EDITORIAL COMMENT: The cost of not doing business

EDITORIAL COMMENT: The cost of not doing business
Reserve Bank of Zimbabwe governor, John Mangudya

Reserve Bank of Zimbabwe governor, John Mangudya

ZIMBABWE spent nearly $300 million foreign currency on avoidable imports in the first half of 2017.
By year-end, these avoidable imports will be a huge part of an expected $6 billion import bill, adding to an unsustainable trade deficit.
Electricity and steel imports, at $121 million and $46 million respectively, in the first six months of the year are some of the imports Zimbabwe could have avoided, if government had exercised foresight and judicious management of national assets.
To this list, add grain imports, which cost the country $111 million in foreign currency during the same period.
Zimbabwe’s precarious balance of payments situation is compounded by the fact that close to 90 percent of the country’s export earnings come from no more than five products — gold, tobacco, platinum, chrome and diamonds — all primary commodities susceptible to price volatility.
Central bank governor John Mangudya wants to change the narrative from one focusing on cash shortages to one which places foreign currency shortages at the centre of the economic conversation, to highlight Zimbabwe’s productivity crisis.
Constantly having to stretch the limits of his creativity to ensure Zimbabwe has enough foreign currency to pay for critical imports, including avoidable ones, Mangudya has rightly called for the efficient use of scarce dollars.
However, much of the blame for the current crisis has been incredibly lumped on everyday citizens who have themselves borne the brunt of mismanagement and official incompetence.
It is President Robert Mugabe and his ZANU-PF government who must take full blame for this state of affairs.
A government with foresight would have anticipated that Zimbabwe’s power demand would grow with its expanding population and economy.
It would have invested in new plants, while upgrading the old ones.
A prudent government would certainly not have allowed gross mismanagement of acquired and redistributed farms, to the extent of spending billions of American dollars to import the nation’s staple food, as has happened over the past few seasons.
Steel imports would be unheard of in a country blessed with better than decent iron ore and limestone reserves, with good grades and proven pedigree to produce the metal.
To that, add vast coal-beds accessible by rail.
All these natural advantages have been nullified by government bungling and ruling party politicians’ penchant to let politics trump economic sense.
Poorly managed land redistribution sent food production plummeting to unprecedented levels, making the country a serial grain importer.
The country’s major electricity plants have an average age of 45 years and, until the $500 million Kariba South plant expansion started three years ago with Chinese funding, government had not shown any serious intent to increase the country’s power generation to match growing demand.
Similarly, Ziscosteel, once Africa’s biggest steelworks, has been destroyed under government’s watch.
The manner in which the Zisco-Essar deal unraveled does nothing to help Zimbabwe’s reputation with international investors.
As does government’s reluctance to enact changes to its local ownership legislation — a clear hindrance to foreign investment — more than two years after Mugabe “clarified” the law and promised to amend it.
It has become fashionable for government to talk about improving the ease of doing business, including lowering business costs.
However, the same government’s errors of omission and commission continue to levy a cost on the economy. The cost of not doing business.

  • Scotia

    Well written article, thanks.

  • Matsimba

    Sad, very sad indeed. Citizens who are currently occupying fertile land should do more, as they have the responsibility to produce for the nation. The private sector is willing to fund agriculture but the contract legislations and/or regulations are either non-existent or outdated. The commodities exchange which the private sector advocated for has been conveniently ignored and replaced by command agriculture, whose sustainability is yet to be fully tested. There is need to open the steel manufacturing to small players, as was the case kuNjanja.

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