adminSanderson Abel
Planning is the process of thinking about and organising the activities required for achieving a desired goal.
An important but often ignored aspect of planning is the relationship it holds with forecasting.
Forecasting can be described as predicting what the future will look like, whereas planning predicts what the future should look like. The two aspects should be blended into one to come up with a workable plan.
Why emphasis on planning at this juncture?
The conditions prevailing in the country at the moment no longer require the business as usual approach but rather an approach that is informed through proper planning. Competition for resources in the country is intense hence only well thought out plans are able to sell at the end of the day.
Industry is in need of long-term capital while the financial sector does not have the same. The need to recapitalise industry and develop long-term infrastructure on farms requires that the financial sector provide long-term credit but the economy currently does not have the capacity to generate these sources.
Under such a situation there is need to develop plans on how to get around the problems. The SMEs sector has been acknowledged as the bedrock of the economy after the collapse of the majority of the industries in the country.
It is interesting there is no acceptable register that captures the details of the majority of SMEs and their locations.
This poses a challenge on how the sector can be assisted. Despite its importance there is no proper planning save for a few associations that have been formed but hardly would you find the actual figures say for the total amount that is required to grow this sector.
In this situation the SMEs themselves, industry associations have been found flat-footed and not able to account and plan for such an important sector in the economy.
It is quite interesting to note that year in and year out there are incorrect perceptions about the reluctance of the banking sector to fund agriculture.
The truth of the matter is that it is not the reluctance of the banks but poor planning that hinders financial support to agriculture.
There is need for the various stakeholders involved in the sector to seriously consider putting plans down well before the season starts.
Without projections of what the various stakeholders are planning to produce it becomes difficult for the banks to plan for the sector.
In the agricultural sector, there is need for the Government and farming organisations to ensure that in June/July of each year, plans for the next agricultural season are in place. Estimates of hectares to be planted, inputs required and other accessories should be known in advance for providers of resources to also take that information into their own plans.
This would ensure the availability of realistic estimates and assessment of financing available from governments, donors and the private sector within short-, medium- and long-term time frames.
This would allow banks where necessary to seek lines of credit based on clearly drawn out plans.
Without these plans the banks will make plans solely based on their expectations which might be divorced from reality.
Some of the crops like tobacco will end up winners while important food crops such as maize remain losers. The economy ends up losing out by importing these foods crops.
How does this poses a
challenge?
The SME and agriculture example above shows the weaknesses that have engulfed us as Zimbabweans that proper planning and projecting the future has been our shortfall in as much as we endeavour to seek finance.
Without proper projections from the stakeholders, it puts the banking sector in a precarious position as it attempts to plan for the various sectors of the economy.
Given the scarcity of resources, this situation will cause some sectors to be oversupplied with resources while other are starved. It is thus quite important for stakeholders in various sectors to take planning as part and parcel of their daily activities.
The availability of adequate financing including credit is very critical as it influences what is to be produced, who produces it, and how much is to be produced.
This derives from the intermediary role of banks, i.e., as a link between surplus and deficit units in the economic system.
The ability of the banks to provide adequate financing depends in the greater part, on the ability of the demand side to plan their productive activities well ahead and thus allow the financial services sector to also line up funding accordingly.
Bank credit is important for the efficient performance of any business enterprise which requires additional funds for capitalisation, working capital, and rehabilitation, as well as for the creation of new investments.
In any entrepreneurial endeavour, funds are required to bring together the other factors of production -land, labour, and capital – before production can take place. This is why credit becomes very important in the economy.
Sanderson Abel is an economist. He writes in his capacity as Senior Economist for the Bankers’ Association of Zimbabwe. For your valuable feedback and comments related to this article, he can be contacted on [email protected] or on numbers 04-744686 and 0772463008
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