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The role of peace in the economy

29 Jan 2019 at 14:17hrs | Views
We are still struggling, in Zimbabwe and Africa as a whole, when it comes to understanding and executing economic programmes that give sustainable growth. Most analysts tend to paint this poor understanding as driven by greed. I differ with this school of thought, and the reasons for this divergence are explored in this article.

In a nutshell, this article proposes the view that in most countries in Africa, particularly in Zimbabwe, the leadership simply has poor understanding of the role of government, thus the government is found meddling in matters it is not supposed to.

This article proposes a view that there MUST be clear separation of government and private enterprise.

Generally, the line is that government must be concerned with the creation of a conducive environment for private enterprise to engage in its business. In a reciprocal gesture, the private enterprise pays taxes as a token of appreciation for the environment. In business areas, where critical resources are of concern, the government may have a hand in running some enterprise for the management of such a resource, however, this must be maintained as minimal as possible. This view explains why in Zimbabwe, we have seen a number of protests and in general, economic discontent.

It is of critical importance for Zimbabwe to understand that the world has firmly established economic models that provide growth. It is a grave lie, we have been led to believe, that Zimbabwe is an exception to economic rules. The truth is simply that Zimbabwe, like Venezuela and many other struggling countries, prefers to pursue policies that maintain political control in the ruling elite, and the economy is secondary. The irony is that the harder the ruling elite attempts to maintain power, the easier that power slips away.

In fact, by creating a successful economy, the ruling elite would maintain its power longer. What an irony! It, therefore, clearly explains why Zimbabweans, no matter how misguided their actions have proven to be, went on to conduct a week long demonstration. It is without question in my view that the week long protests were a grave error on both sides of the isle, that is, the protesting participants and the government.

I outlined in my previous article how detrimental the protests were, and how they caused lawlessness to an extent where protestors infringed on the rights of other citizens. It is not, however, the thrust of this article to prove that indeed the demonstrators overstepped their constitutional rights, nor is it the thrust of the article to prove that the government failed to avoid the protests because of its policies. Rather, the thrust of the article is to prescribe what I think are solutions to the challenges facing Zimbabwe, giving examples where possible.

Consider the problem of forex appropriation by government to companies based on perceived importance. The government of Zimbabwe, when it was faced by forex shortages resorted to allocating the limited foreign currency, particularly the US dollar, to various companies and government departments based on how "important" the need is. This is a fatal error on the part of government. Why should the government be in the business of distributing foreign currency to private enterprises?

The explanation given is that the government is attempting to distribute limited resources to areas of need and importance. But why, in the first place, are we having foreign currency shortages? In stead of the government focusing on addressing the fundamental problem causing foreign currency shortages, erroneously the government got stuck with firefighting the symptoms of the problem.

The solution here should have been for the government to focus on enabling companies to earn their foreign currency by being competitive on global markets. If Zimbabwean products are competitive on global markets, then Zimbabwe will have sufficient supply of forex, and thus there would not be any need for allocating forex.

On the other hand, the people at large have misguided notions that the government must solve their problems. You hear people saying, we do not have water in our locality, the government must come to drill a borehole for us. This is wrong. While drinking water is a human right in Zimbabwe, the responsibility to achieve that human right lies with the individual(s). If there is no readily accessible water in our locality, we must be responsible enough to sink our own borehole. Yes, it is very difficult, and yes some members of society do not have the ability to sustain themselves, however, society in its generality must learn to do it for themselves.

There are many ways to carry out these objectives and some examples are through cooperatives, trusts, public companies, private companies et cetera. We can not be cry-babies and have the government attend to us each time we face some little difficulty. Conversely, the government must reduce all taxes and levies charged on people when they utilise such natural resources as water. Such reduction on taxes and levies is a huge contribution towards the attainment of the right to water. This approach reduces the government's  burden of public spending.

Consequently, the government would have surplus revenue for conducting other matters of necessity. By closely analysing this point, one can quickly notice that the people have significant public entitlement notions. The people expect free or at least subsidised medical attention,  education, farm input programmes, fuel, et cetera. All these "free" or subsidised programmes fall on the shoulders of government as public spending bills. This is because in reality, nothing is truly free. To some extent, the fact that the week long protests were sparked by fuel prices suggests that the Zimbabwean population expects the government to subsidise the public's expenses. In a way, Zimbabweans are saying they don't care what the cost of procurement is, all they want is cheap fuel.

Apparently, noticing this weakness in Zimbabweans, political parties have developed a culture of dishing out groceries and other freebies at political rallies, and people vote based on how often they receive these freebies from political parties. It is a chicken and egg problem, trying to figure-out what came first, whether the public expected the freebies first, or political parties offered the freebies first in an effort to buy votes.

In any case, these practices are what create a huge public spending bill on our government, and in turn the government charges very high taxes trying to raise funds. It is clear that the very high taxes and levies in Zimbabwe suppress competitiveness of Zimbabwean businesses on global markets, thus foreign currency becomes scarce. This is a vicious circle and the public may not be able to see it. However, if the leadership of government were to prioritise economic sense, then the public could be nudged in the right direction, step by step.

Research conducted by Strauss-Kahn et al (2009) reveals that destabilisation of peace in  Subsaharan Africa and the Maghreb is due to a number of complex factors, with economic discontent being the major factor. Political violence in Subsaharan Africa and the Maghreb has been linked largely to economic discontent.  Wars of cessation, tribal wars, and civil wars in Subsaharan Africa and the Maghreb have all been linked to economic discontent.

So, it is very clear that economic calamity precedes destabilisation of peace in Subsaharan Africa and the Maghreb. Strauss-Kahn et al (2009) treat Somalia somewhat differently because they cite poor stability of the central government after its independence, thus it is an exception in Subsaharan Africa and the Maghreb. On the other hand, Santhirasegaram et al (2008) reveal that peaceability of a country precedes economic growth. That is to say, the extent to which a country is peaceful provides a background upon which business and investment flourish.

In this school of though, Ghana is used as an example of how peace in that country led to greater trade and investment. With this knowledge, it is clear therefore that, the political instabilities in Zimbabwe, the protests, the contested elections and the lack of dialogue between government and opposition parties, all lead to uncertainties, thus hinder sustainable economic development in Zimbabwe.

The belief that one group can go it alone, or one group is better than the other, creates an unstable environment for business. Investors want to put their money where the calculus of predicting the future is simple. Investors want to recover their profits after an investment, and they tend to minimise risk when making their investments. In this regard, the responsibility upon every Zimbabwean, and on the government of Zimbabwe, is to work together as equals in order to create a peaceful and stable environment that is capable of attracting investment.

Even during the war of liberation, ZANLA did not win the war alone, it needed ZIPRA on the western theater to successfully prosecute the war. However, the teachings today, sound as if ZANLA did it alone. This is the sort of "me-ist" complex that is leading Zimbabwe into economic oblivion, and into a pariah State.

In the years 2009 - 2013, there was recordable economic growth, not because ZANU did it alone, nor because MDC did it alone. No! It was because everyone was working together in the GNU, and there was unity of economic purpose (despite the disrespect the parties showed each other).

So, the lesson here is, for these political disturbances to end, the government needs to work with all other social groups and opposition parties in some framework that allows for dialogue, and mutual reciprocity. Further, the government needs to respect private enterprise and reduce the burden of licences, taxes, levies and meddling in general.
 
Another example of how the government is not able to dialogue with other players can be seen on the junior doctors' case. The junior doctors were making requests to have their remuneration and conditions of service reviewed. However, the government went on to rubbish even their position that they are an important part of the medical fraternity in Zimbabwe. If one goes into government hospitals today, the junior doctors are handling almost 90 percent of cases. The fully qualified doctors attend to cases with complexities. It is against this background that the junior doctors were presenting their case.

In stead of the government recognising the critical role that these doctors play in service delivery, the government decided to bully them by saying they are "students". Once again, the "me-ist" complex finds expression. Now, we hear that junior doctors are beginning to say they can not attend to some cases citing that they are just but students. Yet, the fully qualified doctors are not always available because most of them are in private practice. In the long run, the solution imposed by government will begin to show its limitations and once again stability will be called to question. One can only hope that our government will, some day, realise that force and intimidation are archaic tools and are not the best tools to run the Zimbabwean economy.


Kernan Mzelikahle is an apolitical analyst, and may be contacted by cellphone on 0775195334, or by email on k.mzelikahle@gmail.com, twitter handle is @Mzelikahle. This article and others like it may be found on Mthwakazi Forum website: sites.google.com/view/mthwakaziforum

Source - Kernan Mzelikahle
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