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Zimbabwe’s business sectors at the end of 2021 are obviously taking stock, but what must now be grabbing the attention of most is not, outside the tourism sector, recovery or how to make more use of their capacity but far more of how to grow their business and increase their capacity.
No one denies that much of Zimbabwean business went through two dark periods in the first decades of this century.
First there was the hyperinflation, which made business ever more difficult and towards the end almost impossible unless there were strong daily cash flows. Most of us remember the near empty shelves, the every growing difficulty of buying even basic food and despite the ever rising of the printing presses, with more than half the Government spending coming from this printing, the ever longer queues to get cash. A lot of business either went under, cut right back or resorted to complex financial transactions to stay afloat. As in all hyperinflationary environments the rich got richer, and the poor became poorer. In rural areas many families at least avoided starvation, but most were having to use subsistence farming to stay afloat, since growing crops for sale was simply not an option when prices changed so rapidly.
With exports crashing things like fuel became ever harder to buy, except of course for the rich, and it became impossible to buy or build a house since it was impossible to raise a mortgage. In fact the pool of mortgage money was simply wiped out and if there was going to be any recovery the interest rates would be in the billions.
There was loud cheering when Zimbabwe dollarised. But very quickly the price of this process became apparent. When anyone could, and did, import or buy imports the local business sectors were hard hit. Sometimes it was their own fault, since they had been established and partly flourished in the old days when the economy was so tightly controlled under UDI and the first couple of decades of independence and had not bothered enough about quality, customers and efficiency.
So the dollarisation came as rude awakening, especially as a lot of their capital had been converted into waste paper in the hyperinflation. Some managed quite well, often because they had a foreign big brother who could now invest in modern equipment and help them retool, others because they had good managers who could read the economy and do something.
But generally most goods on the shelves were imports, fine for consumers especially as their pay was rising as what we eventually discovered was continuing deficit budgeting, if such a reasonably precise term could be applied to what was actually happening, and now fake electronic US dollars were in effect being printed, and that was not sustainable. But industry was flattened and even when there was an attempt to return to import licences this did not help much in such a distorted economy.
With the arrival of the Second Republic a determined effort was made. For a start it was admitted that economic laws could not be ignored, but that if they were worked with rather than ignored, progress was possible. So we started having balanced budgets, for the first time in Zimbabwe, treating taxes seriously and controlling national spending. Subsidies arising from multiple exchange rates managed by Reserve Bank of Zimbabwe bureaucrats were eliminated, markets were seen as a path, the only path, to sustained growth.
Investment was encouraged, with an openness that startled some who had tried earlier but had walked away when they were asked to pay huge bribes and now found wider doors not just opening for free but with the doormen being exceptionally helpful. Government programmes to help farmers get back into production were revamped, largely to remove the politics and the corruption so the real farmers could win and grow stuff.
The result was that by late 2020 we had fixed the basics and then the growth this year allowed businesses, from the very tiny to the giants, to recover. So we are now in a new world where the stress is on growth, not recovery, where the stress is not on surviving but on how to expand.
Some areas have seen a movement well away from the old systems. Zimbabwe is in the process of rebuilding a steel industry for example, but through the efforts of huge investments from two major Chinese companies that have done their sums and figured out how modern technology and methods can work. As these come on stream we will not be restoring what we had but enjoying something a lot bigger and more sophisticated, with a far wider product range and serous exports. Once again growth nor recovery.
The textile industry is still in the intensive care unit, largely because of a legal dispute preventing the obvious and interested investor moving forward, but that hopefully will be sorted out and with the increase in cotton production be able to take off.
Other local businesses are moving forward fast. One interesting point that came from Agritex figures this week is that more than a third of the hectarage planted to maize is either on private contract or self-financed, suggesting that major companies have worked out direct deals with farmers. Other industrialists are now less fussed over access to foreign currency markets and more concerned about the size of the harvests. They are also more worried about how fast markets will grow with increasing prosperity and how they can grow demand faster than in figuring out how to drip feed a declining market.
Recovery was an interim stage, getting over the mess the Second Republic inherited. It is obviously not a permanent goal since we all want a far more prosperous country with a huge urban and rural middle class driving both local production and local markets. We are already seeing, for example, many of those small colonial towns that were dying expanding way beyond their old boundaries as suppliers and downstream businesses move in to take advantage of the rise in agricultural production.
Our problems are more and more problems of growth. Some complain about the mess small industrialists make, and the way they ignore town planning. The solution to this problem of growth is to create more industrial sites, convert premises of dead businesses, and generally make the growth easier.
Next year will see more decent growth. That will create its own side effects, good and bad, but our planners need to be now alert to how we cope with growth and encourage growth, not how we “recover”, so a huge change in mindsets is now needed.
Online Reporter