adminDr Gift Mugano
Today Zimbabwe joins more than 170 countries including regional countries like Senegal and Egypt in Africa in releasing its first ever National Competitiveness Report (NCR).
The Zimbabwe National Competitiveness Report (ZNCR) was commissioned by the National Competitiveness Commission 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), which includes contributions from leaders in the public and private sector, is to provide a benchmark against which policy makers and private sector leaders can contribute achievement of the Government of Zimbabwe’s objective of high rates of economic growth and development of policies aimed at raising living standards in Zimbabwe.
By identifying the economy’s strengths and weaknesses, as well as the need to foster public private dialogue, the NCR serves as the first step in the process of developing aimed at enhancing Zimbabwean competitiveness.
This week’s discussion will focus on the importance of the NCR and showcase lessons from other countries.
The ZNCR presents information for comparisons of 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 percent GDP 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. The 2015 tri-partite Trade Agreement has the potential to provide Zimbabwe with positive opportunities for trade throughout most of Africa while also raising the spectre of greater competition from other regional actors. For these reasons this report is very timely and relevant.
This ZNCR 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. It is the purpose of this report 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 fair 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 ZNCR 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 also analyses important cost-drivers that constrain Zimbabwe’s competitiveness. The ZNCR summarises important work on cost-drivers completed in 2014. This 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.
It is hoped that this first Zimbabwe National Competitiveness Report will have contributed to informing the dialogue and coalescing support in the right direction. As the first-ever report of its kind, it is the intention to help inform debate and focus attention on Zimbabwe’s competitiveness, a unifying thing theme behind which public, private and civic leaders can unite.
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], cell: +263 772 541 209.
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