Private enterprise key to future growth

ECONOMIC freedom seems to be eluding the whole of Africa. Reading the book, Why Nations Fail, by Daron Acemoglu and James A Robinson, leaves one with sadness in that, despite Africa having some of the world’s largest natural resources, we remain locked in a cycle of poverty.

Most of it has to do with our history of course, but we in Africa, have also been responsible for creating the continuing inequalities through apathy, mismanagement and corruption.

We therefore cannot continue to blame the past.

Africa’s rise, which is being punted by international development agencies, is unfortunately not distributive nor based on its industrialisation, but is a consumption-driven boom that will merely result in Africa’s bourgeoning middle class consuming more goods from Europe, China and the United States.

Africa is failing to manufacture and consume its own products and thus unable to create sustainable developmental states.

It is difficult to disagree that colonialism survived on extractive racial political and economic systems.

Although it developed substantial infrastructure and public administrative systems in countries such as Zimbabwe, the liberation struggle political parties inherited skewed development patterns and rent seeking economic structures, which were geared solely to export raw goods for manufacture overseas.

Unfortunately, they, in turn, did nothing to transform their economies and to this day, we are still largely dependent on raw material export earnings mainly from China.

Nothing has fundamentally changed and this continues to make our economy vulnerable to international commodity prices. Africa still specialises on being poor.

In the case of Zimbabwe, it is evident that there really was no agenda of transforming the structure of the economy we inherited — a dual economy characterised by a well-developed first economy and a second economy whose role was merely to provide labour and taxes to the centre.

Since 2000, the collapse of the first economy has exacerbated poverty with millions now locked in a survivalist informal economy.

As a result, many Zimbabweans remain poor even given the high level of functional literacy that we continue to boast about.

Extractive economic systems are not sustainable because they limit economic freedom and free enterprise.

Inclusive economic systems that protect private property rights, create fair access to economic opportunity for all, encourage investments in new technologies and skills are more likely to create better societies and developing societies.

That is the Zimbabwe which we must all work hard to create.

Of course, this can only happen with political reforms.

Zimbabwe was certainly on the right track when, in 2009, it formed the Government of National Unity where it sort political reforms, particularly the necessity of a professional military and police institutions which continue to be instruments of enforcing exclusive political and economic interests of the elite.

This of course was hijacked by ZANU-PF, a predatory post independent liberation struggle political organisation, which was unwilling to compromise.

Authors Acemoglu and Robinson capture our fundamental challenge when they proffer that economic growth and development will never be sustained under extractive political systems for two main reasons.

The first being that sustained economic innovation cannot be decoupled from creative destruction, which replaces the old with the new in the economic realm and also destabilises established power relation in politics.

This is because dominant elites fear creative destruction and they will resist it at all costs.

Any economic growth under such conditions will, therefore, be short lived.

Second, the ability of those who dominate extractive political systems to benefit at the expense of society means that political power is highly coveted and all will fight for it, not because they seek to create better conditions, but merely to wield unchecked political power.

Because of this, they will always be political forces pushing for political instability.

The questions we must answer are: Why have we failed to gather momentum in the last 37 years, particularly with regard to further diversifying our economy and creating a more sustainable and robust industrial base?

Why have our businesses icons left the country and are successful elsewhere?

The answer is very simple — it all has to do with the lack of economic freedom and free enterprise at home.

Explaining the failure of private enterprise in Mozambique, Greg Mills and Jeffrey Herbst in their book, Africa’s Third Liberation, say that: “The failure to attract private funds is linked to overall tensions in Mozambique’s business sector that arise from wide spread protectionist sentiment against investors and a State-centric and interventionist response to development demands, where the private sector is over regulated and subject to over bureaucratic practices, crowded out by the State-linked actors, and a target for elite rent seeking and resource nationalism.”

This, incidentally, accurately describes Zimbabwe.

Free enterprise underpinned by innovation and economic freedom are a critical success factor for recovery.

In the Zimbabwe we want to create, we must appreciate that it is only when we have succeeded in creating a vibrant free economy that we can begin to achieve our social developmental objectives.

A successful private sector must be looked at as a source of revenue and growth and not a political threat.

The private sector is therefore not an enemy, but the engine for growth.

Every country must protect its industry from foreign competition in order to allow the emergence of a strong industrial sector.

However, this protection must not result in the protection of high production costs and inefficiencies, but must nurture our industry so that it can ultimately face international competition.

Underlying all this must be a clean and accountable government, the respect of human rights, the rule of law and an inclusive culture where all Zimbabweans participate in the creation of a new ethos that says that Zimbabwe belongs to all its citizens.