Opinion / Columnist
Why Zimbabwe needs to protect its economic sovereignty as the Rand continues to plummet
27 Mar 2016 at 10:42hrs | Views
Preamble:
OF late Zimbabwe seems to be getting a lot of attention from South Africa. If I may refer my readers to an article which appeared in last week's Sunday News: article "SA business delegation visits". The article was about the Investment and Trade Initiative between Zimbabwe and South Africa that was held in Harare, Gweru and Bulawayo the previous week.
The major highlights of the Investment and Trade Initiative was that attracted mostly were South African companies that were looking for markets for their products in the country as opposed to those that were seeking to inject direct capital into Zimbabwe.
The majority of these company representatives, when interviewed in Bulawayo made it clear that their objective was to penetrate the Zimbabwean market and identify gaps for their products and services. Among the companies was the Get Mining Services — suppliers of capital equipment like bulldozers, motor graders and excavators. Quoting one of the delegates to the trade mission, Ms Olivia Fuka: "Our main objective coming to this trade mission was to penetrate the Zimbabwean market and fill the gaps. We noticed that there is a need for capital equipment especially with all the mining activities going on here. We are considering becoming trade partners with businesses in Zimbabwe". The delegates from South Africa also showed keen interest in investing in the infrastructural development, especially in the area of our railway road services.
The Rail Roads Association of South Africa president Mr Elvin Harris seemed to be excited about the potential business that the National Railways of Zimbabwe could provide to South African companies. Mr Harris said they were convinced that Zimbabwe was working on reviewing and amending certain frameworks and laws making it easier for investors to come through.
The cautious approach that Zimbabwe needs to take in order to protect its Economic Sovereignty.
Not to be outwitted, the South African Deputy Minister of Trade and Industry, Mr Mzwandile Masina called on Zimbabwean businesses to use the rand as a trading currency as it was now stabilising after the adoption of measures to prop up the South African economy.
"As of yesterday morning, the rand was trading at R15,65 to the $1 which has been stabilised around these weaker levels in the past few weeks amid a better response plan from the South African government dubbed the '6 I's' response plan focusing on industrialisation, infrastructure, investment, innovation, inclusion and integration," Mr Masina said then. The minister went on to assure the Zimbabwean business community that the volatility of the South African economy would dissipate as the rand stabilises. As a result, South Africa can only encourage the Zimbabwean people to consider using the rand as a trading currency between the two countries and the challenges that are facing the South African economy now will dissipate.
The deputy minister reiterated that the South African government has no doubt that the currency will stabilise and that is why it has come up with the "6 Is" response plan that is industrialisation, infrastructure, investment, innovation, inclusion and integration as a strategy. The deputy minister went on to chronicle the increasing investment in South Africa, with investors day in and day out launching big projects in South Africa. The deputy minister played down the perceptions that investors were shivering on the sliding scale of the rand and the potential uncertainty over the future of the South African economy.
As a Government, Mr Masina stressed that they have been upfront about the country's challenges and have not hidden the truth that South Africa has been hit by the global economic crisis and exposure, however, the government has a response plan.
The South African rand has been part of the multicurrency regime introduced in Zimbabwe since 2009 to stem hyperinflation.
However, as the rand plummets it is facing challenges of loss of confidence in Zimbabwe, as people favour the US dollar that has continued to strengthen.
South Africa is bearing the brunt of Zimbabwean exports that are getting more and more expensive as the rand plummets. While Zimbabwe is able to import more of goods from South Africa with the same amount of the import bill — as each dollar spent on South African imports fetches more of the import goods than it could yesterday, notwithstanding the double edged effect of use of the US dollar-imports made cheaper and exports made expensive.
Our continued inability as a sovereign economy to take advantage of the goings on in South Africa — loss of investment confidence, the potential downgrade by the Moody's to junk status, and especially the depreciation of the rand, by creating a more conducive and attractive environment to FDI — beyond the Sadc, and South Africa in general, that is, taking advantage of our use of the more stable currency — the US dollar. The US dollar has not only been attractive to South Africa, but to other countries as well, so we need improve our productive capacity to reduce our import bill to sustainable levels and move away from being a consumptive economy to a productive one that is making South Africa to continue viewing us as a potential market for their products. This direction is very clear from the recent held Investment and Trade Initiative between Zimbabwe and South Africa.
The question is, is this what we want? Is this what Zimbabwe needs?
No! Zimbabwe is an Economic Sovereignty. South Africa may be tactically pushing Zimbabwe into joining its Customs Union with Lesotho, Swaziland and Namibia so that it can dump its products into Zimbabwe as well. It is for this reason that I strongly agree with Mr Kipson Gundani and Zimbabwe National Chamber of Commerce (ZNCC) past president Mr Obert Sibanda, when he said that, "proper consultancy was needed prior to such engagements so as to avoid a mismatch in delegates as the South African delegation was made up mostly of people coming in to sell their equipment and products and in turn meeting with people with the same intention."
Mr Sibanda went on to emphasise that none of the businesses were ready to offer solutions to closed Bulawayo companies for example, as they had their own products to sell.
"What we need as companies is capital injected into our economy to resuscitate our own companies. It is difficult when you meet up with people who are looking for jobs like us," he said, adding that he would have wanted to see people looking for partnerships.
The South African delegation suggested that they have identified gaps in our market that could be filled by their products. While that may be true, the best solution is for South African companies or investors to come into Zimbabwe and go into joint venture partnerships with their Zimbabwean counterparts and establish new or subsidiary business ventures locally, so that the products they are intending to sell are produced locally by these established joint ventures. The joint ventures could even target some of the already identified Special Economic Zones, to take advantage of the concessions and taxation relief that the Government has put in place.
Serious caution has to be taken when it comes to investment in the infrastructure, such as the NRZ.
Zimbabwe has learnt things the hard way from some of the Build, Operate and Transfer initiatives that have been entered into in the past, where lack of caution and proper due diligence has seen Zimbabwe tying itself in these arrangements that have little benefited the country and unfairly favoured the other party — the investor — as they seek to recoup their investment cost.
In conclusion, as long as our productive capacity fails to meet domestic demand for goods and services and our import bill soars we will continue projecting ourselves as a potential market for our neighbouring countries' products, at the expense of our economic sovereignty.
Dr Bongani Ngwenya is a Bulawayo-based economist and senior lecturer at Solusi University's Post Graduate School of Business. Feedback-ngwenyab@solusi.ac.zw/nbongani@gmail.com
OF late Zimbabwe seems to be getting a lot of attention from South Africa. If I may refer my readers to an article which appeared in last week's Sunday News: article "SA business delegation visits". The article was about the Investment and Trade Initiative between Zimbabwe and South Africa that was held in Harare, Gweru and Bulawayo the previous week.
The major highlights of the Investment and Trade Initiative was that attracted mostly were South African companies that were looking for markets for their products in the country as opposed to those that were seeking to inject direct capital into Zimbabwe.
The majority of these company representatives, when interviewed in Bulawayo made it clear that their objective was to penetrate the Zimbabwean market and identify gaps for their products and services. Among the companies was the Get Mining Services — suppliers of capital equipment like bulldozers, motor graders and excavators. Quoting one of the delegates to the trade mission, Ms Olivia Fuka: "Our main objective coming to this trade mission was to penetrate the Zimbabwean market and fill the gaps. We noticed that there is a need for capital equipment especially with all the mining activities going on here. We are considering becoming trade partners with businesses in Zimbabwe". The delegates from South Africa also showed keen interest in investing in the infrastructural development, especially in the area of our railway road services.
The Rail Roads Association of South Africa president Mr Elvin Harris seemed to be excited about the potential business that the National Railways of Zimbabwe could provide to South African companies. Mr Harris said they were convinced that Zimbabwe was working on reviewing and amending certain frameworks and laws making it easier for investors to come through.
The cautious approach that Zimbabwe needs to take in order to protect its Economic Sovereignty.
Not to be outwitted, the South African Deputy Minister of Trade and Industry, Mr Mzwandile Masina called on Zimbabwean businesses to use the rand as a trading currency as it was now stabilising after the adoption of measures to prop up the South African economy.
"As of yesterday morning, the rand was trading at R15,65 to the $1 which has been stabilised around these weaker levels in the past few weeks amid a better response plan from the South African government dubbed the '6 I's' response plan focusing on industrialisation, infrastructure, investment, innovation, inclusion and integration," Mr Masina said then. The minister went on to assure the Zimbabwean business community that the volatility of the South African economy would dissipate as the rand stabilises. As a result, South Africa can only encourage the Zimbabwean people to consider using the rand as a trading currency between the two countries and the challenges that are facing the South African economy now will dissipate.
The deputy minister reiterated that the South African government has no doubt that the currency will stabilise and that is why it has come up with the "6 Is" response plan that is industrialisation, infrastructure, investment, innovation, inclusion and integration as a strategy. The deputy minister went on to chronicle the increasing investment in South Africa, with investors day in and day out launching big projects in South Africa. The deputy minister played down the perceptions that investors were shivering on the sliding scale of the rand and the potential uncertainty over the future of the South African economy.
As a Government, Mr Masina stressed that they have been upfront about the country's challenges and have not hidden the truth that South Africa has been hit by the global economic crisis and exposure, however, the government has a response plan.
The South African rand has been part of the multicurrency regime introduced in Zimbabwe since 2009 to stem hyperinflation.
However, as the rand plummets it is facing challenges of loss of confidence in Zimbabwe, as people favour the US dollar that has continued to strengthen.
Our continued inability as a sovereign economy to take advantage of the goings on in South Africa — loss of investment confidence, the potential downgrade by the Moody's to junk status, and especially the depreciation of the rand, by creating a more conducive and attractive environment to FDI — beyond the Sadc, and South Africa in general, that is, taking advantage of our use of the more stable currency — the US dollar. The US dollar has not only been attractive to South Africa, but to other countries as well, so we need improve our productive capacity to reduce our import bill to sustainable levels and move away from being a consumptive economy to a productive one that is making South Africa to continue viewing us as a potential market for their products. This direction is very clear from the recent held Investment and Trade Initiative between Zimbabwe and South Africa.
The question is, is this what we want? Is this what Zimbabwe needs?
No! Zimbabwe is an Economic Sovereignty. South Africa may be tactically pushing Zimbabwe into joining its Customs Union with Lesotho, Swaziland and Namibia so that it can dump its products into Zimbabwe as well. It is for this reason that I strongly agree with Mr Kipson Gundani and Zimbabwe National Chamber of Commerce (ZNCC) past president Mr Obert Sibanda, when he said that, "proper consultancy was needed prior to such engagements so as to avoid a mismatch in delegates as the South African delegation was made up mostly of people coming in to sell their equipment and products and in turn meeting with people with the same intention."
Mr Sibanda went on to emphasise that none of the businesses were ready to offer solutions to closed Bulawayo companies for example, as they had their own products to sell.
"What we need as companies is capital injected into our economy to resuscitate our own companies. It is difficult when you meet up with people who are looking for jobs like us," he said, adding that he would have wanted to see people looking for partnerships.
The South African delegation suggested that they have identified gaps in our market that could be filled by their products. While that may be true, the best solution is for South African companies or investors to come into Zimbabwe and go into joint venture partnerships with their Zimbabwean counterparts and establish new or subsidiary business ventures locally, so that the products they are intending to sell are produced locally by these established joint ventures. The joint ventures could even target some of the already identified Special Economic Zones, to take advantage of the concessions and taxation relief that the Government has put in place.
Serious caution has to be taken when it comes to investment in the infrastructure, such as the NRZ.
Zimbabwe has learnt things the hard way from some of the Build, Operate and Transfer initiatives that have been entered into in the past, where lack of caution and proper due diligence has seen Zimbabwe tying itself in these arrangements that have little benefited the country and unfairly favoured the other party — the investor — as they seek to recoup their investment cost.
In conclusion, as long as our productive capacity fails to meet domestic demand for goods and services and our import bill soars we will continue projecting ourselves as a potential market for our neighbouring countries' products, at the expense of our economic sovereignty.
Dr Bongani Ngwenya is a Bulawayo-based economist and senior lecturer at Solusi University's Post Graduate School of Business. Feedback-ngwenyab@solusi.ac.zw/nbongani@gmail.com
Source - sundaynews
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