The Economic consequences of ZIM-ASSET

ZIM-ASSET substitutes STERP as the country's new economic policy with a placed emphasis on "Indigenising, Empowering, Developing and Createing Employment "


The comparative illustration below shows the GNU period, occasioned by higher growth rates. In the next five years the rate of economic expansion will marginally decrease but real term growth is expected to over and above any part of the GNU period.


The article ascertains the likelihood of the predicted economic growth and social development targets.

 

The Ideological Source
On an ideological bearing, the policy is a practical application of  communist existence as defined by Nyerere's TANU creed in the widely referenced Arusha declaration particularly that which says

"The Major Means of Production and Exchange should be under the Control of the Peasants and Workers"

By manipulating the economic base i.e. conditioning forces and relations of production such as social ownership reforms, Zanu-PF are creating a pro-proletariat superstucture. The intellectual strategy has a clear sense of communist instruct that in turn facilitates the shape and parameters of the "market socialist' proposals.

Personally, I prefer to think of indeginisation as a 'growth coalition' arrangement between public and private actors that creates an inclusive strategy of development over a sustained period of time.

The idea is not particularly new. The means might be slightly combative, assertive and supposedly  FDI "unfriendly" but the end represents a practical embroidery of the themes Nyerere coined half a century ago.

The state of empirical knowledge concerning indeginisation is relatively underdeveloped. It lacks in historical content, back testing provisions or any other ready-made process implementation manual. This makes the procedure altogether sensitive and delicate. Any application of this procedure, therefore, is heterodox and carries a substantial amount of speculative risk.

However , it is timely to explore the  delivery of comprehensive developmental outcomes specifically the "growth coalition" consequences of income redistribution and social accountability.

Develop and create employment

The theoretical  impact of indeginisation, that is, the subsequent increase of capital stocks through the Indeginisation fund via 'single regeneration budgets' or 'regional selective assistance' will assume the following identity specifically for households.



I discussed the identity assumptions here In short, for every dollar invested, social development returns differ to varying degrees. Against this realisation, it's essential to plug in different variables into the identity to test and monitor the elasticity of impacts against set Government priorities.

It is possible to measure "real" area effects to a certain degree. To demonstrate, we used Bulawayo, Zimbabwe's second largest city as a point of reference. The town, decade on decade, loses approximately 300 000 residents to neighboring South Africa due to contractions in industry and trade activity.

Against this background, it is clear the extent to which the some cities are more susceptible to the harmful effects of economic which are a heavy dependence upon a narrow industrial base, rapid decline in manufacturing, inadequate levels of infrastructure and net migration out of the region.

Bulawayo fits the anatomy of the above description. A targeted deployment of finance will be made available for the city through the Indeginisation purse. However, increasing capital stock is will likely short on 3 separate accounts.

Firstly, criteria for loan acceptance is difficult owing to a globally risk averse attitude. This necessarily translates to bad news as the majority of SMEs. Unless traditional lending structures are adjusted to incorporate new companies who lack the necessary credit rating then the efforts remain limited.

Secondly, giving money directly to new businesses or recapitalising existing firms creates additional employment but it does not seem to have any measurable effect on productivity. Year on year factory orders remain relatively static. The cost based investor incentive in respect to price developments is all but forfeited owing to the US dollar. Export-inclined strategies are unlikely to work as the country has lost its competitive advantage.

Thirdly, there exist export complexities as a direct result of sanctions. The ongoing seclusion effects create further obstacle. So what can Government do?

Pay a man to dig a hole and fill it up.
As it were, there is a narrow demand for Zimbabwe's goods and services owing to the various listed factors. Against this realisation the state should do all in its power to increase the spending power of the average person.

The policy has supported wealth effect inclinations through share disbursement but for those groups of society not employed by FDIs the state can stimulate demand by hiring workers to do routine jobs such as painting classrooms, fixing toilets, road maintenance, collecting  rubbish etc so as to create and maintain aggregate demand. That way, money is exchanging hands, business cycles begin and the economy starts improve.

Secondly, Government expenditure should be heavily inclined towards ensuring better education and training for local people as opposed to restoring failed structures which in all probability do not meet or create futuristic jobs demands. Re-capitalisng existing businesses with certain criteria in place will do little, if anything, in turning a city such as Bulawayo around.

Finally, stimulating the market for consumer goods will go a long way in encouraging local commerce. Monopolising trade in favour of home markets either through high duties or complete prohibitions will pave the way for endogenous growth. Regulating imports will give encouragement to firms who cannot compete against the economies of scale enjoyed by large firms.

The discussion explores a tiny fraction of the full policy implications but the broad strategic design throws up interesting finds. ZIM-ASSET alloys itself with social development for all, placing a wealth transfer emphasis to individual on low incomes or living in low income areas and a sustainable multiplying force of output, employment and real wages.

Apart from the expected implementation and legitimacy concerns such as equitability, transparency, accountability and trust, ZIM-ASSET ticks all the boxes. Unlike the vague JUICE model the MDC-T was selling, ZIM-ASSET is much more fluent and persuasive.

The one constant within the policy proposals is the view that any form of social reconstruction cannot be fully realised as long as the majority of workers remain mere wage earners. The full possibilities of increased production will not materilise unless the proletariat comes to be owners, wholly or at least in part.

Every Zimbabwean equally identifies with previously elusive provisions such as dignity, respect, security and power. ZIM-ASSET has a significance of its own, outside the material base, the fulfilment of celebral and emotional needs. It completes the reversal of colonial inequities.

The policy should not be viewed in a strict economic impression, it's a form of mental emancipation.Resource led nations can and should adopt a similar model.

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Bhekinkosi Ngubeni is qualified economist. email him: bheki@zimtradeandinvestment.com