adminGift Mugano
Last week, Zimbabwe launched National Competitiveness Report (NCR) under the Office of the President and Cabinet (OPC) through the National Economic Consultative Forum (NECF).
The objective of the Zimbabwe National Competitiveness Report (ZNCR) is to contribute to achieving the Government of Zimbabwe’s objective of high rates of economic growth.
The NCR provides information for benchmarking Zimbabwe’s products, services, operations and cost against comparator countries and over years. As such it can be used to measure future positive change. It will also build consensus behind key public policies and industry strategies that together can achieve the robust economic goal of 7,3 percent growth. The Government’s economic plan contained in the Zimbabwe Agenda for Sustainable Socio–Economic Transformation (Zim-Asset) calls for achievement of this robust rate of growth.
This Report identifies Zimbabwe’s competitive advantages including its human resources, location and abundant natural resources. Zimbabwe has many comparative advantages. The quality of human resources is perhaps Zimbabwe’s greatest comparative advantage with literacy rates above 92 percent and Zimbabweans are in high demand throughout the region, a result of the Government’s deliberate policy focusing on universal education.
Abundant natural resources include rich mineral deposits, arable tracks of land, flora and fauna, abundant sunlight and water are in evidence even to the casual observer. Zimbabwe’s Economic diversity is another competitive advantage and this diversity includes agriculture, mining, manufacturing, tourism and many other service industries. Zimbabwe’s excellent weather and strategic location make it an ideal venue for investment to serve regional markets. These competitive advantages, among others, explain the resilience of Zimbabwe’s economy during many past challenges. They will also drive the attainment of the economic growth goals contained in Zim-Asset.
Constraints to Zimbabwe’s competitiveness are nonetheless formidable. Despite Zimbabwe’s tremendous competitive assets, many important challenges remain. The purpose of this report was to identify these challenges and to foster public-private dialogue to implement solutions through specific initiatives. Cost drivers are one such constraint and are the focus of one of the chapters of this report.
Analysis conducted in 2014 showed that many of the costs of production in Zimbabwe are higher than those of neighbouring countries with which Zimbabwe must compete for exports and investment. In some cases, domestic industries find it difficult to compete with cheaper imports. By identifying and focusing on these cost drivers, Zimbabwe can enhance the prospects for future growth.
The second constraint is related to education and training and how to build the next generation of knowledge and skills that will boost Zimbabwe’s productivity.
A third constraint relates to infrastructure, especially electricity shortages but also transportation, water and communications. A fourth constraint is related to the business environment for mobilising investment, generating employment and boosting productivity.
There are many constraints to starting companies, hiring people, getting permits and conducting business operations. Access and cost of finance are another aspect of the business environment.
Zimbabwe improved by seven rankings in 2014 on account of an improvement in the macroeconomic environment and good rankings for human resources. Zimbabwe’s major achievement has been to control inflation. But much remains to be done to improve the financial sector and resolve electricity shortages in particular.
Law, regulations and institutions can be improved with the aim to making the economy function better. Property rights and unfavourable regulatory frameworks for FDI should be priorities.
Zimbabwe did not fare very well in terms of efficiency and innovativeness indicators. For instance, the country is perceived to have inefficiencies in the goods, labour and financial market. The country is also perceived to lag in the investment in new technology according to the Executive Opinion Survey that forms part of the GCI.
The country’s productivity as measured by the output per unit of labour is also very low compared to its comparator countries. The country’s major source of employment is agriculture, where productivity is relatively low. The country is also considered to have one of the highest taxes compared to its comparator countries.
Notwithstanding these challenges, the country can improve its status given its natural resources and skilled workforce. Zimbabwe has already begun to address some of the challenges through its economic blue print, the Zim-Asset, which underscores the need for improving the country’s infrastructure and institutions. The recent formation of the National Competitiveness Commission is another positive sign.
The report also provides an overview of recent developments in Zimbabwe’s real economy. The economic slowdown since 2013 requires focus on astute economic policies to set the economy on track to meet the Government’s GDP targets as set in Zim-Asset. Liquidity constraints hold back the country’s growth potential. It is therefore important to mobilise foreign exchange from all sources such as tourism, exports, remittances and foreign direct investment. Under the multi-currency system, some macro-economic tools such as monetary policy can do little to affect liquidity and interest rates.
Therefore removing the micro economic constraints to growth will be particularly important. Zimbabwe needs to find a way to invest heavily in infrastructure to spur economic activity.
The public-private dialogue and public-private partnerships are very important in achieving improved stock of infrastructure. There is also need to improve access to finance by the private sector, to replace old machinery and acquire new technology in order to improve the country’s competitiveness.
The Report found that while Zimbabwe’s companies enjoy relative cost advantages, overall they face higher costs than in neighbouring countries related to finance, power, labour, water, transportation, taxes, trade and information technology. These will need to be addressed.
Micro-economic constraints are usually quite amenable to Government policy initiatives and private sector action.
Working together, the public and private sector, with the involvement of trade unions, can focus on removing critical constraints to new business formation, business formalisation, new hiring, business expansion, productivity growth, investment attraction and export performance.
By enhancing the conditions for efficiency across the economy, there will be good prospects for stimulating growth and jobs. Success in doing this will provide a growing number of good jobs and greater prosperity for Zimbabwean families.
What is interesting is that the issues which the Report highlights are in the context of the state of the nation address (SONA) made by His Excellency President Robert Mugabe on August 25 2015. His Excellency laid the ten pointers namely:
Revitalising agricultural and the Agro- processing value chain;
Advancing beneficiation and/or value addition of agricultural and mineral resource endowment;
Supporting infrastructure development in key sectors like energy, water, transport and Information Communication Technologies (ICTs);
Unlocking potential of Small to Medium Enterprises (SMEs);
Encouraging private sector investment;
Restoration and building of confidence and stability in the financial services sector;
Promoting joint ventures and public private partnerships (PPPs) to boost the role and performance of state owned companies;
Modernising labour laws;
Pursuing an anti corruption thrust; and
Implementation of special economic zones to provide impetus for foreign direct investment.
What came out clearly in the report is that the country is suffering from productivity problems especially in agriculture. Productivity is synonymous with competitiveness.
The overall low productivity in agriculture, that is, about $400 value of units produced per unit and labour out of about 4 million people employed in agriculture which is 67 percent of total labour force, is weighing down the country’s capacity to compete with the rest of the world both the local and foreign markets.
The problem becomes so defined if we bring in the aspect that agricultural sector supplies about 70 percent of total raw materials required in the manufacturing sector.
Based on the Report, Zimbabwe’s productivity is five times lower than South Africa. In other words, our goods are five times expensive than South Africa. This explains why about 70 percent of the goods in the shelves are from South Africa.
Basing on this argument, it becomes clear that the findings of the reports were well read by His Excellency.
There is no doubt that if we put concerted efforts in revitalising our agricultural sector power it by efforts aimed at providing the required infrastructures together with efforts aimed at attracting foreign direct investments as outlined in the SONA we can raise the national competitiveness and achieve Zim -Asset growth targets of 7,3 percent in the very near future.
In this regard, the Report calls to action to establish working groups.
It specifically asks the National Competitiveness Commission to establish action-oriented working groups for various industries and thematic areas which are pronounced in the SONA.
- Dr Mugano is an Economic Advisor, Trade and Competitiveness Expert, Research Associate at Nelson Mandela Metropolitan University (SA) & Lecturer at the Graduate School of Management (University of Zimbabwe) and Reviewer of the ZNCR. Feedback: Email: [email protected] <mailto:[email protected]>, cell: +263 772 541 209.
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