EDITORIAL COMMENT: The cost of not doing business

Source: EDITORIAL COMMENT: The cost of not doing business | Financial Gazette (News)

ZIMBABWE spent nearly $300 million foreign currency on avoidable imports in the first half of 2017.
By year-end, these avoidable imports will be a huge part of an expected $6 billion import bill, adding to an unsustainable trade deficit.

Electricity and steel imports, at $121 million and $46 million respectively, in the first six months of the year are some of the imports Zimbabwe could have avoided, if government had exercised foresight and judicious management of national assets.

To this list, add grain imports, which cost the country $111 million in foreign currency during the same period.

Zimbabwe’s precarious balance of payments situation is compounded by the fact that close to 90 percent of the country’s export earnings come from no more than five products — gold, tobacco, platinum, chrome and diamonds — all primary commodities susceptible to price volatility.

Central bank governor John Mangudya wants to change the narrative from one focusing on cash shortages to one which places foreign currency shortages at the centre of the economic conversation, to highlight Zimbabwe’s productivity crisis.

Constantly having to stretch the limits of his creativity to ensure Zimbabwe has enough foreign currency to pay for critical imports, including avoidable ones, Mangudya has rightly called for the efficient use of scarce dollars.

However, much of the blame for the current crisis has been incredibly lumped on everyday citizens who have themselves borne the brunt of mismanagement and official incompetence.

It is President Robert Mugabe and his ZANU-PF government who must take full blame for this state of affairs.

A government with foresight would have anticipated that Zimbabwe’s power demand would grow with its expanding population and economy.

It would have invested in new plants, while upgrading the old ones.

A prudent government would certainly not have allowed gross mismanagement of acquired and redistributed farms, to the extent of spending billions of American dollars to import the nation’s staple food, as has happened over the past few seasons.

Steel imports would be unheard of in a country blessed with better than decent iron ore and limestone reserves, with good grades and proven pedigree to produce the metal.
To that, add vast coal-beds accessible by rail.

All these natural advantages have been nullified by government bungling and ruling party politicians’ penchant to let politics trump economic sense.

Poorly managed land redistribution sent food production plummeting to unprecedented levels, making the country a serial grain importer.

The country’s major electricity plants have an average age of 45 years and, until the $500 million Kariba South plant expansion started three years ago with Chinese funding, government had not shown any serious intent to increase the country’s power generation to match growing demand.

Similarly, Ziscosteel, once Africa’s biggest steelworks, has been destroyed under government’s watch.
The manner in which the Zisco-Essar deal unraveled does nothing to help Zimbabwe’s reputation with international investors.

As does government’s reluctance to enact changes to its local ownership legislation — a clear hindrance to foreign investment — more than two years after Mugabe “clarified” the law and promised to amend it.
It has become fashionable for government to talk about improving the ease of doing business, including lowering business costs.

However, the same government’s errors of omission and commission continue to levy a cost on the economy. The cost of not doing business.

COMMENTS

WORDPRESS: 2
  • comment-avatar
    Chatham House 2 weeks

    Mugabe and Scoones are the best economists in the world.

  • comment-avatar
    william mills 2 weeks

    In general hydropower is used mostly for ‘Peaking’ power. The flow of a river is after all finite and highly variable. The reservoir behind the dam can dampen and even-out the flow of the river, but even the largest reservoirs must live within the budget set by the flow of the river. The ‘base-load’ is usually supplied to the grid by thermal, nuclear or other (solar) types of power generators. The budget specified by the flow of a river can not as yet be manipulated for political reasons therefore it can’t be screwed up. Read the above carefully you incompetent politicos as there is a lesson in there for you as regards an economy as well as many other systems……