Critical economic areas needing attention

01 Dec, 2017 - 13:12 0 Views
Critical economic areas needing attention President Mnangagwa

eBusiness Weekly

Business Writers —
Zimbabwe has been in economic doldrums for the past 17 years, which have been characterised by widespread corruption, a steep decline in social indicators, fiscal excesses, policy inconsistencies and lack of predictability and low foreign investment among others. While Government had already started work on various economic reforms with the help of its technical partners and under the Rapid Results Initiative, there has been, overall, a lack of uniformed political will to see through the process.

However, following the inauguration of President Emmerson Mnangagwa, Zimbabwe is seeking an exit from prolonged instability, isolation and fragility through significant macro-economic and structural policy shifts and reversing long-held ideological positions that stymied development gains.

These are some of the critical areas that President Mnangagwa will need to urgently address.

Foreign direct investment
“Key choices will have to be made to attract foreign direct investment to tackle high levels of unemployment, while transforming our economy.” These words were part of the maiden speech presented by President Emmerson Mnangagwa on his inauguration last Friday. He added that there is need to create conditions for an investment-led economic recovery that puts a premium on job creation.

The above statement provides clear indication, from the country’s highest office that the country is not only open for business but acknowledges that we cannot go it alone in our efforts to revive the country’s economy. It also points to the fact that the country is not looking at any form of investment, but has a bias towards Foreign Direct Investments (FDI).

A foreign direct investment is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. This might be done through buying and investing in an entity that is already operating in the country or starting a completely new entity altogether.

It is different from other forms of private capital flows such as portfolio equity, debt flows, and other short-term flows where the investors will not have direct control of the companies involved. Foreign Direct Investment is also not as fickle as the other inflows mentioned above.

In times of crisis, like the financial crisis that bedevilled the country for close to two years now, FDIs are usually the last ones standing, as the others are quick to look for a much safer home. In close to a year period we have witnessed foreign investors turning from being net buyers on the ZSE to being net sellers amid currency uncertainties and limitations in repatriating sale proceeds and dividends.

FDIs have however been resilient, with only a few foreign owned companies closing shop. This is partly because FDIs entail direct control of the investments, hence its resilience in times of crisis. The resilience is the reason why FDIs should be prioritized over other forms of capital flows. Against this background, it is thus imperative that foreign direct investment (FDI) should be a key focus area if the country’s economy is to be turned around.

Nothing attracts healthy foreign investment as readily as political stability and availability of good resources. While the country has always been said to have strong assets in form of a high literacy rate and a potential workforce plus vast natural resources, its policies have not been attractive as admitted by President Mnangagwa in his speech.

Foreign Direct Investment is also the closest this country can access capital. The country’s debt overhang makes it difficult for business to access capital in the form of loans. In cases where creditors are willing to provide finance, the risk premium attached makes the whole exercise expensive. Such difficulties, faced by local companies provide foreign owned companies with an opportunity to set base and dominate the local markets.

Unlike portfolio investments – money invested in stock markets – FDIs brings in long term benefits to the country’s economy. Some of the benefits include but are not limited to the transfer of technology—particularly in the form of new varieties of capital inputs—that cannot be achieved through other financial inflows such as debt. Then there is also the issue of skills transfer where recipients of FDI often gain employee training in the course of operating the new businesses, which contributes to human capital development in the country.

FDI can also promote competition in the domestic market. Over the years, because most of our industries have closed down due to economic constrains, we have seen those that have remained operational resorting to hiking prices on inferior products, taking advantage of the limited supplies. If the country is to attract FDIs, it would help in bringing competition to the market and in the process making products affordable and of good quality even for the export market.

FDIs also improves the perception of a country to other investors. Herd mentality. But in the long run it strengthens local economic systems as these have to align to international best practices. The level of FDI inflows or outflows should thus act as an indicator to the authorities on whether the country’s policies are in line with international standards. Other benefits are that FDI is a cheaper way of funding economic activity as the risks and costs are borne by the investor. Increased tax revenues is another important aspect. This is from direct taxes and downstream taxes.

As much as we are in need of FDI as a country, we should however be cautious about taking too uncritical an attitude toward the benefits of FDI. There is need for us strengthen our financial markets because if they are weak, foreign investors will prefer to operate indirectly instead of relying on local financial markets, suppliers, or legal arrangements thereby limiting the benefits. If the authorities concentrate on improving the environment for investment and the functioning of markets then the country is likely to be rewarded with increasingly efficient overall investment as well as with more capital inflows.

Tourism, a low hanging fruit
The major problem that has affected tourism has been the image of the destination: how the Zimbabwe brand is viewed across the various source markets the world-over. Admittedly, most of the negative perceptions harboured in tourism source markets were emanating from our national politics and governance issues. However, President Mnangagwa created optimism amongst the people when he assured the nation and the rest of the world that issues of governance and policy will be addressed.

He admitted that circumstances in the past made the country be perceived as a pariah State. Surely that was not good for tourism and this explains why the tourists arrivals had continued to plummet, dropping to as low as 1.8 million. So in this scope what we need now as a country is to invest in Perception Management and Destination Image Transformation programmes. In pursuance of the vision outlined by President Mnangagwa, resources permitting, the sector has already identified key source markets where it will launch Visit Zimbabwe campaigns like in South Africa and China. The sector will roll out the same campaign gradually in other markets in line with the National Marketing and Growth Strategy aptly called Vision 2025 Strategy.

For years, the sector through the Zimbabwe Tourism Authority, outlined the significance of diaspora engagement realising that a significant number of Zimbabwean population, around 4 million is now domiciled beyond the borders in countries such as South Africa, Botswana, United Kingdom, United States of America and Canada. This population is critical in tourism development and promotion. We are happy that the President reached out to this distinctive constituency, inviting them back home to join the broad economic trajectory pushing for the recovery of our national economy.

Events leading to the historic day speak volumes about the nature of the people of Zimbabwe. In terms of the tourism brand Zimbabwe a World of Wonders, our wonder number one is our wonderful people and culture. Indeed, like the President said, our people are unique, driven by impulses of mutual tolerance, peace and unity notwithstanding our diverse political tolerance.

In tourism, we have always celebrated and marketed that distinctive characteristic of our people. That is the reason why as a country the Harare International Carnival was consummated to celebrate the diversity and market to the entire world of our peace and unity, which are vital cogs for tourism development and ultimately economic development. In this ambit, we are expecting to put up a very big carnival event next year where our national flag will predominantly bring the people together and we will invite the whole world to be part of the celebrations and festivities.

The peace and tranquillity that prevailed in the period leading to the inauguration of His Excellency and even up to now, the sense of oneness among the people and resolve to make Zimbabwe great can only be commended. In this regard we wish to thank and congratulate the people of Zimbabwe for demonstrating what a people we are to the rest of the world. Events preceding the inauguration of President Mnangagwa put the country on the world map and in a very positive way. Zimbabwe made headlines across the world and the critical messages disseminated hinged around how everything had happened in a peaceful environment.

Even the international media trooped into the country, peace, tranquillity and civilisation of the people of Zimbabwe was marketed beyond reproach. Feedback from all ZTA offices, we hear, is pointing to a new Zimbabwe that tourists are ready to give us a chance. In this regard, it is also our hope that adequate resources will be made available to enable us to ride on the dividend of the positive media received of late. It would be desirable to go to the international media houses, the likes of CNN, BBC, Sky, Aljazeera, CCTV etc, with promotional campaigns. Media reports in the past were negative and had a devastating impact on our tourism. We will take advantage of this situation to reinforce the vision of the President and really make sure that we are more than ready for both investment and tourism business.

Further investments into ICTs
To reform literally means to make changes in (something, especially an institution or practice) in order to improve it. A policy is a set of ideas or plans that is used as a basis for making current and future decisions. So when it comes to government policy reformation no one can count themselves out of those who will be affected. ICT has an impact on all sectors of the economy, from mining and agriculture to finance and health. According to the 2016 Zimbabwe National Policy for ICT, government stated that ICTs should be developed into one of the major pillars of our socio-economic development and growth. The Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-ASSET) clearly spells out ICTs as one of the pillars for national socio-economic development.

The document stated adopting strategies that embraced inclusiveness, promising to ‘bridge the digital divide and provide broadband for all’. There was also mention of creating a National Broadband Plan which is still to be implemented. Of particular interest is what the document stated about Cybersecurity;

‘There is no cybersecurity framework in place. Cybersecurity is the collection of tools, policies, security concepts, security safeguards, guidelines, risk management approaches, actions, training, best practices, assurance and technologies that can be used to protect the cyber environment and related assets. Such assets include connected computing devices, personnel, infrastructure, applications, services, telecommunications systems, and the totality of transmitted and/or stored information in the cyber environment. Cybersecurity strives to ensure the attainment and maintenance of the security properties of the country’s assets against relevant security risks in the cyber environment. The overall security objective is to ensure the availability, integrity and confidentiality of data in cyberspace.’

However, when the Ministry of Cybersecurity, Threat Detection & Mitigation was introduced in October of 2017, the government specified, through Presidential spokesman Mr George Charamba, that the ministry was a protective portfolio aimed at protecting the nation from cyber threats posed by the abuse of social media. This is completely divorced from ‘ensuring the availability, integrity and confidentiality of data in cyberspace.’

With this in mind and a number of other issues arising around ICTs and their role in the nation’s economic development, there are key considerations that need to be made when creating a new and effective national ICT policy. The first one being implementing sturdy structures around Cybersecurity which focuses on offering individuals, businesses and the state, protection against cyber theft and manipulation of data.

Under ICT Infrastructure, legislation around ISP management should make considerations towards allowing ISPs to have the flexibility to access the free market for traffic routing. That way they may stand a chance at getting competitive tariffs. Ultimately ISPs and ICTs in general should eventually be able to share infrastructure.

As per global standards, it would be good to shape a policy that underlines access to internet as a basic human right and works towards promotion of access to marginalized communities. A clear framework also will need to be developed on net neutrality. An e-Government strategy needs to be quickly finalized and deployed so as to swiftly improve service delivery among its own ministries and agencies (G2G), between Government to the private sector (G2P), and between Government and its citizens (G2C).

ICT content development needs to be actively fostered to boost the country’s presence in the global digital economy. Legislation needs to be designed that supports disruptive innovation and reward productive experimentation. For example, creating Regulatory Sandboxes for the finance sector to allow them to develop FinTech solutions that utilize the cloud and big data, which can be safely backed up by solid regulation, compliance and reporting structures. Another example is to encourage research into blockchain technology and its implementation in administration systems which can streamline almost every sector and improve the country’s overall efficiency.

The policy also needs to address the standardization of e-Commerce to allow for e-trade to flow smoothly and contribute to the country’s GDP. The policy frameworks around e-commerce raised in the 2016 document were sound but need to be deployed sooner rather than later, as the rest of the world is already developing infrastructures around the Fourth Industrial Revolution. Zimbabwe is still very behind on this front.

In summary the biggest push behind ICT adoption and implementation is education. This needs to begin right from grassroots level and should be inclusive for citizens with disabilities. Much can be done to improve the livelihoods of citizens living with disabilities through the use of technology, from creating ICT medical solutions to designing ICT processes within Government and companies that foster sheltered employment solutions, for example for young adults with Autism.

Zimbabwe produces some of the world’s most intelligent and brilliant innovators and minds that are contributing to the economies and development of other countries. We need to bolster the country’s ICT infrastructure and policy in order to create a conducive environment that cultivates growth and development. A sound National ICT Policy is the first step.

To be continued next week

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