The Zimbabwe we want (pt 5): Private enterprise is the key driver of growth

via The Zimbabwe we want: Private enterprise is the key driver of growth (Part 5) – Nehanda Radio Feb 19, 2014 By Vince Musewe and Elton Mangoma

In the Zimbabwe we want, we need to capture this spirit of entrepreneurship to drive our economic growth and development. There is no doubt in our minds in the role that the private sector must play as the engine of economic growth.

We are currently faced with a situation where this sector has been decimated through inconsistent government policy. More damaging is the apparent abhorrence by this government to see a strong black capitalist class emerging in as this is seen as a threat to political power.

The issue of patronage and fear of change to this day continues to stifle black empowerment and the emergence of a strong black capital base. Indigenization will not address this.

The private sector not only employs multitudes of our citizens but provides a broad tax base for the government. Its growth, unencumbered by ill-informed government policies that stifle it, must be encouraged and the sector must be left alone to develop to its full potential.

Our experience shows us that state enterprises are inefficient and mostly run on parochial basis that favours cadre deployment, corruption and abuse. State enterprises cannot therefore drive sustainable economic growth.

The private sector is there to meet specific needs and the state must play only a facilitating role to make this happen. The private sector is there to make a profit and therefore tends to pursue efficient means of producing the goods and services.

As a country, we need to capture this spirit of entrepreneurship to drive our economic growth and development. There is therefore nothing wrong with the pursuit of profit as long as this is done within the law recognises fully the dignity, worth and wellbeing of the employees.

The fact of the matter is that the greater part of the wealth of a country is in the hands of its citizens. Rich countries have wealthy individuals in them and the state benefits from this.

Therefore there should not be distinction of wealth whether it be in private hands or in state hands, the country is the ultimate beneficiary. Wealthy individuals are good for the country and therefore ownership and the pursuit of personal wealth is not something to be abhorred, but should be encouraged

For governments to grow, it is in their interest that a vibrant private sector exists. The promotion of free enterprise must therefore not be crowded out by state enterprises or unnecessary government red tape. Any government must be an ally to private enterprise.

In the Zimbabwe we want, a strong financial services sector is critical to support private enterprise. How we regulate the financial services sector becomes an important enabler.

A clear example is the issue of how we have regulated our banks by forcing them to have a large statutory capital base. This is the wrong approach. Any size of bank can be successful and this has nothing to do with their capital base.

We have for example, small banks that can be profitable and large banks that can be unsuccessful. What matters more is the loan to capital ratio, the quality of its book and the nature of the business of the bank or its purpose and target market.

In the Zimbabwe we want, we must have an environment that allows any size and type of bank to operate. We need a Reserve Bank that supports competition and free enterprise in this sector as opposed to stringent political control.

In the Zimbabwe we want, we must facilitate the growth of an entrepreneurial attitude. This includes making it simple and easy to establish new businesses, movement from informal to the formal sector and deliberately putting in policies that make it easy to do business.

This includes creating a favourable tax regime, access to loan capital and attracting new investments. More important, we must create an environment where it is easy to start again because entrepreneurship requires continuous trying. In the Zimbabwe we want we must see failure as a necessary event before success.

We also want to see entrepreneurship culture developing at schooling level so our educational institutions must be part and parcel of this new culture.

In the Zimbabwe we want, we want to encourage the growth of youth through entrepreneurship by providing them the necessary support. Our youth empowerment projects are not being implemented correctly.

Money has been dished out to youths, without looking at the viability of their projects and ensuring that youths have the technical ability to start new ventures. We must ensure that there is capacity of ensuring that new business ventures are adequately assessed and funded and mentorship.

Import substitution is a critical factor to our economic recovery. A clear example is how the Koreans have developed a car industry by a deliberate government strategy over a long period because they had a vision.

We must drive the future now by anticipating trends and needs and facilitate the establishment of institutions of research in all sectors of our economy. The Zimbabwe we want must have a long term vision that supports research and development.

Any government that wishes to be successful needs to support private enterprise and its laws and regulations must reflect that support.

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

Vince Musewe is an economist and author based in Harare. Elton Mangoma is a Zimbabwean politician and entrepreneur. You may contact Vince directly on vtmusewe@gmail.com