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Dr Gatsha Mazithulela
IN the last 10 or so weeks of this column, we have discussed a lot of background issues related to the economic potential of Bulawayo which has not been realised due to many factors in recent years. I presented historical information on how this city and its surroundings grew out of exploitation of geographic advantage in relation to several classes of natural resources, and in relation to proximity to a number of national boundaries in Southern Africa.
I described how these advantages were turned into economic possibilities through investment in large scale and enabling infrastructure, being rail, electricity, roads and sources of water, including the ambitious Zambezi Water project under planned initiatives.
I have analysed comparative advantages that this city possesses and proposed several new industries that are based on sustainable competitive advantages and warned against the development of the so called “me also” businesses.
During this time, the issue of lack of financial capital seemed to put a very obvious theoretical flavour to our discussions and from the first week, I received countless comments on that the biggest issue is lack of capital and not lack of ideas.
I agree partly but as a businessman, I will insist that our lot is indeed struggling to come up with winning business plans that would force a financial institution to bet its last dollar. I will however, dwell on the most popular question that I have received — that of solving the issue of lack of capital.
Being a politician, I am inclined to emphasise a point that can’t be spoken about enough times — before I give you the policy options that are available for our empowerment. The illegal sanctions must go, for most things become unreasonably complex in a sanctioned environment.
Secondly, I am not holding my breath until our elected representatives in Bulawayo start to deliver empowerment and indigenisation. They are the wrong crowd. They are the sanctions crowd.
The various key and niche industries that I have spoken about will cost a lot of money and have declared such ideas stillborn as a result. What should be clear is that there is no community that has ever developed from 100 percent aid or external support, without any sacrifice from within.
There are many cases of major urban/industrial developments that have taken place when communities decide to take destiny by the scruff of the neck, the collar as we say here. Examples of such communities are as far as the development of the Mississippi Valley in the USA and as near the community cooperatives that built institutions like ABSA and NedBank in South Africa.
But where does the money come from? So let’s get to the point.
Has anyone ever thought of how the economic downturn made Zimbabweans rich? Let me explain before I am laughed at! Zimbabweans own their properties. Comparatively, we probably have the lowest debt rates in the world when compared to similar countries due to the lack of people wanting to lend us any money as a country in sanctions.
I’m not sure that I know more than a handful of people that have a mortgage for their property. The cash economy has actually turned us into real asset holders. People living in societies where credit is readily available and even abused, may seem to have more than the average Zimbabwean but the net worth of such societies is a very sorry number compared to Zimbabweans with paid-off houses, cars and so on.
The asset value of the population of Bulawayo and Zimbabwe in general is worth more than the capitalisation of the banks that we want to borrow money from! Who is richer? A big issue for me is not lack of money. It is about how we securitise our assets so that a real value of money can be put to them, so that they can be traded, so that they can be used to establish banks, as opposed to using them to borrow from other banks.
This is the concept that we should consider.
We cannot talk about all the ideas that I have come across on these matters but I will mention a few common threads amongst various systems that I have observed.
Banks are like any business — you can own a bank. The asset value of about 1 000 mortgage free suburban properties at an average of $100 000 is $100 000 000 — more than the magic figure of the amount of money that you should have to start a commercial bank. The figure is even lower for other types of financial institutions that you may wish to start.
So 1 000 mortgage free households can group their assets and start a bank? Not quite that simple. You need to have liquidity (cash) but the asset value of more than the required amount would be a good start. Those assets would need to be turned into cash which can be borrowed by others and generate interest.
In my mind, it seems not such a big ask to find let’s say 1 000 people with such assets and link them to professionals who can actually securitise the assets and start a bank.
I think we have more than 100 000 mortgage free “second” properties in this city and it is therefore not unimaginable that a development bank of Bulawayo or Harare can be started by you the interested parties. If you have your own bank you can set the rules and tell the borrowers that you want the money borrowed to start a business here only!
The matter that is difficult in delivering such an idea is the lack of community cohesion, the kind of common purpose that would have made this kind of idea to have been tried by now. Some leadership — and followership is required here. I would appreciate being shown how this is not possible for I love to learn every day.
The law is an enabler — you can change the law.
Acts of Parliament are the instrument that enables certain issues to be regulated for progress in our democracy. As economic development occurs, there are two competing forces that must be managed and they are risk-aversion and risk-taking. These two states of mind are very uneasy bedfellows but the funny thing is that a preference for one over the other makes for bad laws whilst the academic and professional disciplines that underpin them are essentially the same.
The priority is to get things right by striking a balance between the two tendencies. When I have discussed with commentators on this issue in the past weeks, it has become clear that in order to talk about community development banks, some aspect of the law book needs attention and that is the work of parliamentarians.
Again, some leadership is required to help our lawmakers deliver enabling legislation for communities to easily use their substantial assets to form community development banks. All countries that I have studied, that have this type of financial institution have had to craft the necessary laws to regulate the industry and strike a balance between healthy risk-aversion and risk-taking.
Some have even made laws that ask the existing banks be obliged to reveal a fair spread of lending across communities and minorities as a condition for the bank to continue being licensed. Perhaps parliamentarians can look into this industry hygiene factor too?
So are we able to imagine a time when the entrepreneurs of this city no longer talk of financial institutions that marginalise them? This would be when there is a Community Development Bank of Bulawayo. Amongst other initiatives towards fair lending, the best one is to have your own bank.
I know there are hundreds of issues that I haven’t covered here on this subject but this is meant to ignite some debate and the column would benefit from further discussions behind the scenes.
* Dr Gatsha Mazithulela is a scientist and politician with a strong passion for the growth of Bulawayo. He can be contacted on [email protected]
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