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Bongani Ngwenywa
THIS instalment is a continuation of last Sunday’s article, “Was abandoning of structural adjustment export wise?”
It extends the argument that the structural adjustment programme set the right tone for reforms towards open market economy, which saw a free play of market forces of demand and supply playing a much role in determining what to produce, how to produce, in what quantities, and for whom.
This was set to be realised through active participation of the private sector in the economic development of the country by reducing Government intervention and protectionist tendencies that were adopted from the colonial administration.
The post-independence Government initiatives such as affirmative action and indigenisation policies were relaxed largely as the economy was opening for more private investment participation and competition, both domestic and foreign.
Protectionism in the form of price controls and subsidies, and stringent labour policies and regulations were abandoned and relaxed respectively in order to attract foreign direct investment into the country.
The State-owned enterprises that were enjoying subsidies at the expense of the fiscus, were to be commercialised and eventually privatised to make them self-sustaining. All this was meant to free Government resources so that they could be channelled towards more needy areas such as addressing the previous socio-economic imbalances that were created by the colonial regime. There is an argument by other people on the other hand that the economic and political measures advocated by the Breton Woods institutions (structural adjustment programme) contributed to the very impasse Zimbabwe is in today.
Like I said last week, I beg to differ. Zimbabwe as a less developed or developing country is faced with the dilemma similar to many developing countries, and particularly in Africa in general, the struggle to balance between the internally-oriented or inward looking development strategy aimed at strengthening domestic investment through local accumulation on the one hand, and the requirements of the Bretton Woods institutions to open the economy and business to FDI and global economic interests, on the other.
Of late, there have been calls for Zimbabwe to seriously consider boosting its economy by placing more emphasis on domestic capital over foreign investment through attractive investment packages and other incentives. This came as the Confederation of Zimbabwe Industries (CZI) was calling for greater support and recognition of local business as the country fights to turn around its economic fortunes, with the key local institutions such as the Reserve Bank of Zimbabwe (RBZ) and the Zimbabwe Revenue Authority (Zimra) actively working hard to mobilise internal resources.
“Domestic investors should be promoted because they are more stable. In the event of any economic challenges, domestic capital is also normally more resistant and this is why we are advocating for more partnerships as opposed to foreign investors coming in and taking away all the resources,” CZI president Mr Sifelani Jabangwe said recently.
“When we say Zimbabwe is open for business, we must ensure that local investors are also given the same incentives and opportunities as foreign investors. Domestic investors also have the capacity to turn around the economy, but require technical and financial assistance.”
This was part of the industry body’s recent resolution to lobby the Government on the urgent need to mobilise domestic capital in order to improve the country’s ailing economy. In support of Mr Jabangwe’s remarks, a top regional commentator and this year’s Top Companies Survey guest, Mr Kevin Wakeford, suggested that Zimbabwe has a potential of raising up to 60 percent of its total capital needs domestically.
While these calls and sentiments are quite noble ideas, the argument is that Zimbabwe needs to balance between its inward-oriented economic development strategies and outward looking strategies, and attract as much FDI as possible.
Foreign direct investment should not be viewed as an instrument for looting the country’s resources. This myopic African mentality has actually led to the very economic impasse that Zimbabwe is in today. The failure to recognise this as the backdrop to Zimbabwe’s economic problems might even speed the country along a path towards an even more profound economic impasse and perhaps further economic meltdown of the proportions beyond the hyperinflation era of the 2008.
It is quite encouraging though to read about concerted efforts to finally support the revival of the country’s industry.
Some of us have been yearning for a very long time to see these things happening, and hoping these are not just stories.
During the week, we learnt that the Reserve Bank of Zimbabwe (RBZ) has managed to secure $1, 3 billion offshore loans through the African Export-Import Bank (Afreximbank) and Trafigura to support production and promote exports. This information was revealed during the ZimTrade-Banks’ export awareness seminar that was held in Bulawayo, by the central bank’s principal analyst for financial markets, Mr Tapiwa Furusa, who said the offshore loans were meant to support various sectors of the Zimbabwean economy.
“During the period November 2017 to May 2018, we have managed to arrange $1,3 billion offshore loans through Afreximbank and Trafigura. These have been realised,” Mr Furusa said, suggesting that some of the loans would be used as credit line facilities to support the industry.
“We have got $1,5 billion trading guarantee facility from the Afreximbank which is currently in negotiations. We have also raised $850 million, which is another pipeline offshore finance facility. We have also allocated foreign currency using priority list biased towards productive sectors and essentials.”
On the other front, there are positive developments and initiatives by the private sector. For example, the NMB chief executive officer, Mr Ben Washaya told exporters who were attending a breakfast meeting the bank held recently, that, I quote, “We currently have a $15 million four-year facility from two European DFIs which is at your disposal. The facility can also be used to support part of your external forex payments, on condition that the repayments are done in hard currency.”
The Government has so far recovered US$850 million out of the US$1,4 billion illegally externalised by corporates and individuals following a three-month moratorium given by President Mnangagwa upon his assumption of office in November last year. The President told delegates who were attending the 31st Ordinary Session of the African Union (AU) General Assembly last Sunday that the amount returned home now stood at US$850 million.
My opinion is that this money could be channelled towards the resuscitation of the industry, by adding it to the loans and credit line facilities that have been arranged or mooted. I believe that would be the most productive way of utilising the previously externalised funds, bearing in mind that a significant share of the culprits have been some of the businesses and companies themselves.
In conclusion Zimbabwe, like any other country, has to find its position in the global community of economies as a player and at the same time develop its internal capital accumulation. There is a need for balance between inward-looking and outward looking strategies for sustained economic growth.
Dr Bongani Ngwenya is based at the University of KwaZulu-Natal as a post-doctoral Research Fellow and can be contacted on [email protected]
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