Monday 27 March 2017

Instability & Fragmentations: The haunting spectres of the Jambanja (violence) Political Economy

Instability & Fragmentations: The haunting spectres of the Jambanja (violence) Political Economy

Tamuka C. Chirimambowa and Tinashe L. Chimedza*

Treasury: Spending Like a Drunken Sailor

In the recent Ministry of Finance Quarterly report which focused on the last quarter of 2016 treasury revealed the state of economic stagnation which shows evidence that the government is not making any headway in reforming policy to put the economy on a growth trajectory. The Quarterly Bulletin reports that economic growth was a mere 0.7 %; recurrent expenditure is taking 66% of the budget and a whopping 92% of the revenue. The shocking revelation was that the government overspend by a mind blowing 42.3%; rather than the budgeted US$1b they spent more by US$0.6b.  No one is held accountable. The most worrisome news in the Treasury Bulletin is the veiled confessions: ‘in the face of declining revenues, the gap was largely financed through domestic borrowing, the bulk being Treasury Bill issuances’ and further that ‘government domestic borrowing is unsustainable as it crowds out private sector borrowing for productive activities’. 


Fig 1.0 Chinamasa and Mangundya : Spending like Drunken Sailors.

In last week’s Gravitas we argued that the Government of Zimbabwe (GoZ) and Reserve Bank of Zimbabwe (RBZ) are playing ‘casino’ with public funds and slowly the truth is coming out that the emperor is naked.

Minister Chinamasa and Governor Mangudya may want to take wisdom from  the former RBZ Governor, Dr Kombo Moyana’s contribution at a SAPES dialogue, who stated the following:

In my time working with Bernard Chidzero we made sure our wage bill was maintained at 20% of government income. We would shiver if it reached 25% but now people go to sleep when it is at 83%. No country or institution can survive when it is using 83% of its revenue for wages (Newsday, 14.05.2016)

To put it into perspective imagine a civil servant earning $500.00 and every month that same person borrows, from banks, an extra $200 to spent. The end result is that if the civil servant were to keep on borrowing every month they end up bankrupt and the bank would eventually refuse to lend more money and even send the sheriff knocking. On the other hand Chinamasa thinks he can ‘grow money’ by issuing more Treasury Bills but fails to realise how that is melting the whole financial system.  The rate at which the government runs through the Treasury like a bull in a Chinese shop is the reason why Zimbabwe needs a robust public financial system with critical oversight from democratic institutions. Imagine the rate of inflation if Zimbabwe had a local currency and instead of Treasury Bills the machines at Fidelity would have been cranked to full speed. No sense of budget restriction at all. 

The question is why is the government failing to reign in expenditure and set the economy on a new path? In our view, we argue that with the advent of the jambanja political economy which came via the Fast Track Land Reform Program (FTLRP),  Zimbabwe is now gripped in an expropriation mode which means government policy and elite behaviour is now geared towards re-distribution without any growth. This re-distribution mode means that democratic state institutions are trampled with no regard to accountability and the ruling elites have taken full advantage of the instabilities  and as a consequence any serious investor, local or foreign, is nerved by this predation.

Dispossession, Displacements and Elite Accumulation : From Chiadzwa to Manzou

In the past few days the Zimbabwe Lawyers of Human Rights (ZLHR) obtained a High Court order barring the Ministry of Lands and the Zimbabwe Republic Police  from displacing the Manzou villagers. At the heart of the matter  is an allegation that the ‘First Family’ wants to displace poor villagers, dispossess them of land and in the process accumulate vast amounts of land for their business.
Fig 1.2 Manzou Families making Way For the Powerful
 
It is not only in Manzou that this sense of instability is common; in Chiredzi Zimbabwean diaspora based investors have been forced to seek protection from the courts after unilateral revocation of their offer letters midway the farming season; in the urban areas clean up operations destroying homes and livelihoods  have become a routine phenomenon; in Chiadzwa the debacle was worse with hundreds displaced with insignificant compensation; so was the same in Chisumbanje where thousands were dispossessed of their land and replaced with a big corporate.This state of instability and insecurity is directly linked to the Fast Track Land Reform Program (FTLRP) which has led to a destruction of land related property rights. The consequence was the breeding of insecure tenurial rights, and access to land and any other resources became determined by patronage networks and the only sense of protection seems to come from joining the ruling elite networks.

Black Economic Empowerment and Indigenisation : The limits and parochialism.

The ruling elites have also extended this expropriation mode to the entire economy under what they have called ‘indeginise and empower’ and the consequence there have been catastrophic looting. Witness how the Minister of Indigenization went on a rampage charging that all ‘foreign’ companies must comply with local legislation that 51% must be owned by local people. At the heart of that harangue was not the desire to empower people but to directly make sure that the political class becomes a business class without producing any goods or services.

In Marange the much-vaunted Community Share Ownership Scheme, turned out to be a farce of stage managed events meant for electioneering campaigns. The whole indigenisation and black economic empowerment ideology and policy is built with a very faulty logic: that economic growth comes from parcelling a cake and not from baking more. It is a very emotive but limited ideological propaganda feat.


1.3 Patrick Zhuwao:  Who is being empowered ?

At the height of the indigenisation mantra the citizen was told of an economy in which they would fully participate and opportunities will be ‘aplenty’ and the ruling class youths threatened fresh invasions against ‘non-complying companies’. It turned out that this was an ideological cover for the elites to muscle into so called foreign companies; in Masvingo a local political ‘warlord’ muscled into a mine.

The so called Sovereign Wealth Fund has not gone anywhere and while the legislation has been enacted stating that 25% of mineral royalties will flow into the Fund it seems like a mirage. Here is a government with an appetite to spent unchecked, swamped with debt, foreign and domestic, claiming that 25% will be set aside for the Fund. Such a promise, as they say, is only a comfort to a fool. The National Indigenisation & Economic Empowerment Board (NIIEB) has suddenly found that they have no job to carry out and the wild claims in 2012, by then then Minister of Indigenisation, that the Fund had a value of $3billion was just a number picked from the sky (Newsday, 24.12.2012).

But the chaos soon spread with the minister saying banks must follow the indigenisation law and even the brother Gideon Gono was alarmed and had to issue a rebuttal that the ‘finance sector’ was only regulated by the central bank and no one else. But the real capital had already noticed what was happening and since then it has become problematic if not impossible for local financial institutions to obtain real capital on global capital markets. But the young people also learned well.  Witness how the Old Mutual Kurera/Ukondla Fund was just looted and emptied with no consequence whatsoever and in certain cases mobs of youths turned up at your business to query whether the business was compliant. This level of chaos, appropriation and outright entitlement was borne out of the jambanja political economy in which the might of force, coercion and state apparatuses are used to muscle into businesses. The elites have learnt a dangerous lesson; that they can always reap where they did not sow.

Moving into the Future: Halting the Jambanja Political Economy

Professor Sam Moyo and Paris Yeros argued that Zimbabwe’s party-state could be characterised as a ‘radical state’ because they had effected a large-scale redistribution of land and managed to smash white-settler and colonial based agrarian property relations. However, Moyo and Yeros did not anticipate that once the ruling elites had been trained in the art of expropriation it would be a mammoth task to make them unlearn that mode of destructive accumulation. The effect of that political economy  of expropriation is now a cancer which has to be dealt with decisively because it  has placed unregulated public power in the hands of a predatory elite and the economy is now locked in a ‘permanent crisis’ with no exit. 

The ruling elites at the centre of this racketing scheme mobilise a radical nationalist discourse to confuse citizens. When these ephemeral manoeuvres are exposed they charge us of being ‘little boys’ in universities, but they forget despite being of smaller stature, we are citizens who need answers. The brother who accuses us has a stiff and very plump neck sinking in fat gathered from dipping in sick people’s public health insurance premiums, at PSMAS, whilst the public health system is in shambles.  The big brother reminds us of the rotund character Gitutu Wagataanguru in Ngugi Wa Thiongo’s book 'The Devil On The Cross'. The full Christian name, he boasted, was ‘Rottenbrough Groundflesh Shitland Narrow Isthmus Joint Stock Brown’. Gitutu got very fat feeding on people's produce and was unforgiving to those who mistook him for a small time thief and he would fume in defense of his records in the art of thievery and robbery. For those who dared to ask where his belly came from Gitutu bellowed that the belly grew the moment he discovered that he could reap where he did not plant, eat without shedding a sweat and drink what others had fetched.

1.4 George Charamba: In Defence of the ‘nationalist elites’ ?

The looting of public funds, even from dying people, is arrogantly described as a ‘pittance’ and the citizen must keep quiet because Sheiks in the Middle East get ‘millions’ in oil money.  The brother Gitutu does not reveal that the same Sheiks have Dubai to showcase for the oil money and here is an interesting fact: in 1985 Air Zimbabwe, had more than 10 planes and Emirates had about five; fast forward to 2016 and Emirates has nearly 300 planes, employs nearly 40,000 and Air (Si)Zimbabwe has only 7 planes (most of them are grounded) and a $150m debt that must be added to the public debt. The question is: what do you have to showcase for the looting nationalist elite besides the harangues and decadent mansions? A ‘radical nationalism’ which has partially descended into naked racism, an indigenisation project which feeds the elites; a black empowerment policy which is anti-production and a party-state apparatus which acts extra-judicially is at the heart of our economic meltdown.

Zimbabwe needs a serious re-think of the mode of development that was ushered in by the ‘jambanja’ political economy. While the world is grappling with the ‘fourth industrial revolution’ and what has been called the ‘internet of things’, Zimbabwe’s economy is stuck in a semi-feudal structure. Mcdonald Lewanika’s observation, in a working paper on the ‘future of work’  that Zimbabwe is locked in a slippery non-industrial vortex of ‘subsistence farming and informal economy’ is spot on[i].  The informal economy, the cross border activity, the importation of cars from Japan and the night vending is indeed hard work by the citizen but this must never be mistaken for being a substantially accumulating economy. The economy needs to be rescued from a survival mode. In simple ways we need to look in the mirror and admit that ‘we have seen the enemy, it is us’
...................................................
Tamuka C. Chirimambowa & Tinashe L. Chimedza are the Co-Editors of Gravitas.



Monday 20 March 2017

Gravitas Vol 1 Issue 4 Public Policy perspectives and Public Financial Management in Zimbabwe

The Other Side of Multi-Currencies: Exporting Public Financial Management Responsibility and Importing Cost.
Tamuka C. Chirimambowa & Tinashe L. Chimedza*

Rejection of the South African Rand: The Spectre Haunts Us.

The official adoption of the use of the multi-currency regime in Zimbabwe helped to arrest rampant almost unquantifiable hyper-inflation. However, the policy of the usage of a basket of multi-currencies albeit a euphemism of dollarisation in reality, seems to have reached its dead end.
The policy was supposed to be short-term and give policy makers a breathing space to come up with alternatives. The policy orientation of our leadership is reactionary and not futuristic and the continued use of the $US as a medium of exchange has become an albatross to our fiscal and monetary policy.
Fig 1.1 Daylight Robbery? Raiding $US and Replacing it with Bond Notes

The rejection of the Rand marked the end of the honeymoon of the multi-currency regime and what has followed has  been a ‘liquidity crisis’.  The use of plastic money and importing $15m a week has not helped and the introduction of the ‘bond economy’ is taking us back Gideon Gono’s casino economy era.

What is shocking is that under the guise of the multi-currency system and the ‘bond economy’ the ruling elites are actually engaged in a wholesale looting of US$ without the need of any legislation. Through the Real Time Gross Settlement System (RTGSS), requirements to surrender foreign currency, denominating bank accounts in both Bond Notes and $USD and then by limiting how much you can withdraw the ruling elites have plundered foreign currency accounts. This is daylight highway robbery sanctioned by the Treasury and implemented by the Central Bank with a minimum whimper from the National Assembly. This is the continuation of the ‘jambanja’ economy in which governments simply expropriates what it wants. When the late Professor Sam Moyo summed the ruling elites as ‘radical nationalists’ he did not imagine they will perpetually run amok unchecked through the citizen’s bank account.

On one hand the RBZ has been calling for a lowering of the interest rates while on the other hand the the banks have started calling for the raising of interest rates citing viability issues and the need to boost their capacity to support private sector funding. This points to a dire future for our financial system. By clinging to the Basket of Multi-Currencies (US$ Dollar) we are exporting public financial management and civic responsibility but at the same time importing an unsustainable cost structure. This calls for a revisit to the debate on the introduction of a proper local currency but most of the citizens are still traumatised by the 2008 hyper-inflation scenario. The situation has been worsened by the secrecy around the Bond Notes and skulduggery tactics by both the Treasury, the Reserve Bank of Zimbabwe (RBZ) and banks. This points to a weak public financial management system and the need for citizens to begin to think on how to use the constitution to enforce financial probity as well as making the banking system serve the public.

Importing Cost, Exporting Irresponsibility: the Bane of Foreign Currency Volatility
The use of a basket of currencies has introduced a semblance of normalcy in the currency markets but as President Mugabe admitted people are banking under the ‘bed’. He even suggested the unleashing of the army and police into private homes, revealing a fundamentally flawed logic which puts force and coercion at the centre of public policy. The brother Dewa Mavhinga now at Human  Rights Watch (HRW) nailed it in when he used to argue about ‘moving from the logic of force to the force of logic’.
Fig 1.2 Unemployed Graduates: A Message for the Chancellor

Firstly, by using a basket of currencies we have imported stable currencies yet they also come with complex cost structures associated with their domestic economies. The Rand will carry the value and volatility of the South African economy,  the US$ will carry the value and the volatility of the US economy and so goes for the other currencies. Secondly, by importing foreign currencies managed by foreign institutions we are exporting or effectively outsourcing public policy interventions to the source countries of the foreign currency. Thirdly, the Zimbabwean economy is now burdened with an investment terrain with foreign cost structures that make it highly unattractive as a destiny for capital of any kind (domestic &foreign). But the problem is deeply structural and it lies at two levels: (I) the non-productive economy and importantly (II) at the level of a public financial management system which is in shambles and is routinely mangled by these nationalist elites.

For God’s sake even some countries with raging civil wars and under sanctions have functional national currencies because they have a rudimentary public financial management system and the ‘dear leaders’ of those countries do not ride roughshod with a wrecking ball through budgetary limitations.

De-Industrialization: The consequences of poor public policy

Since about the mid-1990s Zimbabwe has been de-industrializing meaning that more industries are being closed, the existing ones are operating below capacity and the new industries have been so insignificant such that the contribution of manufacturing to GDP has been ‘shrinking’. The evidence of this de-industrialization is at different levels; (i) rising unemployment; (ii) stagnant and at times falling revenue to government, (iii) sluggish growth which at times was stuck in the negative, (iv) a rising import bill which means a persistent negative balance of payments, (v) collapsed public social services like health and ultimately a (vi) declining GDP per capita.

The failure of using effective public policy to craft and implement a development policy regime came to a head during Governor Gideon Gono’s era when he started playing a ‘Russian roulette’ with the economy. When one plays Russian Roulette the loaded gun, with a single bullet in the chamber, is held to one’s own head. In the case of Zimbabwe, Gideon Gono, cocked the gun and played the fatal game with the gun against the temples of citizens and him laughing hysterically all the way to his lavish properties in North Harare. The result was rampant inflation and traumatized citizens migrated from using the local currency as a medium of exchange to foreign currencies.


Fig 1.3 Laughing While Rome Burns: Public Policy Inconsistencies

The demise of the local currency was first registered by the citizens before the Minister of Finance then moved to announce the use of a ‘basket of currencies’. Under the present structure the government has basically used the Bond Notes as as surrogate currency in an attempt to re-domesticate monetary policy. This attempt is a cosmetic reform which is not paying attention to structural questions and in this case the flagrant mangling of the public financial management system has meant a loss of confidence in any local currency that maybe introduced by the government.In the real market there is already exchanges of the bond notes at a discount signifying the gradual descent to hyperinflation. Good money is already replacing bad money as the Gersham law says.  

Russian Roulette With Kidnapped Heads: The Mafia is Taking us back to 2008

The brother at the RBZ has already started dishing out money while Chinamasa thinks ‘money grows on trees’ by printing treasury bills and multiplying public debt. It was revealed that CBZ for example now holds TBs worth $US600million, for the CBZ this is either a stroke of genius or they are being held by the collar to buy TBs because government is a significant shareholder. The major Achilles heel in all this is a deliberately weak public financial management system where the parliament and its committees have been reduced to a mere rubber stamp of the executive. There is very limited parliamentary oversight as the government will fully continues to indebt the nation under the guise of ‘national security’ and ‘sovereignty’. Already, the government has circumvented parliament by borrowing US$500 to finance command agriculture from the private sector without any legislative authority. When the brother Gideon was pressed for answers as to his non-stop printing of the currency his excuse was that the ‘security’ of the country was at risk.

Fig 1.4 Gono’s Casino Economy: are the Bond Notes taking us there ?

The RBZ’s policies and the Treasury’s speculative quasi-fiscal activities  are taking us back to the Casino Economy. We have argued that a Casino Economy is never designed to benefit the citizens but its inventors, in this case the ruling elite, intent to pickpocket the citizen in broad day light. Already, the casino machines are beginning to jam as the citizens are steadfastly being bankrupted. The Bond Note project is busy laundering and mopping up people’s hard earned foreign currency under a very secretive exchange rate system. The RBZ chief claims that there is now about $102 million of the bond notes in circulation vis-a-vis the purported $200mn AFREXIM Bank loan facility. This loan too has been one of the many secrets that the executive has kept away from parliamentary scrutiny. When stories of an emerging parallel market rate and different pricing systems are told by the independent media, Governor Mangudya claims the reports are based on outliers and are a few. All this denialism ignores the fact that Zimbabwe’s economy is now highly informalised and when these so-called insignificant small businesses are put in a mathematical equation it translates into a huge amount.

A Man Must Lick His Lips in Dry Weather

Honourable James Maridadi’s recent contribution in parliament graphically exposes the schizophrenic nature of the Mafioso as the economy is losing out to Chinese companies operating in Zimbabwe without remitting anything to treasury. Statutory obligations are reportedly violated and in this particular story the prejudice to treasury runs close to a million US$. In a related story, a few years ago, another Chinese company, Jinan was reported to have siphoned US$500mn of diamonds money, and the authorization was reportedly given by Minister Sydney Sekeremayi. The same Jinan never contributed anything to the Zimunya Marange Community Share Ownership Trust citing that its agreement says it will remit 2% of net profits and all long along it has been making losses, albeit having declared a dividend of US$10mn, yet the Mafioso is quick to sloganeer ‘Zimbabwe shall never be a colony again”!

In short by sticking on to the basket of currencies operating alongside a secretive bond note regime we have given the Mafioso an opportunity to bankrupt us as they did with our public pensions and insurances in 2008. It is our contention that we need to push for financial probity within public institutions and insist on a functional public financial management system so that Zimbabwe can have a local currency otherwise locking ourselves to a basket of currencies is the easiest way of exporting responsibility and importing the currency volatility and cost structures of other countries.

West African local wisdom has it that: ‘a man who does not lick his lips should not blame the wind for drying them up’. We leave you with the wise words of none than our dear brother Wanachi:

The majority of Zimbabwean people, including you, have got this false notion that we can outsource our struggle to the opposition. That’s not possible. The opposition is as good as the people it purports to represent. And part of the problem is that the majority of Zimbabweans adopt an innocent bystander approach and think that there is a Moses amongst the opposition. There isn’t a Moses amongst the opposition. So, all of us, including yourself, must play a role in the struggle for our emancipation.

Zimbabweans need to realise that they are their own liberators and that responsibility cannot be exported.


*Tamuka C. Chirimambowa & Tinashe L. Chimedza are the Co-Editors of Gravitas and the Co-Founders of the Institute for Public Affairs in Zimbabwe (IPAZ)


Zimbabwe’s Look East Policy: Counting the Costs.

HON. MARIDADI: I would like to ask the secretariat of Parliament to bring me some exhibits that I have. Can you kindly bring the exhibits that I want to show to the House – the dishes and all the other things so that when I debate, I put my debate in context.One small dish, one large dish, transistor radio, a thread, binder and outer blanket were laid on the table.

Fig 1.5 Not Happy Madam Speaker: Hon James Maridadi Exposes Chinese Companies and Government Collusions?

The President spoke about two issues. He spoke about the economic downturn and he said Government was working hard to ensure that the economy can start working again and for very obvious reasons. The President then spoke about the need for Zimbabweans to shun corruption. Madam Speaker, I want to talk about those two issues, the need for Zimbabweans to shun corruption and the need for the economy to grow. There are issues that I want to highlight here which militate against the growth of this economy. The last time I spoke about this, I brought exhibits of blankets and I spoke to that. Today I have some exhibits and some documentary evidence here that I have which are militating against the growth of this economy.

There are people that are operating in this economy that are not following regulations that are stipulated by Government. What I have before this House are two dishes. These two dishes are imported into this country by a company that I have put tabs on. When this dish (small) comes through the border, it is cleared at $0.02. This one here (big) clears at the border at $0.04. That is the duty that they pay. I went to buy this one here (small dish) for $6 and I bought this one here (big dish) for $13. They are imported from China. In China Madam Speaker, they pay the correct amount but when they come to Zimbabwe, they do not pay the correct amount. I am talking about $0.02 and $0.04 and I have the evidence here.

I have another item. This is a transistor radio. This radio declares at the border $1.20 and it is sold in Zimbabwe for $14. Let me go on to the next thing. I have here what is called a quilting kit. A quilting kit consists of a liner, binder and the outer blanket. When these things are imported into Zimbabwe, there is the binder, liner, the outer blanket and the thread. It is called a quilting kit. When you put these together, you then come up with a blanket. This blanket here in Zimbabwe sells for about $20. A blanket which is manufactured in Zimbabwe is sold for $30 for a double. Companies in Zimbabwe like Waverly do all the manufacturing from lint to a complete blanket. The lint will lead to this outer material, it will also lead to this inside material and it will lead to this binding cloth and to a complete blanket, a double of which will sell for $30.

Fig 1.6 Looking East While Local Industry is Decimated ?

When these quilting kits come into Zimbabwe, what they declare at the border is $0.40. A local company which is manufacturing blankets cannot compete with a company that is importing a quilting kit for $0.40 and sell a blanket because they can even sell it for $3 and still make a profit. Actually, this material here, when it is being imported into Zimbabwe must declare $2.93 per metre at the border but this whole set is declaring $0.40 at the border. That is the level of prejudice to this Government.This Chinese Company would not able to do this if they are not protected by senior people in Government. The document that I have here Madam Speaker will tell you what has been imported into this country. The Chinese Company I am talking about here is called Yufan Import and Export Trade Company. It does not have a bank account. I wonder how they are then able to pay for these things in China if they do not go through the Reserve Bank of Zimbabwe because they must essentially go through the Reserve Bank of Zimbabwe. They must submit an application to the RBZ and say we need so much to be able to import these items into the country but I do not know how they do it because they do not go through the Reserve Bank of Zimbabwe…

HON. MARIDADI: They do not have a bank account and what it means is that they do not pay corporate tax. When I went to buy these items, they have three different sets of tariffs. They do not allow to swipe. If you are buying using bond notes, this dish here costs $16. If you are using US dollars you pay about $12. They will tell you that if you are buying more than one, they do not want bond notes, they want US dollars and I have documentary evidence to that. Madam Speaker, if you look at the extent of prejudice – I was calculating here – a 40-foot container paid ZIMRA $4 000 when in actual fact it should have paid $49 970. I am talking of one container. This item that I have here which is called a Bill of Entry talks about twenty 40 foot containers that have come into Zimbabwe and they have only paid about $80 when in actual fact if you calculate $49 000 by 20, it is about a million. With this kind of attitude, we are not able to go anywhere. But let me bring it home.

ZANU PF owned two companies, one called National Blankets and another one called Kango. National Blankets had machinery and employed people to produce blankets. But because National Blankets can no longer compete with people that are protected who import these quilting kits. National Blankets; to all intents and purposes has closed shop; it is no longer there. All of us in this House, when we grew up, we remember the kind of plates and pots which were called Kango. Kango is a company that was owned by ZANU PF. Kango has closed shop because of imports of plates like this for two cents and sell it for whatever price, Kango cannot compete because they must buy material and come up with a plate like this via a manufacturing process.

I will bring it closer to home even further. Cone Textiles is the company that used to do most of these materials. It is now done by a company called Waverly Blankets. Waverly employed 1800 people but when these imports started coming into Zimbabwe, they have retrenched and now employ about 400 people. What it means is that 1400 jobs have been exported to China who do not pay corporate tax, Pay As You Earn, et cetera.Madam Speaker, what we want to do is, we need now to say, the Chinese companies that are operating in Zimbabwe, how are they registered? Who are they doing their banking with? Does the Reserve Bank and ZIMRA know that they are importing and exporting? When they get bond notes, they simply go on the streets of Harare and harden the money into US dollars and the money is spirited out of the country. It is very easy to take money out of Zimbabwe. If you have $200 000, you simply go to Charles Prince Airport, you charter a plane and you fly into South Africa. It is that simple. You do not use Air Zimbabwe and South African Airways because Harare International Airport security limits the amount of money that you must take out. That is how money is leaving this country. It does not really matter how much policy and regulations the Reserve Bank of Zimbabwe is going to put into place, money will still leave the country.

The fact of the matter is that, we must start now to investigate all companies. I am talking across sectors. If you go into the brick moulding sector, Chinese companies that are moulding bricks are selling those bricks at a price such that Willdale Limited, a Zimbabwean company cannot survive. A Chinese company that is selling fast foods does it in such a way that a Zimbabwean company that is in that industry is not able to survive. Madam Speaker, the textile industry in Zimbabwe to all intents and purposes is dead. Hon. Nduna from Chegutu can vouch for me. There is no way that David Whitehead can come back if we have this kind of thing. These are cheap imports but what I want to reiterate today is that these people who are doing these things are protected by senior Government officials.

Fig 1.7 Will Capri Manufacturing Survive Against Cheap Imports?

Today I hear that one of the Chinese people and a Member of Parliament of Zimbabwe are trying to borrow money from CBZ so that they resuscitate National Blankets. You will not be able to resuscitate National Blankets as long as there are cheap imports that you are going to compete with. You are not going to revive the textile industry for as long as there are cheap imports that you are going to compete with. You are not going to revive Kango for as long as there are these imports coming into Zimbabwe that are equally good but are selling at a quarter of your input into production. Madam Speaker, there is Capri Corporation, a wholly owned Zimbabwean company. In the past two years, Capri Corporation has invested $15 million into the manufacture of refrigerators and stoves. They made a profit of $200 000 in 2015. If you are in business and you invest $15 million and make a profit of $200 000, get out of that business. You would rather put that money in a bank. Where you have an interest rate of 5%, you are able to make more money than you are making in manufacturing.

The reason why Capri is making that meagre profit is because there is Samsung. Samsung is a South Korean company that has been given a licence to manufacture in Zimbabwe. If you go to Samsung in Harare today, all you see is an office the size of this desk. That is all they have. They bring complete refrigerators to sell in this country competing with refrigerators from Capri and the other company which does industrial refrigerators. Madam Speaker, if you go to Capri, which I visited about three weeks ago, it is a hive of activity but they are operating at 40% of capacity because of Samsung. Why are we bringing Samsung into Zimbabwe when we have our own company that is manufacturing in Zimbabwe? Samsung could not go into Zambia.

In South Africa, their products have knocked down the prices of refrigerators but they now have a ready market in Zimbabwe. They have been given a ready market in Zimbabwe, they are militating against our own companies and we are exporting jobs to South Korea.Madam Speaker, I would like to thank you for your time but I want to say the attitude of senior Government officials who protect corrupt people, especially Chinese must stop. In my next instalment which is coming very soon, I am going to name and shame you. What I am urging Hon. Ministers and Hon. Members of Parliament who are protecting these people is to please stop forthwith so that you avoid the embarrassment of me standing up here because I will name you. I will say your first name, second name, surname and the constituency that you represent.

Thank you Madam Speaker.
Hon James Maridadi is a Member Of Parliament for the MDC-T & we would like to thank him for granting his consent to publish this.



Rethinking Zimbabwe’s Industrial Policy: Lessons from Japan and the East Asian Tigers.
Taurai Chinyamakobvu*

I will start by an anecdote. My friend’s acquaintance travelled from Zimbabwe to China to buy stuff for resale. After buying a certain product, he complained that its quality was poor. The Chinese seller angrily retorted, “Why you complain (sic)? In Africa, you can’t even make a toy.” A typical case of bad customer service, but the take is that we have to learn to make tangible, actual products – genbutsu in Japanese. The issue of an Industrial Policy (IP) must be at the center of our government programs because it can fix more than half of our national problems.

Fig 1.8 Zimbabwe Stock Exchange (ZSE): Dominated by Booze and Mobile Phones?

Our economy in its current form is largely agrarian and while agricultural production is important in the contemporary political economy it is a myth that we can ever develop on the basis of agriculture as no economy has ever advanced on that basis.  If at all we envisage transforming Zimbabwe from a third world country to a developed one, we must as a matter of course industrialize. That our economy is in bad shape needs neither a rocket scientist nor a Nobel-prize winning economist to discern. There is everything wrong with an economy where the largest listed company is a mobile phone operator, followed by a beer company.

An industrial policy remains important in transforming the economies of third world countries, and while context differs in determining the success of IPs. An IP is a strategic effort and a set of programs adopted by a government to develop and grow productivity, particularly in the manufacturing sector, through targeting certain industries, providing clear guidance, subsidies, trade protection and anti-trust exemption in others. Far-eastern countries like Japan, Korea, and Taiwan are good examples where IP has been effectively used to catch-up with the West.

Lessons from the East: The rise and transformation of Japan

By far the most judicious example of industrial policy to learn from is that of Japan. In Japan’s case, the role of the Ministry of International Trade and Industry (MITI) as the IP champion is widely renowned and revered.  To argue that adopting the Japanese style pro-growth IP would be replicated in Zimbabwe would be naiveté of the worst sort, as context, including ideological politics is a major factor. The main objective of the IP is to “restore the manufacturing sector’s contribution to GDP of Zimbabwe from the current 15% to 30% and its contribution to exports from 26% to 50% by 2015”. A section on necessary conditions for Zimbabwe’s industrialization reads “… there will be a critical need for close cooperation in the following key areas” like electricity, water, roads, rail and labour legislation for the IP to succeed. Yet prior to finalizing the policy, that close cooperation and consensus must have been sought and cemented. That is the greatest lesson that can come out of Japan’s successful IP. MITI championed consensus even under very difficult circumstances and disagreement – the so-called nemawashi (consultation to lay the groundwork).

Fig 1.9 Global Icon: Toyota’s Attempts First to Export were a Disaster

Developing an IP needs a strong dose of systems thinking. That thinking does not run through the present IP. Systems thinking requires the development of a policy by breaking the system down into its constituent parts and then evaluating each in detail by looking at its inputs, processes and outputs. For example, the desired output of the IP is a 15% increase in the manufacturing sector’s contribution to GDP. The next question should be, what inputs do we need to double the output? Clearly, the inputs required are labour/skills, technology, capital, energy, water, innovation, among others. Thereafter, one needs to ask what processes should take place and what exogenous factors need to be managed, especially where exports are to be doubled.  During the GNU the Prime Minister expressed shock at having discovered some equipment fitted in 1923 in some factories.

The IP clearly suffers from a resource shortage. The IP simply notes that government will identify credit lines of a short to medium term nature. The policy should specify how and what should be done for capital to flow in and for the country to attract those credit lines. It also suggests the formation of an industrial bank. However, the case of IDBZ, its capitalization issues and record in infrastructure development does not help in inspiring confidence that an industrial bank will be formed and help to capitalize manufacturing companies enabling them to double output. Relating this to the successful case of Japan’s IP, that country benefitted from a large amount of local savings. Without savings in Zimbabwe, NSSA, which has largely been involved in stock market and real estate, has a role to play in funding manufacturing. If Old Mutual, a private mutual fund, can provide $20 million for distressed companies, NSSA which collects money from everybody should be able to set a side much more than that to capitalize industry.

The IP also promotes cluster development – the targeting of specific sectors, such as the chemical industry, agro-processing industry and metals and electricals sector. This is noble in developing competencies in these sectors where the country has an advantage. But the policy is not clear on exactly what the government shall do with these sectors to double their output. For example, much of the section on the metals and electricals cluster simply describes the revival of Ziscosteel. It is not clear what aspects of electricals the IP will promote. It also lacks an examination of the value-chain elements of those specifics cluster areas and how they will be developed to create sustainable competences.

What can be discerned from MITI’s success was how it leveraged industrial keiretsu (related value chain companies), providing comprehensive and clear support to sectors such as electronics, chemicals, rail and so on. A sector that is a prospective clear winner, though it does not constitute hard manufacturing, that could have been supported by the IP is the software industry, which can easily position Zimbabwe as a software outsourcing hub for Africa.  Clearly, the policy spells out a cluster development approach that seeks to promote certain productive industries. Critical to developing a country’s competencies in specific sectors is the development of innovation and heavy investment in research and development (R&D).

Fig 1.10 Made in Japan : Used to be a laughing stock.

Here is a good example of how Japan supported the semi-conductor cluster in order to chip away at the dominance of the United States during the 1970s. The Asahi Shinbun in 1976 reported that, a VSLI (very large scale integration) R&D project was started jointly by the government and the private sector. To do so, the VLSI Technology Research Association was formed comprising five domestic producers in two groups, viz “Fujitsu-Hitachi-Mitsubishi and NEC-Toshiba. The firms together with MITI created a joint research institute comprising “100 researchers from the member firms and MITI’s Electronics Research Institute. During the following four years, about 70 billion yen, including a government subsidy of 30 billion yen was spent. The technology necessary to develop VLSI was developed and the association disbanded…”. Our own MIC needs to learn from this and provide guidance towards joint research that stresses the necessity of pooling R&D efforts to efficiently use scarce scientific manpower and research funds. One way of generating funding for technical research is to redirect the funds from state and private lotteries towards scientific research, and then licensing the patents out to the private sector.

The MIC’s IP encourages import substitution. However, the policy is not clear on export promotion with regards to the quality of output for exports and its competitive pricing. Apart from a general comment on the Standards Association of Zimbabwe, the policy contains no robust measures on setting sustainable standards on the goods to be exported. To export value added goods, while protecting some local industries from foreign competition as proposed in the policy, we must necessarily go beyond import substitution to export promotion. Yet fundamental production inefficiencies in our factories render our goods uncompetitive internationally.

The policy lacks mechanisms to ensure the supported clusters are put under pressure to reduce per unit costs of production through production efficiency, use of technology, eliminating waste and ramping up output. The policy also lacks a program of technical cooperation with international and local agencies to engender technology transfer and diffusion. In order to catch up, the country must work with developed countries. For example, Korea’s electronics industry was a great beneficiary from Japanese and American engineers and scientist and their innovations. That is how companies like Samsung quickly developed competencies in memory chips, particularly dynamic random access memory. In the same vein, Sharp Corporation of Japan also leveraged RCA’s patents on liquid crystal to create liquid crystal displays (LCDs). This is the only way Zimbabwe can leap-frog itself to the latest technology curve.

Eventually, the success of Zimbabwe’s shall be a function of implementation of the policy. First, the policy needs to be improved clear of all vagueness and the missing links. Another lesson that can be drawn from the Japanese example is the mutual cooperation between government and the private sector – the cooperation of government and business as collaborators and not as adversaries. Also the use of administrative guidance (gyōsei shidō) by MITI as an instrument of enforcement can help our own MIC is implementing its own policy. This entailed the use of persuasion, advice, and influence to push corporations towards a direction viewed as desirable by MITI’s bureaucrats who also had the power to give or to withhold government contracts, import permits, tax concessions, loans, grants, subsidies, licenses, foreign currency and approval of oligopolistic cartels. In conclusion, the current policy lacks a clear program of agreed actions that will double Zimbabwe’s manufacturing output and most of all, there is need to learn from successful frontrunners.

*Taurai Chinyamakobvu is a consultant and scholar of Japanese technology and business methods. The opinions expressed herein are his. Feedback can be sent to tchinyamakobvu@gmail.com