Opinion / Columnist
Miracle of economic growth in Zimbabwe
08 Feb 2018 at 13:24hrs | Views
After being ushered in the office President ED Mnangagwa has done a lot of wonders with his team. Zimbabwe has witnessed the stampeding of foreign investors coming to invest in the country. Zimbabwe's growth prospects hinge on steady commodity prices and a good agricultural season but weather forecasts have been pointing to poor rainfall this year threatening the country's agriculture. This has not dampened the spirit and vision of the new era. The herald reported that Zimbabwe has attracted in over 1.7 billion dollars in seven weeks. These numbers do not sound encouraging, but compared to a GDP growth of 4.5 percent for January February 2018, this news provides some encouragement for Zimbabwe's economy. Although it is nowhere near the needed growth rate for our struggling nation, the recent news of an economic turnaround is a cause for celebration, especially when U.S. and European economies are eying Zimbabwe with an investing eye.
Zimbabwe's economic journey from an impoverished country to an emerging global economy is an inspiring dream for many. In order to understand Zimbabwe's economic voyage, it is essential to shed some light on its political and economic history. After 37 years of independence Zimbabwe had suffered and bruised seriously by the sanctions, bad publicity and indeed corruption. The once blooming state was reduced to a 7th century kingdom. Investors left the country enemas and nobody could trust the nation. This was made worse by the politics of the day and the uncertainty in the succession issue. Even though on paper succession issue was a done deal in reality the country's politics was hijacked by those who benefited more from corruption and they wanted the protection of the then president.
Early Economic Growth To better understand Zimbabwe's economic growth, its economic history should divided into two phases, the first 10 years after the independence and the last twenty years as a free market economy. During the first 10 years after independence our economy was divided into two distinct segments, private and public. The private sector owned and operated small to medium size businesses and industries protected by the government and the government took care of everything else. The government was in charge of most of the consumer services including transportation such as airlines, railroads and local transportation, communication services such as postal, telephone and telegraph, radio and television broadcasting, and social services such as education and health care.
The intention of the government was to provide these services, at a reasonable cost, as well as employment. Zimbabwe adopted a structural adjustment plan from the World Bank, in order to improve infrastructure, agricultural production, health care, and education, but the progress was extremely slow and it destroyed the little survival left in our economy. After this failure the country fell into a full corrupt self-drive which indeed robbed the populace of the little they could have.
Zimbabwe's economy and political system encountered a severe crisis during the time of Mugabe rule. During his last twenty years of his administration, there was no economic progress because of a lack of attention to economic improvement. Those tasked with the duty of salvaging the economy paid more attention to how to remain in power rather than solving economic and social problems. At one stage through the architect of the then minister Moyo Zimbabwe arrested opposition leaders, imposed censorship on the press and made elections difficult for the other parties. During this time, economic growth stagnated and widespread corruption became the norm. The political rallies became internal battle grounds and economy was completely ignored.
During the early this period economy began to worsen and was faced with growing inflation, unemployment and poverty and historically low foreign exchange reserve. As a result Zimbabwe had to buy foreign currency from the free market. Consequently, our foreign exchange reserve fell to a zero. The International Monetary Fund (IMF) and the World Bank offered help to India in exchange for political reforms. The government ran out of options and finally, the army had to take control.
Fortunately, no one from the cabal is in power to make decisions for the country and ED took steps towards liberalization to reform economy. The finance minister has gone forward and introduced several economic reforms. He lowered tariff levels, reformed exchange rate policy, liberalized industrial licensing policy and also relaxed foreign direct investment (FDI) policy. These reforms opened the doors for multinational corporations to invest in Zimbabwe. The country is receiving positive responses from international investors. Before these reforms, foreign equity ownership was restricted to 49 percent and the transfer of technology was necessary to do business in Zimbabwe. These barriers were removed for foreign companies. Many multinational corporations (MNCs) are taking advantage of new economic policies and are increasing their stakes to more than 51 percent in their subsidiaries resulting in a several fold increase in foreign direct investment in just three months.
There were three major driving forces behind economic growth and prosperity after economic reforms; Increased foreign direct investment, the willingness of the government to practice an open door open mind policy. The combination of foreign direct investment and expertise in information technology will help to produce thousands of new jobs and created a growing middle class that in turn will create increased domestic consumption and that will result, in more foreign direct investments to meet the demand of consumers.
To make Zimbabwe's economic growth more sustainable, we need a second generation of reforms to speed up privatization of government owned businesses, improve financial and legal systems to protect investment and modernize its infrastructure. It is also important to introduce business friendly tax reforms, upgrade labor laws to the international level and eliminate bureaucracy to attract more international corporations with more investment.
The government should pay close attention and take the necessary steps to reduce inequalities so everyone can enjoy economic growth evenly, especially people living in rural area. The government should promote the manufacturing sector for future economic growth, in order to reduce dependency on TI and the service industry, and divert future investments to the rural areas to decrease urbanization and increase employment in small towns and villages.
A diversifying strategy like this would compel the government to invest more money in rural infrastructure and other basic public services, such as electricity, sanitation and clean drinking water, to support manufacturing facilities as well as people living in that vicinity. People living in rural areas are now aware of economic progress and it is important to include the people who were left behind and ignored for twenty some years.
In the few months ED has been leading the doors of progress are beginning to crack open. What we need as a country is to support him and give him time to progress. Our country has a great potential.
The problem of corruption can be solved once the prosecution department is overhauled and prosecutions of the corrupt one be fast tracked following the rule of law though.
Vazet2000@yahoo.co.uk
Zimbabwe's economic journey from an impoverished country to an emerging global economy is an inspiring dream for many. In order to understand Zimbabwe's economic voyage, it is essential to shed some light on its political and economic history. After 37 years of independence Zimbabwe had suffered and bruised seriously by the sanctions, bad publicity and indeed corruption. The once blooming state was reduced to a 7th century kingdom. Investors left the country enemas and nobody could trust the nation. This was made worse by the politics of the day and the uncertainty in the succession issue. Even though on paper succession issue was a done deal in reality the country's politics was hijacked by those who benefited more from corruption and they wanted the protection of the then president.
Early Economic Growth To better understand Zimbabwe's economic growth, its economic history should divided into two phases, the first 10 years after the independence and the last twenty years as a free market economy. During the first 10 years after independence our economy was divided into two distinct segments, private and public. The private sector owned and operated small to medium size businesses and industries protected by the government and the government took care of everything else. The government was in charge of most of the consumer services including transportation such as airlines, railroads and local transportation, communication services such as postal, telephone and telegraph, radio and television broadcasting, and social services such as education and health care.
The intention of the government was to provide these services, at a reasonable cost, as well as employment. Zimbabwe adopted a structural adjustment plan from the World Bank, in order to improve infrastructure, agricultural production, health care, and education, but the progress was extremely slow and it destroyed the little survival left in our economy. After this failure the country fell into a full corrupt self-drive which indeed robbed the populace of the little they could have.
Zimbabwe's economy and political system encountered a severe crisis during the time of Mugabe rule. During his last twenty years of his administration, there was no economic progress because of a lack of attention to economic improvement. Those tasked with the duty of salvaging the economy paid more attention to how to remain in power rather than solving economic and social problems. At one stage through the architect of the then minister Moyo Zimbabwe arrested opposition leaders, imposed censorship on the press and made elections difficult for the other parties. During this time, economic growth stagnated and widespread corruption became the norm. The political rallies became internal battle grounds and economy was completely ignored.
During the early this period economy began to worsen and was faced with growing inflation, unemployment and poverty and historically low foreign exchange reserve. As a result Zimbabwe had to buy foreign currency from the free market. Consequently, our foreign exchange reserve fell to a zero. The International Monetary Fund (IMF) and the World Bank offered help to India in exchange for political reforms. The government ran out of options and finally, the army had to take control.
Fortunately, no one from the cabal is in power to make decisions for the country and ED took steps towards liberalization to reform economy. The finance minister has gone forward and introduced several economic reforms. He lowered tariff levels, reformed exchange rate policy, liberalized industrial licensing policy and also relaxed foreign direct investment (FDI) policy. These reforms opened the doors for multinational corporations to invest in Zimbabwe. The country is receiving positive responses from international investors. Before these reforms, foreign equity ownership was restricted to 49 percent and the transfer of technology was necessary to do business in Zimbabwe. These barriers were removed for foreign companies. Many multinational corporations (MNCs) are taking advantage of new economic policies and are increasing their stakes to more than 51 percent in their subsidiaries resulting in a several fold increase in foreign direct investment in just three months.
To make Zimbabwe's economic growth more sustainable, we need a second generation of reforms to speed up privatization of government owned businesses, improve financial and legal systems to protect investment and modernize its infrastructure. It is also important to introduce business friendly tax reforms, upgrade labor laws to the international level and eliminate bureaucracy to attract more international corporations with more investment.
The government should pay close attention and take the necessary steps to reduce inequalities so everyone can enjoy economic growth evenly, especially people living in rural area. The government should promote the manufacturing sector for future economic growth, in order to reduce dependency on TI and the service industry, and divert future investments to the rural areas to decrease urbanization and increase employment in small towns and villages.
A diversifying strategy like this would compel the government to invest more money in rural infrastructure and other basic public services, such as electricity, sanitation and clean drinking water, to support manufacturing facilities as well as people living in that vicinity. People living in rural areas are now aware of economic progress and it is important to include the people who were left behind and ignored for twenty some years.
In the few months ED has been leading the doors of progress are beginning to crack open. What we need as a country is to support him and give him time to progress. Our country has a great potential.
The problem of corruption can be solved once the prosecution department is overhauled and prosecutions of the corrupt one be fast tracked following the rule of law though.
Vazet2000@yahoo.co.uk
Source - Dr Masimba Mavaza
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