Govt should engage the private sector

via Govt should engage the private sector – The Zimbabwe Independent by Kevin Msipha September 20, 2013

President Robert Mugabe submitted a bill of good intentions to the nation, in the form of his speech at the opening of the 8th Parliament of Zimbabwe.

I must confess I was encouraged by what I heard. Along with the rest of Zimbabwe, I heard all the right words and phrases, like zero tolerance on corruption, coming up with a fund for the resuscitation of industries, introduction of performance based contracts for parastatals and even the often dreaded declaration of assets by members of anti-corruption commissioners (members of parliament, anyone?)

The diagnosis of what ails the economy was spot on, even if the prescription of solutions betrayed government’s bias towards seeking solutions that rely on moribund state-owned enterprises.

If I were to have any misgiving about the speech, it would be the omission of government’s expectations and envisaged role of the private system of enterprise in the economy (outside private public partnerships).

The president is not only the Head of State and Government and Commander in Chief of the Defence Forces, but more importantly he is also the CEO of the commercial enterprise that is Zimbabwe.

If companies are to expand through an export-led growth model for example, government must lead the charge in a fashion similar to that of rising Asian countries.

The mandate to eradicate poverty cannot be the sole responsibility of government, as the private sector can prove to be a worthy ally and can play a meaningful role.

The consequences of failing to rise to the challenges are equally dire for both parties (in theory at least), with government suffering at the polls, while the private sector enterprises go out of business.

The case for private sector enterprise is a compelling one. Aside from the profit motive and employment creation, a successful business imparts dignity and a sense of achievement.

It harnesses the power of self-interest and organisation to produce a level of productivity only a few state-owned enterprises have been able to match. This ensures that a system where everything a man gets, from the cradle to grave, is doled out to him by a ruling clique is never realised.

It is against this background that government persists with its confidence in State Owned Enterprises (SOEs).

For instance, the president was kind enough to furnish the nation with information that SOEs have the potential to contribute 40% to GDP.

It would have been even more enlightening had he also availed what contribution to GDP SOEs currently make.

The government will attempt to rehabilitate SOEs, which while possible is unlikely or may take time to implement. Unfortunately, judging from Mugabe’s speech, one can safely deduce that privatisation of SOEs will not be a priority.

Part of the problem has been that historically, government has sought to define its relevance and success through the prism of laudable social objectives such as education, provision of health, decent houses etc.

Measures such as business and consumer confidence indicators or the number of companies registered per annum are hardly ever quoted by public officials.

As a result, the history of post independent government of Zimbabwe is one of profligate social expenditure without the required concomitant expansion of our economic base. These are really just two sides of the same coin.

An increased industrial and economic base can only be positive for government’s social objectives.

Indeed, the huge size of the informal economy stands testimony to government’s inability to create policies that transition micro, small and medium businesses into the mainstream economy, allowing them to grow and contribute to the fiscus.

As it stands, government’s inability to articulate its vision for the private enterprise system in the economy has meant the private sector has been unsure of its boundaries and is suspicious of government’s support in creating wealth for the country.

A business is a citizen and collectively the business community is also a constituency to which government must lend an ear, give space and accord some status in the economic life of the country.

The inadequacies of defining success are not the sole preserve of government.

Universities must now start competing on the basis of scientific and technological breakthroughs and not on the notoriety of their student bodies or just the number of Phd lecturers per square metre of the campus.

I have often suffered at the hands of engineer friends at various social meetings, who furnish me with unsolicited information on the size and prestige of the conferences they have been invited to attend.

When I hazard to ask what contraption they have designed or modified as practical evidence of their engineering nous, I am often dismissed as a jealous plebeian.

Galileo is widely acknowledged as the father of modern science and a major figure in the history of mankind. It is instructive to note that he never completed his university education, but instead attained his fame through his accomplishments in the field of science.

The agricultural season is upon us and the announcement by the president that government will expedite the setting up of the Agricultural Commodity Exchange is welcome news.

The agricultural season will serve as the first cyclical barometer to measure government’s commitment to fulfill its first tranche of election promises. It is a step forward in the creation of viable institutions that will ensure the success of the agricultural sector.

Transparent market pricing is key in the continued resuscitation of the agricultural sector. Hopefully the introduction of the exchange will banish from our midst the scourge that is price fixing.

The most able of bureaucrats could not through price fixing solve the problem of balancing and synchronising the production of hundreds of different commodities in relation to each other.

Yet this problem is solved quasi-automatically through the mechanism of free markets. When a given commodity is scarce in relation to demand its price immediately rises, the profit margin in making that commodity becomes greater than that for making articles in ampler supply.

Msipha is a finalist of the chartered financial analysts programme. He writes in his personal capacity.