Dismay over economy’s poor competitiveness

Source: Dismay over economy’s poor competitiveness | The Financial Gazette November 3, 2016

THE Minister of Policy Coordination and Promotion of Socio-Economic Ventures in the President’s Office, Simon Khaya Moyo said it was baffled by the economy’s poor competitiveness given the structural advantages Zimbabwe enjoys over other countries.

Zimbabwe is suffering from a number of problems that includes a sluggish economic growth rate, a recession which is manifested by a deflationary environment, a serious liquidity and cash crisis, a low capacity utilisation of about 34 percent and lack of external credit.

Foreign direct investment continues to be critically low, there is no long term financing, there is low aggregate demand and the cost of borrowing is too high.

Khaya Moyo’s remarks were delivered by the Deputy Minister of Industry and Commerce, Chiratidzo Mavuwa, at the Zimbabwe Economic Review and National Competitiveness Conference last week. He believes that Zimbabwe should be in a better position than where it is now.

The World Economic Forum recently ranked Zimbabwe at number 126 out of 138 countries on the Global Competitiveness Index.

He talked about the country’s learned workforce, abundant mineral resources, good climatic conditions (which could be catalytic to spur agricultural production), excellent geographical location (which makes Zimbabwe an anchor for northward and southward bound traffic) and relatively good infrastructural network.

“It boggles the mind that with such a plethora of attributes we still find ourselves not being competitive.”

According to Reserve Bank deputy governor, Kupukile Mlambo, Zimbabwe has the highest export costs in the region.

To export from Zimbabwe it costs US$3 765 per container. In Zambia the cost is US$2 765 while in Botswana it is US$3 045.

Khaya Moyo admitted that “we are our own worst enemies” and went on to suggest that the country had still not found alternative models to the ones it inherited from the colonial government in 1980.

“May I pose the question; why are we not competitive? The answer is probably found in the production processes that we inherited which were geared towards import substitution industrialisation.”

Economist Roy Jubenkanda believes that Industry and Commerce Minister, Mike Bimha’s decision to ban the importation of a number of listed products under Statutory Instrument 64 of 2016 will give local industries the chance to improve their competitiveness.

“It is important during that protection that industry must know that this is a temporary window and we need to retool both in terms of capital equipment and also the human capital element.”

Another economist Prosper Chitambarra says that the cost of borrowing remains a huge deterrent to the growth of local industries.

“A producer in Zimbabwe pays US$0,12 for every dollar they borrow while in some countries like Japan it is free and the highest in Africa is US$0,05 per dollar. Another contributor to unit costs is the high risk premium which makes it very expensive to borrow offshore.”

He said that according to the World Bank’s enterprise survey, what hinders firms most is not the regulatory environment, but competition from informal firms, high tax rates, limitations in infrastructure, access and cost of finance, and government behaviour (corruption).

All these are prevalent in Zimbabwe.

Confederation of Zimbabwe Industries vice president, Sifelani Jabangwe, wants contracts and tenders to go to local companies.

“We believe every infrastructure project should have local inputs otherwise we will just wake up with a loan which does not benefit the country.”

Zimbabwe Revenue Authority chairperson Willia Bonyongwe talked about the government’s struggles with revenue collection.

“The tax base as we know it has shrunk but the tax base is still there. Houses are being built, cars are being driven and all these things have been paid for in cash. So the tax base is still there. Maybe we just don’t know where it is.”