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Earlier in the week, I finally got around to studying the Treasury Quarterly Bulletin from the Ministry of Finance and Economic Development.
As I was reflecting on it, I saw an update from the Ministry of Information, Publicity and Broadcasting: Cabinet had adopted the Zimbabwe National Industrial Development Policy (ZNIDP). ZNIDP will be the reference document for anyone, local or foreign, seeking to understand the country’s strategy on industrialisation all the way to 2023.
Underpinning the ZNIDP is promotion of local content in the entire manufacturing value chains. Sadly, at the time of the update and even at the time of writing this piece, the policy document is yet to be in the public domain. This means that the discussion on ZNIDP is, at least for now, limited to what was said during the update as circulated in social media.
It is unfortunate that not even an abridged version of the ZNIDP has been circulated for the public to reflect on. Public debates on forthcoming economic policies kindle citizens’ interest in the workings of Government. Through the debates, people get to know subtle policy details that would have otherwise remained obscure to them.
This empowers citizens to ask public officers better questions so complimenting procedural parliamentary reports officer submit. Robust policy debates are the foundation of enduring democracies and bases for formidable political associations.
From the little we’ve heard on the ZNIDP, a growth rate of 2 percent per annum has been set for the manufacturing sector.
“The 2 percent growth per annum is both ambitious and achievable,” said Minister of Industry and Commerce Mangaliso Ndlovu. He said this after mentioning that the ZNIDP is a result of extensive consultation with industry. There is a enormous problem here. A manufacturing growth rate of 2 percent does not tell of a poor country striving to be a middle-income economy by 2030. One would have expected the target to be north of 5 percent.
But then, in reading the Treasury Quarterly Bulletin, one can empathise with the ZNIDP target. The Bulletin is very candid in telling us of our dire circumstances even as it celebrates a budget surplus. It mentions basic things such as a shrinking national cattle herd partly because of diseases. It reports significant drops in the hectarage under cultivation, except for 5 or so crops (roundnuts and sunflower being two).
Things are not looking great in the mining sector and tourist arrivals are sliding. What a gloomy chorus this is and so well buttressed by the humming generators! Maybe Minister Ndlovu is being reasonable and pragmatic in his 2 percent growth target. Things are bleak.
Yet, in bleak outlooks, the question policy makers must wrestle with is not what would be a reasonable growth rate for a sector or the economy. The question should be on what must be done to mitigate challenges such as droughts so that they cease to dictate our fate as they have for generations.
Progressive society, as we see in countries such as the UAE, entrust researchers and scientists to relentlessly inform the design of tools and strategies that dwarf seemingly imposing mountains (and deserts!) on a people’s path to progress.
In the early 2000s, three economists wrote an incisive paper from their base at John F. Kennedy School of Government, Harvard University. The paper is titled “Growth Diagnostics” and is fully available online for free.
The three are Ricardo Hausmann who once was Minister of Planning in Venezuela in the 1990s before being the first Chief Economist of the Inter-American Development Bank; Dani Rodrik whose home country Turkey is known for its recurring flirtations with democracy; and Andrea Velasco who grew up away from him homeland Chile thanks to his father’s stance on the rein of General Pinochet. He would return to Chile and become Minister of Finance, among other things.
All three are clearly hands-on economists very much like the former African Development Bank Chief Economist in our midst.
They based their paper on simple observations. A typical developing country has many problems (recall all are from developing countries so they knew exactly what they were talking about).
The country will always have limited resources to deal with its problems. The country must therefore find a systematic way, free from personal and institutional biases, of prioritising these problems.
The systematic way should show the impact of each of the problems on growth. The problem with the largest impact is called “the binding constraint”.
Once the binding constraint is identified, limited national resources can then be used to eliminate the binding constraints.
Once the biding constrain is eliminated, the country will grow at an optimal rate at which point the analysis starts all over again: to determine next binding constraint since in eliminating the first some problems would have been solved and others emerged. Ultimately, an efficient economy is realised after several decades, of course.
The analytical framework in Growth Diagnostics is one of several sound approaches of designing growth-focused policies. Typically, economists would use an array of econometric models to arrive at the binding constraint and thus base their future growth estimates on such analyses.
The 2 percent manufacturing growth target by ZNIDP appears to be based on the assumption that Zimbabwe will do its very best to work within the existing plethora of constraints. The purpose of this article has been to emphasise that policies that transform societies strive to obliterate growth constraints.
A society that works within its constraints as if constraints were not immutable remains trapped. It is only through sequential elimination of constraints that a country can ascend to new growth trajectories.
Zimbabwe must entrench in all policy formulation processes the scientific dexterity seen in frameworks such as the Growth Diagnostics for Vision 2030 to become a reality.
Bongani Ndlovu