Opinion / Columnist
Private enterprise is key to our future growth
11 Aug 2016 at 13:31hrs | Views
"We owe it to all the peoples of the sub-continent to ensure that they see us not merely as good leaders waxing lyrical about our development, but as front commanders in the blast furnaces of labour, productive investments and visible change." Nelson Mandela
Economic freedom seems to be eluding the whole of Africa. Reading the book- Why Nations Fail- by Daron Acemoglu and James A Robinson, leaves one with disdain in that, despite Africa having some of the world's largest natural resources, we remain locked in a cycle of widespread poverty and hunger. Most of it has to do with our history of course, but we in Africa, have also been responsible for creating the continuing inequalities through bad leadership, mismanagement and corruption. We therefore cannot continue to blame the past as our leaders incessantly find convenient to do.
Africa's rise, which is being punted by international development agencies, is unfortunately not distributive, but is a consumption-driven bubble which will merely result in Africa's bourgeoning middle class consuming more imported goods from the West and the East. Africa, and Zimbabwe in particular, is failing to manufacture and consume its own products and thus is unable to create sustainable economic and social development.
It is difficult to disagree that survival of colonialism was mainly based on extractive racial political and economic systems. Although it developed substantial infrastructure and public administrative systems in countries such as Zimbabwe, the liberation struggle political elites inherited skewed development patterns and rent seeking economic structures which were geared mainly to export raw goods for manufacture overseas. Unfortunately, they in turn did nothing to transform their economies and to this day, we are still largely dependent on raw material export earnings mainly from China. Nothing has fundamentally changed and this continues to make our economy vulnerable to fluctuating international commodity prices and an international predatory class of investors who continue to dominate and exploit our resource sector.
In our case in Zimbabwe, it is evident that there really was no agenda of transforming the structure of the economy at independence. We inherited-a dual economy characterised by a well-developed first economy and a second economy whose role was merely to provide labour and taxes for the regime. Since 2000, the collapse of the first economy has exacerbated poverty with millions now locked in a survivalist informal or second economy. As a result, many Zimbabweans remain poor despite the high levels of functional literacy which we continue to boast about.
Extractive economic systems are not sustainable because they limit economic freedom and free enterprise. Inclusive economic systems which protect private property rights, create fair access to economic opportunity for all, encourage investments in new technologies and skills, on the other hand, are more likely to create better and developing societies. That is the Zimbabwe we want. Of course this can only happen with substantive political and economic reforms.
Authors Daron Acemoglu and James A Robinson capture our fundamental challenge in their book when they proffer that - Economic growth and development will never be sustained under extractive or dictatorial political systems such as we have in Zimbabwe for two main reasons. The first being that sustained economic innovation cannot be decoupled from creative destruction which replaces the old with the new in the economic realm and also destabilises established power relation in politics. This is mainly because dominant elites, and especially President Mugabe and his cronies in our case, fear creative destruction and they will resist it at all costs. Any economic growth under such conditions will therefore be chaotic and short lived.
Second, the ability of those who dominate extractive political systems to benefit at the expense of society means that political power is highly coveted and all will fight for it, not because they seek to create better socio-economic conditions, but merely to wield unchecked political power. Because of this, they will always be political forces pushing for political instability.
It is fact, for example, that since 1980, there has always been a fight in Zimbabwe between politicians and the private sector. The animosity has reduced any chances of a cooperative development agenda. During Rhodesia's UDI from 1965 to 1979, for example, there was some measure of cooperation between business and the government in order to address the challenges of sanctions. This led to significant local industrial and infrastructural development spurred on by the need to substitute imports. In fact, in 1980 at independence, we inherited a comparatively reasonably developed economy only second to South Africa-an economy that was largely functional and was producing enough food to feed its people and even export it to the SADC region.
Explaining the failure of private enterprise in Mozambique, Greg Mills and Jeffrey Herbst in their book- Africa's Third Liberation- say that; "The failure to attract private funds is linked to overall tensions in Mozambique's business sector that arise from wide spread protectionist sentiment against investors and a state centric and interventionist response to development demands, where the private sector is over regulated and subject to over bureaucratic practices, crowded out by the state-linked actors, and a target for elite rent seeking and resource nationalism"
This, incidentally, accurately describes Zimbabwe where there is the fear by the political elite of the emergence of a strong private sector bourgeoisie. The reaction by ZANU (PF) has been to stifle business growth that is not aligned to its patronage system. This has limited the potential of the emergence of a growing a competitive and innovative industrial sector.
Typical examples of how we frustrate potential investors include the recent reported denial of visas by our immigration services for Aliko Dangote's technical team to come into the country despite the fact that billions will be invested in our economy. That is ridiculous. In addition to that, the revelation that Ravi Jaipuria, the Indian billionaire who will be investing $30 million in a Pepsi bottling plant which is expected to create about 400 direct and 1500 indirect jobs, had to seek special favours from the President in order to expedite his investment is just another example of how a predatory elite seeks to play gate keeper of the economy in order to extract rents from potential investors.
In the Zimbabwe we want to create, we must reverse this ZANU (PF) mentality and appreciate that it is only when we have succeeded in creating a vibrant free economy through long term foreign and local investment that we can begin to achieve our social developmental objectives. A successful private sector must be looked at as a source of revenue and growth and not a political threat. The private sector is therefore not the enemy here.
In my opinion without a change in political leadership, Zimbabwe cannot perform at its full potential. A change in political leadership is therefore a matter of life and death for our economy.
We certainly need a new paradigm at State house which seeks to create equity through a fair practice and efficient regulation of the economy to allow innovation and private investment without limit. Unfortunately President Mugabe has failed on this.
We have to create a vibrant private business sector in Zimbabwe and this involves doing all we can to attract new investment from the likes of Dangote and Jaipuria. This idea that the President must always intervene and do favours is just not acceptable. We need a leader at State house who understands his or her role as chief motivator and not as a village chief.
Another Zimbabwe is possible!
Vince Musewe is an economist and author based in Harare. He is also the secretary for Finance and Economic Affairs for PDP. You may contact him directly on vtmusewe@gmail.com
Economic freedom seems to be eluding the whole of Africa. Reading the book- Why Nations Fail- by Daron Acemoglu and James A Robinson, leaves one with disdain in that, despite Africa having some of the world's largest natural resources, we remain locked in a cycle of widespread poverty and hunger. Most of it has to do with our history of course, but we in Africa, have also been responsible for creating the continuing inequalities through bad leadership, mismanagement and corruption. We therefore cannot continue to blame the past as our leaders incessantly find convenient to do.
Africa's rise, which is being punted by international development agencies, is unfortunately not distributive, but is a consumption-driven bubble which will merely result in Africa's bourgeoning middle class consuming more imported goods from the West and the East. Africa, and Zimbabwe in particular, is failing to manufacture and consume its own products and thus is unable to create sustainable economic and social development.
It is difficult to disagree that survival of colonialism was mainly based on extractive racial political and economic systems. Although it developed substantial infrastructure and public administrative systems in countries such as Zimbabwe, the liberation struggle political elites inherited skewed development patterns and rent seeking economic structures which were geared mainly to export raw goods for manufacture overseas. Unfortunately, they in turn did nothing to transform their economies and to this day, we are still largely dependent on raw material export earnings mainly from China. Nothing has fundamentally changed and this continues to make our economy vulnerable to fluctuating international commodity prices and an international predatory class of investors who continue to dominate and exploit our resource sector.
In our case in Zimbabwe, it is evident that there really was no agenda of transforming the structure of the economy at independence. We inherited-a dual economy characterised by a well-developed first economy and a second economy whose role was merely to provide labour and taxes for the regime. Since 2000, the collapse of the first economy has exacerbated poverty with millions now locked in a survivalist informal or second economy. As a result, many Zimbabweans remain poor despite the high levels of functional literacy which we continue to boast about.
Extractive economic systems are not sustainable because they limit economic freedom and free enterprise. Inclusive economic systems which protect private property rights, create fair access to economic opportunity for all, encourage investments in new technologies and skills, on the other hand, are more likely to create better and developing societies. That is the Zimbabwe we want. Of course this can only happen with substantive political and economic reforms.
Authors Daron Acemoglu and James A Robinson capture our fundamental challenge in their book when they proffer that - Economic growth and development will never be sustained under extractive or dictatorial political systems such as we have in Zimbabwe for two main reasons. The first being that sustained economic innovation cannot be decoupled from creative destruction which replaces the old with the new in the economic realm and also destabilises established power relation in politics. This is mainly because dominant elites, and especially President Mugabe and his cronies in our case, fear creative destruction and they will resist it at all costs. Any economic growth under such conditions will therefore be chaotic and short lived.
Second, the ability of those who dominate extractive political systems to benefit at the expense of society means that political power is highly coveted and all will fight for it, not because they seek to create better socio-economic conditions, but merely to wield unchecked political power. Because of this, they will always be political forces pushing for political instability.
It is fact, for example, that since 1980, there has always been a fight in Zimbabwe between politicians and the private sector. The animosity has reduced any chances of a cooperative development agenda. During Rhodesia's UDI from 1965 to 1979, for example, there was some measure of cooperation between business and the government in order to address the challenges of sanctions. This led to significant local industrial and infrastructural development spurred on by the need to substitute imports. In fact, in 1980 at independence, we inherited a comparatively reasonably developed economy only second to South Africa-an economy that was largely functional and was producing enough food to feed its people and even export it to the SADC region.
Explaining the failure of private enterprise in Mozambique, Greg Mills and Jeffrey Herbst in their book- Africa's Third Liberation- say that; "The failure to attract private funds is linked to overall tensions in Mozambique's business sector that arise from wide spread protectionist sentiment against investors and a state centric and interventionist response to development demands, where the private sector is over regulated and subject to over bureaucratic practices, crowded out by the state-linked actors, and a target for elite rent seeking and resource nationalism"
This, incidentally, accurately describes Zimbabwe where there is the fear by the political elite of the emergence of a strong private sector bourgeoisie. The reaction by ZANU (PF) has been to stifle business growth that is not aligned to its patronage system. This has limited the potential of the emergence of a growing a competitive and innovative industrial sector.
Typical examples of how we frustrate potential investors include the recent reported denial of visas by our immigration services for Aliko Dangote's technical team to come into the country despite the fact that billions will be invested in our economy. That is ridiculous. In addition to that, the revelation that Ravi Jaipuria, the Indian billionaire who will be investing $30 million in a Pepsi bottling plant which is expected to create about 400 direct and 1500 indirect jobs, had to seek special favours from the President in order to expedite his investment is just another example of how a predatory elite seeks to play gate keeper of the economy in order to extract rents from potential investors.
In the Zimbabwe we want to create, we must reverse this ZANU (PF) mentality and appreciate that it is only when we have succeeded in creating a vibrant free economy through long term foreign and local investment that we can begin to achieve our social developmental objectives. A successful private sector must be looked at as a source of revenue and growth and not a political threat. The private sector is therefore not the enemy here.
In my opinion without a change in political leadership, Zimbabwe cannot perform at its full potential. A change in political leadership is therefore a matter of life and death for our economy.
We certainly need a new paradigm at State house which seeks to create equity through a fair practice and efficient regulation of the economy to allow innovation and private investment without limit. Unfortunately President Mugabe has failed on this.
We have to create a vibrant private business sector in Zimbabwe and this involves doing all we can to attract new investment from the likes of Dangote and Jaipuria. This idea that the President must always intervene and do favours is just not acceptable. We need a leader at State house who understands his or her role as chief motivator and not as a village chief.
Another Zimbabwe is possible!
Vince Musewe is an economist and author based in Harare. He is also the secretary for Finance and Economic Affairs for PDP. You may contact him directly on vtmusewe@gmail.com
Source - Vince Musewe
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