eBusiness Weekly
Alfred M. Mthimkhulu
The Minister of Finance has been busy writing newspaper articles this week. I’ve read two. In one he says “we are heading in the right direction”.
In the other he explains the meaning of a budget surplus. He’s been going on and on about the budget surplus in the past few months to the dismay of many experiencing a miserable existence.
In both articles, the Minister says exactly what we’ve come to expect from him: a bumpy road ahead, a call for patience and some assurance of forthcoming prosperity.
He should be applauded for his style of demonstrating being socially engaged. In reality though, what he says seems to fuel more resentment, anger and helplessness.
Even more worrying than these unquantifiable human emotions of frustration is the growing and now more assertive call to redollarise and abandon the new currency. Redollarisation is a very rudimentary argument that falls flat if the ultimate goal of the economy is not only prices stability but growth.
Indeed, prices of goods are running. The few with regular incomes have watched their buying power shrink by nothing short of 70 percent in a few months.
Numerous entrepreneurial ideas that could have boosted production and exports have been shelved thanks to power cuts and high energy costs. What recovery is there to talk about? Where is the basis for an expectation of a growing economy and a stable currency when local production and demand is subdued?
Can Team Pfee deliver an escape from this depressing state of existence and does it have the capacity to turn Zimbabwe into a middle-income economy by 2030? These are rather heavy questions and a detour is necessary to gather one’s thoughts carefully before trying to answer any of them.
It was on some afternoon in May 2012. I had been stuck to the desk for hours running and re-running models for some assignment. I closed my laptop and stepped out to stretch my eyes in a neighbouring shopping mall. As I walked past a bookshop, a book titled “Why nations fail: the origins of power, prosperity and poverty” caught my attention.
I walked in. The writers are well-known institutional economist Daron Acemoglu and James A. Robinson then at MIT and Harvard University respectively.
I bought it, walked back to my place and read it over a week or so. Their argument is simple. They suggest that every society encounters critical junctures. They define a critical juncture as “a major event or confluence of factors disrupting the existing economic or political balance in society”.
Critical junctures are often random in occurrence.
They include tragic events. How a society manages itself during and in the aftermath of the critical juncture can catapult the socioeconomic wellbeing of its members way beyond their prior state.
Consider how Rwanda has transformed itself after the genocide.
The tragic genocide is in that case a critical juncture.
In the book, the authors trace the progress of several human civilisations since the Neolithic Revolution (i.e. 10,000BC).
The Neolithic Revolution refers to our transition as humans from being wandering gatherers to being home-based farmers. In tracing the progress of the civilisations, the authors cite several examples of critical junctures.
One is the Bubonic plague of 1346 which wiped out half the population along the Silk Road trade route from China, through North Africa into Europe.
In parts of Europe such as England for instance, the scarcity of labour as a result of the plague “shook the foundations of the feudal system”. Peasants were emboldened in lobbying for better working conditions. This would have been inconceivable had it not been for the plague.
For many Zimbabweans, events of November 2017 seemed like a critical juncture, but not quite. The institutional architecture in Zimbabwe remains the same.
There has been limited reform of the very institutions that should drive transformation. As Acemoglu and Robinson observe, the tragedy of post-independent Zimbabwe (and Africa) has been the inertia to transform colonial era extractive institutions to inclusive ones.
Extractive institutions merely take what is readily available and whatever can be gotten with as little effort as possible.
A basic illustration: the stream of cattle to a CSC depot dries, the depot is converted to a school or a wedding venue — alternatives that require little if any extra capital but generate a free cash which has no regard whatsoever to the initial capital invested in the depot.
That’s an extractive mindset. Cartels, syndicates and monopolies account for most of the economic activity in extractive economies.
Inclusive institutions are what advocates of the so-called Singapore model have in mind. Inclusive institutions are run by competent people who are empowered to make and implement decisions to best serve all stakeholders.
Can Team Pfee rescue us? Can they? Only if they accelerate institutional reforms. In this regard, the IMF Staff Monitoring Programme is welcome news. The IMF’s assessments and advice can enrich the reform process with essential objectivity to birth inclusive institutions.
Zimbabweans should now be scrutinising with utmost zeal the pace of the reform of public institutions — state-owned enterprises, government departments and regulatory bodies.
As long as these quasi-political institutions are unchanged, they will continue to “enable the elites controlling political power to choose economic institutions with few constraints or opposing forces.
They [will] also enable elites to structure future political institutions and their evolution” so write Acemoglu and Robinson.
Without reforming these quasi-political institutions, they labour in vain those that pursue broad-based prosperity.
◆ Alfred Mthimukulu is a Senior Lecturer, Graduate School of Business, NUST, Email: [email protected],Twitter: @mthimz
