Towards a competitive economy

Source: Towards a competitive economy | The Herald January 11, 2018

Victor Bhoroma
Zimbabwe cannot afford to lag behind its regional peers in terms of economic competitiveness as we build a new model premised on the new political dispensation.

Zimbabwe is currently ranked on 124 out of 137 countries on the 2017-18 Global Competitiveness Index (GCI). The same report ranks our regional peers as follows: South Africa (61), Botswana (63), Zambia (118) and Mozambique (136). The best ranked economies on the planet being Switzerland, Singapore, United States, Netherlands and Germany respectively.

GCI defines competitiveness as the set of institutions, policies and factors that determine the level of productivity in an economy, which informs the level of prosperity that the country can attain in a given time-frame. Competitiveness is measured using a standard method that takes into consideration key aspects such as infrastructure development, macro-economic environment, institutions, labour market efficiency, goods market efficiency, financial market development, technology and innovation among others.

Besides being an obvious barometer on productivity, competitiveness is very important in ensuring economic growth and improvement in income levels (Human Welfare). It is no secret that countries which score high on the GCI Index mostly score high on foreign direct investment (FDI) as investors often shy away from markets where it is tough to control or monitor their investment.

Zimbabwe’s FDI fell by 30 percent to $295 million in 2016 from $421 recorded in 2015 and further from the all-time high of $545 million of 2014 (RBZ 2017). Building a competitive economy is colossal task for Zimbabwe, but it is the best way to achieve sustainable economic growth.

The major causes for Zimbabwe’s poor rankings in terms of global competitiveness include high levels of both foreign and domestic debt which hoover around $11 billion, poor infrastructure, policy inconsistency, political uncertainty, corruption and a subdued industrial capacity utilisation which currently stands at 45 percent for the local industry.

The Government is slowly addressing part of these aspects with key scores in the upgrading of Victoria Falls International Airport, Command Agriculture, amendments to the Indigenisation and Empowerment Act, Plumtree to Mutare road resurfacing, electricity supply stabilisation through ZESA, IMF debt repayment and the much hyped Beitbridge-Harare road dualisation (If it materialises). However a lot still needs to be done, not for short term populist objectives but with a long term vision.

Some of the policy initiatives that require attention include:

Institutional Reforms
To build a competitive economy, institutions that govern the rules of the country need to be strengthened and upheld. Key institutions comprise respect for property rights, the rule of law, public sector bureaucracies, import and quality standards and efficient financial markets. Most of these institutions derive their effectiveness from political will to uphold them. Property rights are very much connected to investments. Strong institutions serve to instil confidence in local and international investors. Zimbabweans deposited over $1 billion in off shore accounts in the last 2 years, a clear sign of lack of confidence in their local institutions.

Infrastructure Development

Key infrastructure such as the rail network, ports of entry, roads, water and electricity directly feed into the cost of doing business for the local industry. For example, resuscitating NRZ will bring the cost of long distance haulage for raw materials down as producers are being forced to rely on the quick but pricey haulage trucks which upsurge the cost of production. The long planned power generation projects are also key in ensuring that electricity is not only readily available but priced competitively so that producers can maintain the cost of production. A quick comparison on fuel, electricity, water and transport costs between Zimbabwe and other SADC countries will reveal why our products are not competitive.

Agility in SEPs privatisation and reforms
Zimbabwe’s State Enterprises and Parastatals (SEPs) rank as some of the worst in the world in terms of performance. Out of the 107 SEPs in Zimbabwe, only a handful have sound corporate governance policies. Those few are slowly contributing meaningfully to their given mandates. Notable examples being Zimra, TelOne, Potraz, NSSA, POSB Bank, Zera and Agribank. The rest are not only debt ridden but loss making year in year out and relying on the government handouts for survival (not growth). The recently formed privatisation agency needs to be agile in finding possible suitors for entities such as CSC, Air Zimbabwe, Zupco and Zisco Steel among others. Non-commercial and regulatory entities require a lot of governance reforms so as to contribute meaningfully to the economy.

Advances in public sector efficiency

The recently announced budget has kick started the process of public sector reforms even though the public sector system is much more complex to address with proposals and presentations. Public sector processes require efficient IT systems for governance, audits, cost control, fleet management, resource allocation, project management and above all accountability. Processing times for licenses, permits, documents, payments, clearing and human capital management need to improve so as to improve economic competitiveness. Zimbabwe cannot develop if over 85 percent of its budget is directed towards civil service salaries and costs. When will savings start? How about investment in innovation?

Improvements in the investment climate
The investment climate centres mainly on improving the ease of doing business and tax reforms. Tax reviews in key sectors such as petroleum, telecoms, mining and finance are key. For example taxes on financial transactions (RTGS), local and international calls, duty and levies on diesel and petrol and lastly royalties on mining products such as gold, nickel, chrome and platinum need to be aligned with our regional peers. The ease of doing business reforms are also vital in attracting investment. The number of days it takes to set up a company and get requisite paperwork should be shortened to within 10 working days.

  • Victor Bhoroma is business analyst with expertise in strategic marketing and business management aspects. He is a marketer by profession and holds an MBA from the University of Zimbabwe (UZ). For feedback, mail him on or Skype: victor.bhoroma1.