoting productivity improvements in all sectors of the economy as a lever to raise GDP growth and the standard of living.

Now, as part of public sector productivity drive, it is critical to keep government and state owned enterprises (SOEs) lean and efficient by for example streamlining some operations and removing duplication of roles. Moreover, the widely commended cabinet-proposed salary and allowance caps for SOE chiefs and recommended measures resulting from malfeasances unearthed by audits should be speedily implemented to stop the hemorrhage that almost created a faction of SOEs-CEO millionaires in the midst of poverty and record inefficiencies. Government’s initiative to implement the results based management system and a code of conduct for its officials deserves the support of all.

A lesson from the Chinese economic planners is that long-term planning is important as ample time and optionality are available to rethink or remodel plans to match changed circumstances and to source financial resources. Therefore, beyond ZimAsset 1 and if the quest for sustained productivity improvement triumphs, focus areas and potential future economic game changers could include (1) SMEs (2) Tourism – for example raising its GDP contribution to 20% (3) Infrastructure, Energy amp Power – consideration should be made for example, to the construction of a new Beira-Mutare-Harare rail and oil pipeline and a stake in port infrastructure (the Beira corridor or the Eastern flank). This can be achieved through strategic partnerships such as public-private partnerships.

A recent private sector example of such strategic partnership is that of the Brazilian mining behemoth Vale and Japan’s second largest trading house, Mitsui amp Co. Mitsui amp Co will invest US$763 million in Vale’s Mozambican coal operations. Of this amount, $450 million is for a 15% stake in Vale’s US$3 billion Moatize coal mine and $313 million is for a 50% stake in Vale’s investments in Nacala Corridor rail and port infrastructure project.

It is critical to note that a poor core infrastructure stock (e.g. roads, rail, power plants, and lack of ports) holds back productivity and therefore kills potential economic growth. Dualized paved highways facilitate the smooth flow of road traffic. An especially incomprehensible neglect of the need for dualization has been that of the country’s busiest road, the Beitbridge-Harare highway on which many people have perished through road accidents as increased heavy traffic overwhelm this highway exacerbating its deteriorating state and further endangering lives of motorists.

Achieving 20K – 50K megawatt electricity generation capacity is an ambitious goal worth pursuing to cater for (4) Mining amp Industry – which should see large scale base amp precious metal and diamond mines and their processing plants, refineries, steel and fertilizer production as well as appliances manufacturing. Joint ventures with international exploration companies and sharing technological know-how could speedily address our mineral prospecting challenges. (5) Rural and Urban development – a possible scenario is that of sprawling urbanization as cities, towns and some growth points embark on massive expansions.

The above would create massive demand for local services such as finance amp insurance, IT, telecoms, retail amp wholesale, hospitality, health facilities, transportation, tertiary and vocational education and training among others. Increasing productivity in these local services results in GDP growth and high standards of living.

The onus is on policy makers to ensure that policies are productivity friendly and all barriers, which include bureaucratic bungling, corrupt and incompetent officials are removed forthwith. The productivity task is well cut out for us. The era of obsession with accumulation and control of idle or underutilized assets for speculative purposes to the demise of the country is gone.

Noel T Ngangira writes in his own capacity and can be contacted on ntngangira@gmail.com

Source : New Zimbabwe