CAN ZIMBABWE EVOLVE INTO A DEVELOPMENTAL DEMOCRATIC STATE?

 

“Global Politics and the role for CSOs/Trade Union in the efforts to transform into a Developmental State[1]

 While it is too early to say whether Zimbabwe can evolve into a Developmental Democratic State (DDS), these on-going debates are trying to understand whether this is a viable route for the country’s future development post-2018.  Over the last two decades, there has been a debate on whether Zimbabwe is a Failed and Conflict-Affected State (FCS), and the consensus seems to have been that the country exhibits some elements of FCSs, especially in its inability to meet social needs for most of its population (a Weak State); but that the Coercive State Apparatus and its operations does not exhibit the characteristics of a FCS (a Predatory State).  The result of these two contradictory State-typologies has been that Zimbabwe has over this period kept many scholars and analysts busy with trying to predict the future.  The prevailing ideas of a Command Economy (in Agriculture, Infrastructure, Fishing, and others), Plan to Restructure State-Owned Enterprises so that they can play a greater role in the economy, and the desire to Maintain State Interventions in the wider Economy as defined by the framework of “Zimbabwe is Open for Business and promise of Free, Fair, Transparent, and Credible Elections” all seem to provide a basis for concluding that Zimbabwe meets the criteria for a foundation upon which a DDS can be built.

A. Objectives

Trade Unions are interested in what role the State plays in regulating the relationship between Labour and Capital in pursuit of a fairer sharing of profits (giving rise to a Tripartite Engagement)

CSOs are interested in what role the State plays in providing social safety mechanisms to support and provide the poor and the vulnerable with more opportunities (based on principles of Social Protection within a Social Risk Management framework).

Both Trade Unions and CSOs are interested in what role a State plays in the distribution of power and wealth between the elite, ordinary citizens and the State in order to reduce social inequalities (giving rise to a form of Social Compact).

B. Context: Democracy and Economics

1. Three Democracy Types

1.     Liberal Democracy (emphasizes freedoms of the individual within a capitalist system).

2.     Social Democracy (modifies Liberal Democracy by supporting economic and social interventions to promote social justice).

3.     Democratic Centralism (where political decisions, taken by party leadership through its democratically elected bodies, are binding upon all members of the party with little room for dessent).

2. Two Economic Models

1. Washington Consensus

These are "standard" reforms promoted for developing countries in crisis by three institutions based in Washington, D.C. (the International Monetary Fund -IMF, the World Bank, and the US Treasury Department).  The specific Washington Consensus policy recommendations are:-

1.    Fiscal policy discipline, without large fiscal deficits relative to GDP;

2.    Redirection of public spending from untargeted subsidies towards the provision of pro-growth, pro-poor services like primary education, primary health care, and infrastructure investment;

3.    Tax reform by broadening the tax base with moderate marginal tax rates;

4.    Interest rates that are market determined;

5.    Competitive exchange rates;

6.    Trade liberalization covering imports, emphasis elimination of restrictions like licensing; removal of all trade protection by use of low and relatively uniform tariffs;

7.    Liberalization of inward foreign direct investment;

8.    Privatization of state enterprises;

9.    Deregulation by removing regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions;

10.   Legal security for property rights.

2. Beijing Consensus (sometimes called the China Model)

This gained ground in Southeast Asia as these countries shifted their development strategy “from one based on free markets and democracy to one based on semi-free markets and an illiberal political system.” Its main features are:-

1.     Replacing trust in the free market for economic growth with "a stronger state hand on the levers of capitalism";

2.     An absence of political liberalization;

3.     Strong leading role of ruling political party;

4.     Population control;

5.     A pragmatic concern with serving the people;

6.     Constant trial and error experimentation with an element of innovation;

7.     Gradual reform rather than neo-liberal economic shock therapy;

8.     A strong and pro-development State;

9.     A "selective cultural borrowing" of foreign ideas;

10.  A pattern of implementing easy reforms first, and difficult ones later.

C. Six contemporary forms of the State

1. Failed State

1.     Without control of its territory, or monopoly on the legitimate use of physical force.

2.     No legitimate authority to make collective decisions.

3.     Unable to provide public services.

2. Weak State 

1.     Has low or stagnant economic growth

2.     Its governing institutions are unable to implement policies or maintain autonomy due to corruption or conflict. 

3. Predatory State

1.     Seeks to maximize the profits of government, rather than seeking to maximize the welfare of its constituents.

2.     Players in the State enrich themselves through corruption and associated practices.

4. Dependent State

Follows negative experiences with Washington Consensus and:- 

1.     Examines the patterns of interactions among nations (divided into periphery and metropolis/centre).

2.     Argues that inequality among nations is an intrinsic part of these interactions because resources flow from a "periphery" of poor and underdeveloped states to a "core" of wealthy states (metropoles), enriching the metrople at the expense of the periphery.

5. Local Developmental State

Takes place at a city/municipal level, rather than at a state level where the City:-

1.     Places a great emphasis on tackling social exclusion.

2.     Uses profits from assets to fund municipal spending of infrastructure projects,

3.     Develops a program of cash grants that provide support for poor families.

4.     Supports the poor in developing business by providing many incentives (finance, loans, technical, etc.).

5.     Develops the local economy with new micro-enterprises

6. Developmental state

1.     Uses state intervention with extensive regulation and planning.

2.     A model of capitalism (often referred to as state development capitalism).

3.     Has more independent and autonomous political power.

4.     Has more control over the economy and leads macro-economic planning.

5.     Is primarily focused on economic development.

6.     Is charactaresitc of societies that come late to industrialization.

7.     Decides to lead the process and takes on development roles.

D. CHARACTERISTICS OF THE DEVELOPMENTAL STATE

1. Examples in the last Century

Japan after Second World War

East and Southeast Asia towards the sedond half of the Century

o   Thailand

o   Singapore

o   South Korea

Botswana since the early 1970s (Rwanda and Ethiopia not reviewed yet).

2. Evolution of Developmental State

Due to late industrialization, the State drives the proces and takes on developmental functions.  It has over the years exhibited two approaches towards private economic activities:

(a) Regulatory, and

(b) Developmental

This further leads to two different kinds of Business-Government relationships.

(a) Regulatory as in the USA

(b) Developmental as in Japan.

Regulatory state

Uses regulatory agencies empowered to enforce a variety of standards of behavior to:-

(a) protect the public against market failures of various sorts, including monopolistic pricing, predation, and other abuses of market power; and

(b) provide collective goods (such as national defense or public education) that otherwise would be under-supplied by the market.

Developmental state

Intervenes directly in the economy through a variety of means to:-

(a)   promote the growth of new industries; and

(b)  reduce the dislocations caused by shifts in investment and profits from old to new industries.

Industrial policies pursued by Developmental States include: 

(a)   Investing and mobilizing capital into the most promising industrial sector that will have maximum spillover effect for the society.

(b)  Fostering cooperation between State and major industries in order to maintain a stable macro-economics framework.

(c)   Intervening in the market system through grants and subsidies to improve competitiveness of firms.

(d)  Control of exchange rate, wage level and manipulation of inflation to lowered production cost for industries caused economic growth.

4. Examples of Developmentalism features

Some characteristics from ThailandTaiwanMalaysiaJapanSouth Korea, and Vietnam:-

1.      Able and willing to protect their people from the negative consequences of foreign corporate exploitation.

2.      Often have little government ownership of industry, with private sector guided by bureaucratic government elites.

3.      Leaders who can confront multinationals and demand that they operate to protect their people's interests.

4.      The Will and Authority to create and maintain policies that lead to long-term development that helps all their citizens, not just the wealthy.

5.      Regulated multinational corporations so that they may follow domestically mandated standards for pay and labor conditions, pay reasonable taxes, and by extension leave some profits within the country.

6.      Sufficient organization and power to achieve their development goals.

7.      Able to provide consistent economic guidance and rational and efficient organization,

8.      The power to back up its long-range economic policies.

9.      Able to resist external demands from outside multinational corporations to do things for their short-term gain,

10.   Ability to overcome internal resistance from strong groups trying to protect short-term narrow interests,

11.   Capacity to control infighting within the nation pertaining to who will most benefit from development projects.

12.   Ability use import substitution by telling multinational corporations wat goods will be imported, if at all,

13.   Used high tariffs  to prevent imported goods from competing with goods made in infant factories in the poorer country.

14.   Incentives to encourage foreign industries to create joint ventures with a local company (even 51% local owenreship) and thus hire local employees, pay local taxes, and keep some profits within the country

15.   Capacity to maintain more infrastructure investment that provides good transportation

16.   Ability to produce an educated labor force that enhances productivity.

5. Some results from State Developmentalism

1. China: the world leader in economic growth since 2001.

2. England: it took around 60 years to double its economy when the Industrial Revolution began.

3. United States: It took around 50 years to double its economy during the American economic take-off in the late nineteenth century.

4. East and Southeast Asian countries have been doubling their economies every 10 years; and while the rich are getting richer, the poor are becoming less poor.

 

[1] Based on a talk given to select leaders of the Zimbabwe Congress of Trade Unions (ZCTU) on 22 February 2018, at Kodzero House, 98 Baines Avenue (2nd Street & Baines Ave)

CALL THE CORRUPT WHAT THEY ARE – THIEVES! Reflections on Corruption and Culture in Africa using perspectives from three Zimbabwean researchers[1]

In practically every African market where citizens sell and buy in semi-formal environments, it is almost a universal truth that you are likely to face death if citizens point a finger at you, shout “Thief” and you run.  However, if the same citizens point a finger at you and shout “Corrupt”, laughter is likely to be heard even if you run.  Would the fight against corruption in Africa be different if we called the corrupt “thieves” – and explained that they are indiscriminate thieves whose victims are often the poor and most vulnerable in society? In Zimbabwe, it is a bigger insult to be called a “Sellout” than  “Corrupt”; but would a “Thief” be a worse person that a “Sellout”? In Kenya, a media survey in 2016 indicated that a majority of the youth were willing to engage in corrupt practices as long as they were not caught, but would the finding be different if the question was around corruption as thievery? Would our attitude to the culture of corruption change if every case of corruption were translated into numbers of persons robbed by the actions of the corrupt?

The 2016 Zimbabwe Annual State of Corruption Report (ZASCR) set out to understand “the cost of corruption on the economy, politics and service delivery in Zimbabwe 2000-2015”.  The approach assumed that a presentation of empirical evidence on corruption could lead to increased awareness, and that in turn lead to changed behaviours by individuals – to either tackle the problem or join in its perpetuation depending on the cost of either actions.  The evidence presented in the three case studies painted a mixed picture – where citizens had over the last fifteen years resisted corruption, but also instances where they had enjoyed the benefits that come with corruption; and the balance sheet was one that started the process of providing a deep dive into the roots and origins of corruption in Zimbabwe.  In that respect, ZASCR 2016 had outlined an agenda for future studies and advocacy strategies that would have the potential to equip Zimbabwean society with the tools to better understand the underlying drivers of corruption beyond its manifestations projected in the popular media. 

The three position papers presented also provided a good understanding of post-colonial foundations of corruption, while recognising that Zimbabwe was no more corrupt than other African countries; an argument to encourage students of corruption to better understand historical contexts.  Llyod Sachikonye sketched out how political decisions had had economic consequences; and Prosper Chitambara ably showed what these consequences had meant for service delivery – itself well dissected by Sandra Bhatasara by digging into the Local Government sector.  The result was a body of knowledge that points to the critical role the State and its institutions play in creating the conditions for corrupt practices while nurturing them by protecting the perpetrators.  The papers also show that citizens are paying a higher price for services because lack of political will to tackle corruption has led to poor governance, degraded rule of law and institutions, and destroyed infrastructure and economic development.

Political decisions in the 1990s to wage a war in the DRC and the unplanned pensions and allowance pay outs for War Veterans set the stage for the land invasions of 2000.  The political governance patterns that Zimbabwe entered the new Millennium with had far-reaching economic consequences: framed by hyperinflation, deindustrialization, and informalisation driven by rising levels of unemployment. The resulting economic decline and depressed economic performance deprived the State of the revenue needed to maintain the kind of service delivery that the country had enjoyed during the first fifteen years of independence after 1980.  As urban residents shifted their political support from the party of liberation to new opposition parties, political leadership in urban local authorities also shifted to these new parties; while central government leadership shifted its attention to rural service delivery.  The resulting tension between ZANU(PF) central administration and MDC local government management is shown to be at the heart of declining economic performance and service delivery; with corrupt practices taking on the semblance of legitimate tools of political contestation between an elite leadership seeking to exert political, economic, and service delivery hegemony in various spheres of national life.

 The three papers paint a picture of extensive institutional decay, collapse, and capture by different groups in the State – in turn sucking in parts of the private sector into corrupt practices that transfer public resources from services for the general population and channels it to support personal consumption by those with access to State power – be it at central or local government.  With Central Government revenues mostly going towards meeting the wage costs of its employees (less than 5% of the population), intense competition has developed between groups within the State trying to control the remaining small portion (often less than 15% of central government revenue) meant to meet the needs of over 90% of the population.  The papers demonstrate that perpetrators of corruption also wield political power, act with impunity, operate in small political groups (factions), and lack the political will to end corruption.  In return, citizens rationally calculate the cost of confronting well-connected and powerful corrupt groups and adopt the view that corrupt practices are the price one pays for securing services for individuals and their family within the market.

The commercialisation of corruption has become the means for securing more resources for the State from an increasingly impoverished population – that considers the Police, City Council, Vehicle Inspection Department, and Education as the most corrupt institutions in Zimbabwe: these are the institutions citizens frequently come into contact with when seeking services, and where individual State agents collect revenue on their own behalf rather than for the State.  Service delivery has become the face of corruption that is visible to most of the population.  On the other had, Judiciary is considered least corrupt, followed by Registry and Permits (consistent with an economy where liberalization after 2009 reduced the number of such instruments in the regulation of economic activities).   Citizen trust in State institutions described in the pre-2000 period quickly gave way to cynicism in the post-hyperinflation and economic liberalization period after 2005; and petty corruption has become accepted as the “cost of doing business”, with corrupt practices being descripted as “the new normal” as citizens seek a new equilibrium in their dealings with State institutions.  In this respect, citizens are faced by the choice of paying bribes to get services, or paying to avoid the higher cost of contravening regulations and laws enforced by State agents.

The three papers have explored the roles of governance and patronage in fostering corruption under conditions of limited political will to tackle the problem.  The conclusion that corruption denies citizens access to services has generated arguments on what role media and Non-State Actors could play in placing in the public space information on State actions so that power and corruption can be contested between State and citizen actors.  Improved measures of State performance have been identified as possible tools for showing what can be done to stop the State from “turning on its citizens”. For the interaction between politics, economics, and service delivery to tackle corruption, the roles of policy-making and institutional development were identified as critical.  Changes in politics are seen as drivers of economic change, which in turn are identified as necessary to change the parameters of and means for service delivery.

The cultural dimensions of corruption are both country and society-specific.  In the case of Zimbabwe, corruption cannot be understood by just looking at the post-2000 or even post-1980 periods; the reviews needs to go further into the foundations laid by a colonial administration interacting with a population that was also resisting colonial laws and regulations – and where diverting State resources became an anti-colonial statement.  It is culturally significant that a Zimbabwean considers it a bigger insult to be called a “Sellout” (a term used to describe those perceived to be collaborating with former colonial rulers) than to be called “Corrupt”. 

A dive into the social, political, and economic past could help future students of corruption gain a deeper understanding of the cultural roots of corruption; and start informing anti-corruption strategies that tackle the under-lying causes of “legitimized corruption”.  It is a challenge facing many countries in Africa, and beyond; and whose outcome can only be changed by the public dissemination of evidence on corruption and its consequences – especially its impacts on the whole fabric of any society where corruption is prevalent.

 

[1] Based on a note “Can approaches to the study of corruption be innovated?” Summary note on the Transparency International Zimbabwe Annual State of Corruption Report 2016

 

 

WHY DAVOS 2018 WAS IMPORTANT FOR ZIMBABWE[1]

The Davos 2018 theme was “Creating a Shared Future in a Fractured World”, something that Zimbabweans are familiar with given all the setbacks the country experiences over the last three decades in a world not supportive of the tools the political leadership deployed to resolve outstanding issues from the decolonisation era.  Davos 2018 gave Zimbabwe a chance to Reposition, Rebrand, Reconfirm, and Re-invent its place in the world.

In its theme of “Zimbabwe is open for business” articulated at the launch of Investment guidelines and Opportunities in Zimbabwe (January 2018) on the eve of Davos 2018, the new leadership sought to present Zimbabwe as a country working towards a Second Republic that improves the lives of all its people and makes the country a regional and global leader in the building of an African Developmental Democratic State.

Main messages to the Zimbabwe Delegation to Davos were that:-

1.     The President would be the most important face of “Brand Zimbabwe” at Davos.

2.     Foreign Direct Investments (FDIs) will follow if Zimbabweans at home and in the diaspora are investing in their own country.

3.     The Zimbabwe delegation will have succeeded if it leaves those it will have met in Davos with the feeling that:-

(i) “The President is someone they can do business with” and by extension “Zimbabwe is a country to do business with”; and

(ii) “ We as foreign investors are also reassured by what we hear from Zimbabwe businesspeople, and not just what the political leadership says”.

4.     The Lima process is foundation for international financial re-engagement and Government remains committed to pursue it in line with its national development goals.

5.     Observance of SADC, AU, and Commonwealth governance benchmarks is respected and considered a key framework for informing future relations with the world.

6.     Zimbabwe is committed to lowering the country risk through policy consistency.

In elaborating on these main points, it was underlined that:-

1.     The Zimbabwe Business Club seeks to support Government engage with private sector investors in Zimbabwe, the Diaspora, and Foreigners within a thriving market system – one that needs the following key conditions:-

-       Has an educated population,

-       Has good public health,

-       Has an effective legal system,

-       Has a free and objective press, and

-       Has an effective and accountable government.

2.     The Meikles briefing meeting was to give the President and his delegation a chance to hear from a select group of Zimbabweans on some of the issues uppermost in the minds of those who run businesses in Zimbabwe while confirming their commitment to play their part in Zimbabwe’s future economic recovery.

3.     Davos 2018 offered Zimbabwe a chance to re-launch its international image with a single voice to benefit of both domestic and international investors: were Zimbabwe a corporation, the President would be its Chief Executive Officer (CEO) and its Chief Public Relations (PR) Officer.

4.     Respect for property rights should be extended to all Zimbabweans and their foreign players in the economy so that they can build a more inclusive economy with a framework for a sustainable use of natural resources, modern industries, and expanded services. In all this, it was worth remembering David Hume’s three rights:-

-       Right to buy property,

-       Right to transfer property by consent, and

-       Right to enforce contracts.

5.     Future investments will need a stable domestic financial sector: without a currency crisis, with manageable debt levels, and with viable sources of new investment capital in order to expand the kind of infrastructure that will make inclusive economic growth possible.

6.     Although businesses are not democracies, it is democracy that fosters good business practices and explains why investors are interested in the integrity of election processes; and explains the relationship between a minimum level of a democratic culture and economic development.

 

[1] Based on a Zimbabwe Business Club (ZIMBC) presentation to brief the Zimbabwe Team to Davos led by H.E. President E.D. Mnangagwa; held at Meikles Hotel, Harare on 18 January 2018.

WHAT THE NEW DISPENSATION MEANS FOR ALL SECTORS: A GLOBAL PERSPECTIVE[1]

Zimbabweans can use this milestone year of 2018 in the same way its people used 1894 to envision an Anti-Colonial Struggle; in 1966 to envision a Free Zimbabwe from Rhodesia; and in 1980 to dream of a prosperous country.  Citizens can make 2018 the year of envisioning  “A People Living in a Modern and Prosperous Nation built through sweat, hard work, and technological ingenuity”

The year 2018 has ushered in a period for Zimbabwe to do at least five things:-

1.     Undertake “Controlled Change” (which is the essence of Evolution).

-       Stand firmly on ad learn lessons from its rich past.

-       Re-envision the hopeful future its citizens had in 1980.

-       Use this period to “Build a Bridge to the Future.”

2.     Modernize its politics, economics, and outlook in the face of globalization.

-       On the economy, give legs and wings to its wonderful policy statements.

-       On politics, implement its progressive constitution in its entirety.

-       On international stage, find a less confrontational way of pursuing economic justice.

3.     Consolidate its rich history on of Pan-Africanism in the world.

-       Continue to advocate for transformation at regional and international bodies.

-       Convert its rich regional political capital (militant sovereignity) into economic capital (trade and commerce).

4.     Shift gear from Political to Economic Resource Nationalism.

-       Use Fast Track Land Reform Program as foundation for An Agrarian Revolution (modern administration, security of tenure, tools to enhance productivity – e.g. land bank, land tax, land market, land use planning, etc.).

-       Use Economic Empowerment tools to attain Indigenization.

-       Understand and implement economic reforms based on the Country’s Comparative Advantage – human, natural, and geographical resources.

5.     Change the way we do things (which is the essence of Governance).

-       Modernize its institutions and systems (to tackle corruption and improve human rights (economy, political, social, and cultural).

-       Embrace modern technologies and deploy them aggressively.

-       Embrace thrift, fairness, prudence, and generosity

 

[1] Based on talk given at the “Corporate Governance Indaba 2018” held by the Quality Corporate Governance Centre (QCGC) at Zimbali Gardens, Harare, on 16 March 2018

 

 

ZIMBABWE 2018: How could a partnership between Citizens, Commerce, Government, and International Agencies help build a Developmental (and Democratic) State?

A Developmental (and Democratic) State under conditions of rapid globalization is possible in Africa if driven by three freedoms: (1) Freedom of association and thought, (b) Freedom to engage in commerce without hindrance, and (c) Freedom from grinding poverty.  The challenge for Zimbabwe, like many other African countries, is how to create the necessary conditions for its citizens.

“Role of Development and Technical Partners in the new Zimbabwe” - Taking Zimbabwe Forward[i]

Who are these partners?

A. Development Partners

1.     Multi-lateral (where Zimbabwe is also a member with other countries)

2.     Bilateral (where Zimbabwe is in relationship with another country)

B. Technical Partners

1.     UN Agencies (mainly technical)

2.     Aid Agencies representing governments (traditional donors)

3.     Development Banks (International and Regional)

4.     Investment firms (traditionally privately owned, but now often with both private and public funding)

 Preconditions for moving forward

1.     Knowing where we are

2.     Knowing where we have been

3.     Knowing where we want to go

1. Zimbabwe today

Is receiving limited humanitarian assistance from industrialized countries via UN Agencies.

Is indebted to all the major Development Banks (International Financial Institutions and Investment Banks): Defaulted and in Arrears.

Is attracting low domestic and international investments

Is experiencing low productivity in the economy (agriculture, mining, manufacturing in particular)

Is spending more than its revenue (with high and growing budget deficit)

Is experiencing low liquidity associated with high deficits and a desire to avoid hyperinflation.

Is in the midst of positive atmosphere and goodwill (local and international) to new government

Is faced with high expectations from population yearning for improvements in its economic fortunes

2. Where Zimbabwe has come from

From a prolonged stand-off between Zimbabwe Government and some international players over policy positions (primarily over property rights and concerns over “democratic deficit”)

From a background of big gaps between intentions (policy statements) on the one hand and policy follow through (implementation) on the other.

3. Where Zimbabwe wants to go

Direction as sketched in President E.D. Mnagagwa’s Inauguration address is for domestic and international partners to understand that:-

- Land reforms are as irreversible as they were inevitable

- Government plans to compensate white farmers for land

- Strong pillars of democracy are necessary

- Debts need to be sustainable, serviced, and settled

- Investments will be safe in Zimbabwe

- Intentions are to create jobs

4. Why development and technical partners want to get involved

Development and Technical Partners justify their involvement on the need to:-

1.     Support economic growth that brings benefits to the population

2.     Bring relief to the under-served and under-privileged

Investment Partners on the other hand generally justify their involvement on account of potential returns to their investments.

With the rapid economic growth of BRICS countries (Brazil, Russia, India, China, and South Africa) led by China, combined with modest economic growth in traditional Western Donor countries; bilateral funding has become more important than multi-lateral sources of development finance.  There is a shift from the idea of Development Partners (in the framework of development charity) to one of Partners in Development: emphasising the Mutuality of Benefits arising from development cooperation (for instance the growing greater linkage between aid and trade).  There are two major implications arising from this shift for traditional aid Recipient Governments in Africa:

1. The necessity to develop greater internal capacities to manage development projects; which includes setting out priorities, planning, negotiations, implementation, and accountability; and

2. Urgent need to create conditions for citizens and commercial enterprises (both private and public) to engage in activities for profit.

5. The implication for African countries to move away from the old colonial and post-colonial Dependent State to a new Developmental (ideally also Democratic) State in a rapidly globalizing world.

The foundation for this new environment, dominated by Developmental Democratic States, is the facilitation of three basic freedoms:-

1. Political freedoms: for citizens to associate and select representatives (democratic element)

2. Economic freedoms: for citizens to produce and engage in commerce (developmental element)

3. Freedom from grinding poverty: for citizens to access food, health, water, education, sanitation, and other services (inclusivity dimension)

For 2018, expectations are that the changing Zimbabwe Government will in this regard tackle four key issues:-

1. Bring finality to stability in property rights (both agrarian and indigenisation) within in a democratic and developmental framework that fosters economic growth.

3. Implement policies that facilitate domestic investments, and then attract foreign (including diaspora) investors as Partners in Development.

3. Allow citizens to engage in trade and commerce without policy or bureaucratic hindrances, to underpin the developmental and democratic nature of a new economy.

4. Implement safety nets targeted at the poor and vulnerable to foster greater inclusivity.

In view of the above, Partners in Development (Citizens, Private Companies, Public Agencies, and Governments) are waiting for the Zimbabwe Government to articulate its plan with measurable milestones; and then demonstrate implementation progress in a way that reconciles the demands of Citizens and Commerce on the one hand with those of the State on the other.  Then all these Partners in Development will come to the party!

 

Mungai N. Lenneiye (t. @udugunation; blog udugu.org/acacia-talk/), Founder Trustee, Udugu Institute: For a Better Innovated Africa.  Udugu Institute promotes innovation in Institutions, Systems, and Technology (IST).  This note is an example of how Systems Innovation can be approached.

 

[i] Talk at AMH Conversations, Thursday 30 November 2017, Celebration Centre, Harare

 

 ZIMBABWE 2017: LOOKING FOR A LOST COMPASS[1]

During the 2007 hyperinflation period in Zimbabwe, a leader from the war of national liberation asked me where I thought they had gone wrong.   My response was: "I think the comrades lost the compass”.  As these same comrades go about finding the compass, the Church could help by giving them “a moral compass” to complement “the economic recovery compass” the country so desperately needs.

At a time of significant shifts in Zimbabwe’s politics, citizens are expecting that these will translate into changes in economic conditions resulting in increased prosperity for all.  However, like the political shifts, economic transformation will require a changed Leadership at various levels; and it is in this transition of both political and economic Leadership that the Church can find ways to reposition itself in the wider society.  It is also about Commitment to its Values of Service.

Leadership as a function of leader, followership, and environment

By Leadership with a capital L, I mean utungamiri rather than mutungamiri (leader); which is the product of leaders working together with their followership after understanding the prevailing environment.  That is one element from where the Church could draw its strength.  Leadership in this context is about the constant interaction between leaders and followers, acting on the environment, and producing a new reality: something aptly demonstrated in Zimbabwe during the month of November 2017.  Leadership is not just about leaders, it is about leaders and followers acting as a team.

Commitment to the Values of Service

The second is around the question of values – in particular the one about Service.  Here, Churches have an advantage over many other players in what we might call a New Political-Economic Ecosystem – the constantly changing environment where all players collaboratively evaluate their roles, positions, resources, actions, goals, and outcomes; and thus allow them to adjust to change.

The Service Value: here I use a lesson in Change Leadership I got reminded about by the late Herbert Sylvester Ushewokunze back in the 1980s as Zimbabwe tried to come to terms with the transition from a colonial to a post-colonial health service.  The post-1980 generation (“the born frees”) have reconnected with the liberation generation to produce a 2017 mood with some similarities with that of 1980; and with it new opportunities to interrogate the 1980s experiences in terms of what the country can learn and apply today.

In my reflections on that period, I put together what I called Ushe’s Mission in Zimbabwe and what Lessons on Change Leadership I learnt from these early years of Zimbabwe’s post-independence reconstruction.  I pulled out seven themes on change leadership[2] (1. Learn from history; 2. Forgive, but never forget; 3. Act on facts; 4. Be an internationalist; 5. Fight for equity; 6. Give every comrade a job; 7. Push for visible change); but on the day dealt with Theme 1: Learn From History – founded on the idea that our past achievements are a good guide on turning what we considered “impossible” yesterday into the “possible” today and tomorrow.

Ushe’s mission sought to learn from history, and this allowed him to link his actions in the Zimbabwe of 1980 with developments that had shaped the history of Zimbabwe for several hundred years.  Ushe had no doubt that history had a role in post-colonial reconstruction.  This need to learn from history enabled him to construct a critical argument as to why change in Zimbabwe was necessary.  He was quick to identify negative and positive elements from the history of Zimbabwe, and to link the analysis with a program of working for change in the health sector and wider society.

The generation of 2017 has much history to learn from even over the last four decades: including the euphoria of independence in 1980, Gukurahundi in 1982-84, Unity Accord in 1986, ESAP in 1991-96, Black Friday of 1998, the Farm Invasions of 2000, Murambatswina in 2005, Hyperinflaction during 2007- 08, and GNU of 2009-13 among others.  While the past cannot be changed, its lessons can certainly be critical in shaping the future.

In Ushe’s Mission in Zimbabwe, an important part of Learning From History revolved around how medicine had evolved and changed during the interaction between Christian Missionaries, Colonial Administrators, and the Natives.  This African Colonial History produced some important lessons:-

1.     That it is possible to nourish the spiritual without neglecting the physical.

2.     That the Church can be a bridge between old and new values, especially socio-cultural, but also extending to the political-economic.

3.     That providing care to the vulnerable is a critical part of nurturing the spiritual-physical nexus.

4.     That the Church does often find itself in conflict with the State, especially due to some of the unintended consequences of its actions (e.g. teaching “natives” to read in order to increase access to Biblical teachings, only to see the reading skills applied to politics followed and an immediate challenge to the State’s authority: what colonial administrators accused the missionaries of doing  -  “you sharpened the knife on both sides, and now it cuts us”.

5.     That in the provision of services, sometimes the Church finds its goals converging with those of commerce and the state – and often to the benefit of those in need of such services and care.

6.     That knowledge gained from one field of work (like health) can be successfully employed in other areas (for example education benefiting through school health interventions; and mental health benefiting from spiritual contributions resulting from the work of churches).

7.     That the Church is not always able to resist pressure from the State when Church work is considered to be undermining prevailing lay policies (e.g. application of apartheid rules and regulations in schools and churches in direct contravention of the Christian view of human beings).

There few examples of what it means to Learn from History to to demonstrate the important role the Church plays in the development of societal values over and above spiritual needs of its congregants.

Turning to the challenge at hand, what does Leadership and Learning From the Past mean for Churches when it comes to the Values of Service? It is my proposition to you that:-

1.     It is important to first get the best reading of the environment (be it political, economic, socio-cultural, technological, legal, and ecological).  This is the field where leaders and their followers engage each other in order to change both their spiritual and materials conditions.

2.     It is critical to recognize that many followers in one context could be leaders in other contexts.  A congregant in a Church looks up to Church leaders, but the same congregant is often a leader of people in Government or in the private sector (and vice versa – a junior official in their place of work could be a leader in the Church).  These changing leadership roles provide the Church with great opportunities to influence the direction a country and society can take.  This Leadership role played by the Church opens a range of opportunities for it to “do good” with continuity in a way not possible in the constantly changing political arena.

3.     Community presence of the Church also gives it opportunities to serve, influence, and support a society’s development path in both spiritual and physical dimensions.

4.     When it comes to providing support to the vulnerable and the underserved, the Church is often a more cost-effective mechanism than governments when it comes to the delivery of education, health, water and sanitation, distribution of agricultural inputs and food, spreading knowledge in civic responsibilities and engagement, as well as looking after the aged, disabled, orphaned, widowed, and others. While such collaboration between Church and State has faced some constraints in the past, there is also an opportunity going forward; for the Church to engage government in using the limited resources available to society so that more beneficiaries can be reached using the social-spiritual and physical infrastructure available to the Church.

These and many other issues are areas where the Zimbabwe youth is expecting action because a State-Church collaboration using lessons from the last 100 years of service to the people of Zimbabwe would not only provide employment opportunities to the unemployed youth, but the delivery mechanisms could be structured in such a way that they re-enforce moral uprightness, caring for the less fortunate, greater accountability and transparency in delivery; while fostering a stronger foundation for the nation to face an increasingly uncertain world of dwindling resources and growing conflicts.  Were the Church to stretch out its hand in this collaborative direction, would it get reciprocation from government?

Many of these issues cannot be addressed without an inclusive dialogue, and that is the challenge the Church and State face today going forward.

I have scratched the surface in exploring the Leadership–Learn from the Past nexus, and although it cannot successfully operate in isolation, it opens the door to a road where complementary lessons in the reconstruction of society can be applied; and consolidate the Values of Service.

The saying that paths are made by walking requires one to take the first step, however long the journey might be.  In the rethinking of how the Church can remain relevant in what is promising to be a different Zimbabwe, many footsteps have been taken by those who came before in the last 100 years.  It is now important to learn from the work of these predecessors and gather the courage needed for the Church and government to take another step towards each other in order to build a Zimbabwean society that is socially, politically, and economically inclusive.

 

[1] Based on a talk on “What the Church could do in the new environment” at a Zimbabwe Council of Churches (ZCC) meeting on 23 November 2017 at Belvedere ZESA Training Centre

[2] Ushes Mission in Zimbabwe: Lessons on Change Leadership, N.M. Lenneiye (2015), SAPES Books, Harare, Zimbabwe.

USHE’S MISSION IN ZIMBABWE: Seven Lessons on Change Leadership[1]

In April 1980, the late Dr Herbert Silvester Musiyiwa Ushewokunze (Ushe) was appointed the first Minister of Health for an independent Zimbabwe under Prime Minister Robert Gabriel Mugabe.  He remained at his post for eighteen months and was dismissed in October 1981.  In that period, and in years to come when he returned to Government, he was perpetually surrounded by controversies.  To his many admirers, Ushe was a man determined to change Zimbabwe in a hurry.  To his detractors (and he had many), Ushe was seeking to wreck Zimbabwe.  With the many developments in Zimbabwe taking place, the issue of what impact his mission would have had on Zimbabwe had it succeeded is no longer so clear-cut and we have an opportunity to debate, learn, and hopefully act.

As Zimbabweans ponder their future with a new dawn in Zimbabwe, they may find it useful to reflect on these seven themes from Ushe’s mission in Zimbabwe to better inform strategies for the reconstruction of national institutions.

 

1. Learn from history

What we did yesterday taught us that nothing is impossible – Fidel Castro

Ushe’s mission sought to learn from history, and this allowed him to link his actions in the Zimbabwe of 1980 with developments that had shaped the history of Zimbabwe for several hundred years.  Ushe had no doubt that history had a role in post-colonial reconstruction.  This need to learn from history enabled him to construct a critical argument as to why change in Zimbabwe was necessary.  He was quick to identify negative and positive elements from the history of Zimbabwe, and to link the analysis with a program of working for change in the health sector and wider society.

The generation of 2017 has much history to learn from even over the last four decades: including the euphoria of independence in 1980, Gukurahundi in 1982-84, Unity Accord in 1986, ESAP in 1991-96, Black Friday of 1998, the Farm Invasions of 2000, Murambatswina in 2005, Hyperinflaction during 2007- 08, and GNU of 2009-13 among others.  While the past cannot be changed, its lessons can certainly be critical in shaping the future.

 

2. Forgive, but never forget

The weak can never forgive.  Forgiveness is the attribute of the strong – Mahatma Gandhi

Ushe’s mission recognized the need to forgive, but never forget.  Through it, he hoped to support the implementation of a realistic policy of national reconciliation adopted by the Government of Zimbabwe led by Robert Mugabe.  He often noted that many ‘white Zimbabweans saw reconciliation as recapitulation and surrender by the Africans rather than the forgiving spirit of Africa’.  The theme on theneed to forgive, but never forget became the basis for tackling the lack of confidence on the part of Africans, and the need to redress past injustices.  While many white Zimbabweans saw reconciliation as a justification for separate existence in the social contexts, Ushe saw it as an opportunity to promote greater understanding between former protagonists.  He was acutely aware of persisting racism on the part of white Zimbabweans, and fear of wealthy white people by poor black Zimbabweans.  In the style of Fanon, Ushe urged his fellow Africans to start with themselves if they were to successfully confront racism and build a new Zimbabwe.  In addition, reconciliation required the ‘rider’ to disembark the ‘horse’ and walk alongside each other.  In the end, reconciliation in Zimbabwe retained bitter memories among the majority poor Africans with continued old attitudes among white Zimbabweans; while the African elite tried to walk a tight rope.  This is the ghost of post-1980 Zimbabwe and which much of post-colonial Africa continued to struggle with.  Ushe’s theme on this mission points to one way of confronting this ghost as Africa tries to find a larger role in the increasingly more globalized international environment.

This spirit of forgiveness combined with a memory of the past is as relevant in 2017 as it was in 1980; with all the pain various groups in society have experienced these last four decades while being called upon to build a more inclusive society post-2017.

 

3. Act on facts

Always bear in mind that the people are not fighting for ideas, for the things in anyone’s head. They are fighting to win material benefits, to live better and in peace, to see their lives go forward, to guarantee the future of their children . . . ― Amilcar Cabral

Ushe’s mission advocates for one to act on facts, a feature rooted in his scientific training as a medical doctor, where diagnosis provided the evidence and justification for the prescribed treatment even if the medicine was unpalatable.  Facts were stubborn and they would guide action before ideology, and from the outset Ushe was aware of the legal framework within which policy would be developed, even with the euphoria of election victory in 1980.  From very on, Ushe wanted a private hospital development project halted until resource availability to the public sector had stabilized.  It quickly became clear that the gulf between private developers and the Minister could not be closed, and Ushe stated he would have the project halted immediately.  Within a month, Ushe was out of a job.  In subsequent discussions after his dismissal from Government, it was clear that Ushe was acutely aware that there was often a high price to be paid for choosing to act on facts in line with this mission’s element; especially when facts were uncomfortable to the ruling elite.

The 2017-generation is quite social media savvy and is daily faced with information overload – which makes it is often difficult to sift facts from opinions.  In this environment, it is even more critical for facts (as far as they can be objectively verified) to guide actions.  It will not be easy, but a necessary task if the post-2017 Zimbabwe is to build a long-lasting development strategy.

 

4. Be an internationalist

African nationalism is meaningless, dangerous, anachronistic, if it is not, at the same time, pan-Africanism – Mwalimu Julius Nyerere

Ushe’s mission was informed by the need to be an internationalist, arising from his experience in the world he had known, as a medical student in South Africa, as a guerrilla fighter in Mozambique, as a persuader of international organizations to support the struggle for Zimbabwe, and as a development worker interacting with individuals from all over the world.  Ushe had a great respect for intellectual discourse and was eager to engage in one-on-one dialogue with those he thought his equal.  He certainly saw himself as a global citizen, rooted in the African cultural milleu, but immersed in western technological approaches.  It is to the internationally defined primary health care (PHC) approach that he turned to when articulating a rationale for change in the new health service; in spite of attacks by the out-going colonial health administration as someone out to wreck the health service by advocating for the PHC approach.  This mission requiring one to be an internationalist gave Ushe an opportunity to freely learn from others. It is the adoption of this mission’s element that enabled Ushe to mobilize members of his team from all walks of life – irrespective of tribe, colour, gender, or nationality.  The mission’s element provided Ushe with a mechanism to make quick progress in policy formulation by tapping into international expertise while building relevant capacities among his fellow Zimbabweans.

In the Zimbabwe of 2017, internationalism still comes naturally to a generation raised on global platforms of Internet and social media; and many with relatives in the Diaspora where Zimbabweans have gone to trade their skills. Maintaining this great inheritance from those who led the anti-colonial struggle should serve the new generation well as they tap into global innovations and adapt them to the resolution of local problems.

 

5. Fight for equity

The rich man’s dog gets more in the way of vaccination, medicine and medical care than do the workers upon whom the rich man’s wealth is built – Samora Machel

Ushe’s mission on the need to fight for equity was interwoven with a social democratic movement that had its roots in social democratic parties of Europe going back to the nineteenth century.  Inequalities were at the heart of conflicts in colonial Rhodesia, and would continue to pose a major threat to social stability; and he put forward a strong case for addressing inequalities.  He was concerned that failure to address inherited inequalities would undermine the whole social experiment of reconciliation.  In pursuit of his mission to fight for equity, Ushe used health to demonstrate the dimensions of inequalities, many of them mirrored in the wider society.  He was not calling for a uniform spending of health resources per citizen as mathematical equality would demand, but was instead calling for a shift in resource allocation so that those gross inequalities that allowed gaps to widen between the well-served and the under-served could be narrowed.  He was particularly keen to use the motto of ‘those who can afford should pay’ so that Government resources could go to the poor unable to pay for services.  On the face of it, this sounds reasonable today, but it was not so in the post-Rhodesia period where Ushe was working to transform the health service.  The minority that had received so much from the State was most unwilling to give up a few privileges to buy goodwill and cooperation from the underserved African population.

Zimbabwe’s post-2017 changes are going to produce losers and winners, and it will be important for the winners not to leave behind the losers – an act that would initially be a potential source of social conflict, followed by income disparities, and eventually resentment as those excluded from economic opportunities might produce open conflict in society.  Policies supportive of an inclusive economy in the post-2017 Zimbabwe will in the long-term serve the new generation well by creating firm foundations for a stable society.

 

6. Give every comrade a job

Life’s most persistent and urgent question is, what are you doing for others? – Martin Luther King, Jr

Ushe’s mission needed those in power to give every comrade a job, convinced that failure to do so would be a grave mistake and would make it impossible for Zimbabwe to achieve the vision of peace and prosperity. In his first ministerial job in health, Ushe stated the mission simply and directly as the goal of integrating military health cadres into the Ministry of Health.  Ushe was driven by this mission’s theme to give every comrade a job, believing that the future of Zimbabwe could only be assured when every comrade was productively engaged and totally integrated into the life of a new Zimbabwe.  He was in a hurry to implement this particular them of his mission, often impatient with those he saw as having “forgotten the comrades!”  He sensed that the future of Zimbabwe depended on the success of this mission’s theme to give every comrade a job, and he risked everything in his political career on account of its implementation.

With over 90% of the current Zimbabwe young generation not engaged in formal employment and often eking a living in the informal economy, this is a theme that the post-2017 leadership in Zimbabwe would be well advised to explore.  At the same time, leadership will need to recognize that since the public sector cannot be a source of employment, the key to more jobs will be the creation of opportunities for the young generation to use their knowledge, expertise, and access to innovation for self-employment while preparing to become employers.

 

7. Push for visible change

It always seems impossible until it’s done – Nelson Mandela

Ushe’s mission urged everyone to push for visible change, a feature that was at the heart of the conflict that finally saw him out of office so early in the life of Mugabe’s government in its formative years.  Lancaster House had frozen Zimbabwe’s anti-colonial struggle just on the eve of its victory and the result was one where racial privileges were left intact and protected by law.  Getting capable and qualified Africans in positions of authority quickly was one victory that would demonstrate to the majority that the change promised to them was coming; to be quickly followed by a marked change in the type of health services available.   The need to push for visible change led Ushe to dig up facts from an uncomfortable history for the elite, irrespective of race.  The arguments he advanced made many in government nervous that there would be an exodus of white people out of Zimbabwe, and possibly military retaliation by South Africa seeking to maintain the status quo in Zimbabwe.  Ushe’s response was that the future of Zimbabwe lay in the white population making some sacrifices so that space could be created for the majority to participate in society and feel the need to strive for stability.  For Ushe, change was necessary to forestall destructive radical change arising from the frustrations of a majority.  For many in Zimbabwe, Ushe’s push for visible change was perceived as a destabilizing force and a threat to the new order.  Ushe’s response was that reconciliation did not mean total protection of the white minority at the expense of the African majority, but an opportunity for controlled change so that a new Zimbabwe could truly be born from old Rhodesia.  Although the Prime Minister, R.G. Mugabe, often found the message from Ushe uncomfortable, he also often identified with the desired goal and might explain the rather unpredictable deployment that characterized Ushe’s various postings to ministries where the old order was proving rather stubborn in the face of change.  In Ushe’s words, he was a ‘blunt instrument’ used to open up space for change in Ministries and agencies with hard core advocates for the status quo and afraid of a future where their privileges would be challenged.

In 2017, the theme of pushing for visible change is as relevant as it was in 1980, and the post-2017 generation will need to find its own ways to push for visible change.  However, the out-going generation has over the last four decades provided glimpses of how this can be done – with varying degrees of success while society keeps adjusting to new conditions and environments.  While the old generation cannot tell the coming generation how to effect change, their actions do provide sufficient insights on pitfalls and success for those keen to learn from this history, act on facts, and be willing to fight for a more inclusive and equitable society.

 

 

 

Mungai N. Lenneiye (t. @udugunation; blog udugu.org/acacia-talk/),, Founder Trustee, Udugu Institute: For a Better Innovated Africa.  

Udugu Institute promotes innovation in Institutions, Systems, and Technology (IST).  This note is a modified extract from Lenneiye, N.M. (2015) Ushe’s Mission, SAPES Books, Harare.

 

[1] Taken from a 2015 publication of the same title by the author

ZIMBABWE ECONOMY IS DRIVEN BY THE SELF-EMPLOYED  - 10 important messages from players in the Zimbabwe Informal Economy

“A Private Sector Dialogue Forum on the Informal Sector”[1] on 17 October 2017 in Harare brought together at least seven representatives from organisations[2] working with and representing players in the Zimbabwe Informal Economy to dialogue with experts and representatives from at least six organisations[3] engaged in the formal sector. Below are ten key messages I heard as facilitator of the dialogue characterized by intense debates and engagements among all participants.

1. We need to stop the selective criminalisation of labour

Players in the informal economy are self-employed rather than sellers of their labour to others; so “why are we being criminalized?” – asked one of the players. Global lessons suggest the need for a systematic approach to the regularization and mainstreaming of informal economic activities.  The case was made for a Self-Employment Policy (SEP) in place of Destroying Informal Systems. An appropriate SEP would moderate the movement of individuals from formal employment to self-employment, and sometimes back to formal employment as economic conditions change.  Participants wanted to know why individual “consultants” are treated differently from “vendors” and both are sellers of labour? Participants argued that “decent jobs” in the current debates should give way to give way to “decent work” (and get rid of selective criminalization of labour).

In this debated, it is essential for players to understand WHAT is criminalized, by WHO, and WHY in order to move from criminalization to facilitation.  “Dislocation and relocation should be within the Zimbabwe constitutional and legal provisions and frameworks” – said a leader of informal traders.

2. We need a paradigm shift from Day to Night Economies

The traditional and formal “Day Economy” has over the last two decades been dying at the hands of macro-economic difficulties driven by policy inconsistencies; while a “Night Economy” as seen in a number of cities is now dying at the hands of old regulations being enforced in a radically different global economic climate.  In this paradigm shift, we need to “tackle underlying causes of the vending problem instead of tackling economic symptoms” arising from a decaying economic structure.  Local Government by-laws and national spatial planning guidelines would in such a approach inform “a new framework for utilizing revenue from the informal economy” rather than driving its players out of the market.

3. We need a Developmental State

“As a society, we need to give life to the vision of self-reliance, sustainable livelihoods, and empowerment through the informal economy”  argued one of the players in the informal economy.

The many structural issues limiting the growth of enterprises from micro to small through to medium and large sizes need a partnership between public and private sector, enabled by a State that promotes inclusive growth.  The challenge is of ensuring that “government enables” business through appropriate SEPs instead of “controlling them”.  SEPs would require government to focus its attention to economic policy-making and a sound regulatory framework while moving away from competing with and seeking to control private sector economic players.  In a developmental state, the informal economy must “move from being on the table” (discussed as a problem) to “being at the table” (as a partner engaged in dialogue).

4. We are the main economy

It is estimated that 94% of Zimbabweans are in this economy; which is a change since the last FINSCOPE survey of 2012.  It is estimated that US$7.4 billion is circulating in this economy, which is over 50% of the country’s GDP. As one of the leaders of informal traders observed:

“Government and the formal economy have no money, but people have the money.  Lack of investment finance is a policy issue, not just about Foreign Direct Investments. If the Reserve Bank of Zimbabwe puts in place the right polices, we in the informal sector could finance capital investments instead of being just traders”.

5. We suffer from poor financial inclusion

Many informal players have low incomes – it was stated that more than 50% of cross-traders make less than $100 a month; and what they needed are appropriately structured financial products. 

In a situation where 70% of players in the economy are financially excluded, then it can be concluded that the 94% of the population who are in the informal economy are excluded; and therefore existing financial instruments are woefully inadequate to respond to the needs of this new economy.  A key element identified in the evolution of supportive financial inclusion was the need to “reconcile the culture of loan non-repayment with good banking practices in order to support the design of sound financial products”

6. We need to innovate from traditional sub-sectors

The perspective was that as long the formal economy is “stuck” in the old ways of doing business and the informal economy remains in “vending” mode, innovation into new areas of business will remain difficult.  There is need for better responses from all players to address the missing links between informal and formal sectors as a way of innovating the whole economy into new sectors and sub-sectors.   

7. We need to close gaps in policy contents and drivers

Evidence-based policy making approaches are inadequate, and there is a recognition that evidence-based policy dialogue can lead to innovations within the “Informal-Formal Economy Arc” where formal employees become self-employed before graduating to and players in value addition in need of appropriate financial systems on the road to greater formalisation.   There should be “no more talk shows and policies without implementation”.

8. We are poorly connected to formal economic structures and systems

Nearly 85% of players do not belong to any Business Membership Organization (BMO). Cost of membership to BMOs is considered an obstacle, but being non-members weakens the voice of informal players in the economy.

There are very few networks/linkages with formal businesses, a situation characterized by poor and weak “voice” for these players who also recognize the need for being united and better organized.

9. We recognize the need for respectful dialogue and business practices

The rights of different players in the economy need to be respected in order to build an integrated economy between vendors, street traders, small and large retailers, wholesalers, distributors, manufacturers, producers, and others acting in various capacities.  This is the foundation for building an inclusive economy.

10. We can see seeds of The New Economy

The Old Mutual is building an SME Centre that will become a modern market for those transitioning from informal to formal trade, and this Centre in Harare offers a glimpse of new directions where traditional economic players engage the emerging players in order to create The New Economy through dialogue and collaboration.  This trend in engagement underlines the need for a “unified voice from a Representative Organization by those who drive the informal economy” so that they can be more effective partners of other players in the economy.

 

Mungai N. Lenneiye (t. @udugunation; blog udugu.org/acacia-talk/), Founder Trustee, Udugu Institute: For a Better Innovated Africa.  Udugu Institute promotes innovation in Institutions, Systems, and Technology (IST).  This note is an example of how IST can be approached in the case of important economic players.

[1] “A Private Sector Dialogue Forum on the Informal Sector” jointly convened by the Centre for International Private Enterprise (CIPE) and Oxley Consulting on 17 October 2017 in Harare

[2] Street Wise Informal Traders’ Association (SWITA), National Vendors Union of Zimbabwe (NAVUZ), Zimbabwe Cross-Border Traders’ Association (ZCBTA), Zimbabwe Chamber of Informal Economy Associations (ZCIEA), Vendors’ Initiative for Social and Economic Transformation (VISET), Women in Mining, and Bulawayo Vendors and Traders Association (BVTA).

[3] Labour and Economic Development Research Institute of Zimbabwe (LEDRIZ) , Zimbabwe Congress of Trade Unions (ZCTU), Zimbabwe National Chamber of Commerce, Dairibord Holdings Ltd, Bankers’ Association of Zimbabwe, and Association of SADC Chambers of Commerce and Industry

FIVE REASONS WHY ORGANIZED FARMERS BUILD SUCCESSFUL ENTERPRISES[1] - lessons for the “Federation of Farmers’ Unions” in Zimbabwe

Farmers’ Organizations succeed when

1. They are large

2. They meet some minimum operating conditions

3. They provide specialized services to their members

4. They share and learn from common challenges

5. They successfully tackle unique local issues

In September 2017, Farming Unions in Zimbabwe attained an important milestone on the journey towards an all-inclusive Federation of Farmers’ Unions (FoFU – hereafter referred to as The Federation) was launched and is expected to become a driving force for making sure that farmers succeed in their core business to not only make Zimbabweans food secure at the household and national levels; but also contribute to the nation’s economic security by integrating agriculture in the myriad of value chains that develop an integrated and sustainable economy. 

The sharing of regional and international experiences with The Federation was very much informed by the African proverb that says “one who does not travel thinks his mother is the best cook”; and the farmers of Zimbabwe got a glimpse of the work “mothers” elsewhere have tried to tackle feats similar to what The Federation has so bravely set out to do.

The Federation has a historical task, aptly captured by a quote by Rashid Pertev in a paper presented at the International Federation of Agricultural Producers:-

“If there is one principal lesson farmers can draw from history, it is the following: that when farmers are not strong, many sections and sectors of society are ready not only to tell the farmers what they should do, but even worse, to speak on their behalf...  Farmers’ voice cannot be obtained without farmers’ organizations… their representative organizations, structured from grassroots to the international level as their legitimate voice.   In short, an effective farmers’ voice is not only the basis of mutual respect and democracy, but it is also the true basis for agricultural and rural development”.

That sums it up. It basically summarizes the historical responsibility The Federation has to all the farmers of Zimbabwe, their families, and others who make up the nation.

The rest is elaboration, in this case using a few observations from select Farmers’ organizations from around the world.

For a network of such global magnitude, it is difficult to select from all the pertinent issues farmers and their organizations face and deal with, but five themes on successful farmers’ organizations have been identified as characteristics that are relevant to the Zimbabwe Federation of Farmers’ Unions at this early stage, and could be used in the coming early formative years.

1. They are large

·      The International Federation of Agricultural Producers brings together 82 national level farmers’ organizations from 57 countries, and represents over 500 million family farmers (with a population of nearly 2.5 billion individuals).

·      The Philippines Federation of Free Farmers was established in 1953 and has over 200,000 members from 50 provinces representing fishermen, agricultural labourers, agricultural tenants, owner-cultivators, and settlers. 

·      The Eastern Africa Farmers Federation was formed in 2001 and represents over 20 million farmers (a population of over 100 million) in Eastern and Central Africa.

·      The Zambia National Farmers’ Union has countrywide coverage representing the agriculture industry (including small and large scale farmers as well as agribusinesses).

·      The National Farmers’ Federation of Australia was formed in 1979 and brings together presidents of 31 state-level farmers’ organizations into a policy-making Council.

In Zimbabwe, The Federation plans to bring together around 1 million farmers spread out in over 70 Rural Districts and Urban Centres; with the majority of these farmers being smallholder operators with limited capital, poor access to markets and knowledge, but with a big passion for farming.  The Federation also has in its midst a small and highly experienced group of farmers who need an opportunity to get back to the business of farming.  These are both challenges and opportunities for The Federation to tackle and exploit, respecitvely.

2. They meet some minimum operating conditions

·      As member organizations, they allow people to subscribe and to pay a membership fee (a subscription).

-       They are mostly non-political, not-for-profit, and democratic.

-       They have a particular purpose and connect people with common interests – in this case farming.

-       They often have commercially-run membership subsidiaries separate from the core organisations.  The Philippines Federation of Free Farmers owns self-managed cooperative projects and runs consumer stores on their own.

-       They typically rely on their membership network to provide services to their members.

In Zimbabwe, the Federation will meet these minimum conditions, but it has to work hard to develop some of the required new competences so that The Federation can serve all its members and not just the few. Opportunities exist to run commercial entities that not only serve all members, but to also tap into their market potential – as buyers of inputs, equipment, and insurance, as well as being savers.  These are all areas where The Federation would serve its members while building a formidable commercial network to ensure long-term sustainability of its operations.

3. They provide specialized services to members

·      The Philippines Federation of Free Farmers helps its members with subsidized training and financial audit services; and also administers a life insurance program for individual members.

In Zimbabwe, there are many agencies that could partner with The Federation to initially provide subsidized services as a path to helping farmers become customers of the future. Whether these are corporates, NGOs, Development Partners or Philanthropists partners, there is much interest and potential.  This is not to mention Government departments that although short of money have enormous expertise and knowledge that if appropriately tapped could help members of the Federation get on the road to successful farming.

4. They share and learn from common challenges

·      Good farmers’ organizations nurture and advocate for farmers on such issues as markets, productivity, capacity building, information, global and regional trade, among others.

·      They foster linkages with other private sector players (over inputs and outputs markets).

In Zimbabwe, opportunities exist to lobby various players to support members of the Federation, but it might require an adjustment in strategies and a reminder that when any one of The Federation’s organizations lobbies, it does so for all and not for partisan interests based on past alliances and interests.  The interests of all federation members would need to be above individual union interests even if it means sharing resources and influence that an individual union has had access to in the past.   This will be hard, but a necessary condition for building a single federation from the many parts that have come together to make it. This coming together of four Unions to form a federation is very much part of the “philosophy of unity in action” captured by an African proverb: “one finger cannot kill a louse”. 

5. They successfully tackle unique local issues

The Eastern Africa Farmers Federation was championed by national farmers’ organizations from Kenya, Tanzania, Uganda, Rwanda, and DR Congo to enhance regional cohesiveness and socio-economic status of farmers

In Zimbabwe, the Federation will continue to be faced by issues from the past as well as current concerns occupying the minds of farmers.  Without much elaboration, just a few critical issues that The Federation might find itself tackling, and where many countries around the world are also still looking for answers; but somehow are determined to find ways to make progress.  Critical questions include:

·      The issue of who owns land that in Zimbabwe goes back to nearly two hundred years and disentangling it will continue to be difficult but not impossible – be it over reparations, compensation, national identify, and international linkages, among others.

·      The issue of how land is owned has historically generated conflicts everywhere as instruments of ownership, governance and accountability, transparency, and others are tackled at different times and through different means around the world.

·      The issues around why anyone owns land are at the heart of economics, social, cultural, and political discourses.  The creation of efficient ways to make land productive, to distribute it to those who need it as well as to those who can use it, are particularly important in these discourses.  Investments, taxes, land holding sizes, and other issues come to the fore in many societies across Africa and they all demand solutions. 

In Zimbabwe, a federation that can become an effective voice for all its members can play a critical role in helping various stakeholders find workable solutions to what appears as intractable problems of (1) who owns land, (2) how they own it, and (3) why they own it; so that the Zimbabwe of 2030 could have put to bed issues that have dogged land issues for nearly two hundred years – during which time the country saw major movements of populations from the South in the early 1880s, from Europe in the late 1880s and early 1900s, and internally from marginal to more productive land after 2000: with each movement compounding issues from the previous era.  By bringing all farmers’ unions together and agreeing on a common strategy, the Federation can be an important player in resolving some of these issues to the benefit of the whole economy and society at large.

It is difficult to do justice to the breadth of experiences from around the world and regionally, but these few ones point to specific elements and experiences that The Federation could learn from.  Examples abound on country-level experiences where farmers have worked together to achieve both big and small things, and The Federation will in future have its own successes to share with others.

Below are a few examples from where farmers and their organizations have worked with various players like Governments, the private sector, international organizations, non-governmental organizations, community-based organizations, and others to record notable successes in agriculture while playing a critical part in economic and social development.

·      In Western Europe, North America, and Japan, farmers have worked with Governments and other stakeholders to ensure that targeted agricultural subsidies provide an industrial foundation that has made these countries dominate world food markets.

·      In China, farmers worked with government and others to turn failed collective farms into successful privately-owned farming enterprises.

·      In parts of Brazil, farmers have worked with State Governments and other stakeholders to support a land reform program that is making Brazil a global player in food markets.

·      In Australia, the National Farmers’ Federation tackles critical policy issues in productivity, access to markets, digital connectivity, natural resource management, biodiversity, health and welfare, education and training, and workplace relations; a process that has made a great success of agriculture in a particularly hostile physical environment.

Coming closer to home;

·      In Malawi, NASFAM has over the years successfully supported a large number of small to medium scale farmers in securing inputs on time and at reasonable costs.

·      In Zambia, farmers have overcome the death of critical parastatals and restored effective grain production and distribution through commercial channels.

·      In Botswana, farmers have survived being weaned off heavy government subsidies associated with food self-sufficiency and successfully concentrated on areas of comparative advantage like livestock.

·      In Namibia, farmers have successfully deployed modern technology to give the country the badge of being the only country in Africa whose beef gained access to the lucrative US market.

·      In Kenya, farmers have managed to own and successfully manage the tea industry using a membership-owned parastatal-like body (the KTDA).

·      In Uganda, Ethiopia, and Tanzania, farmers have successfully taken advantage of Government liberalization of the coffee industry to ensure that farmers get “a fair price” from the international community (having learnt from several coffee-producing countries in Latin America).

·      In Kenya and Ethiopia, farmers have successfully responded to the international market for flowers and fresh produce in the Northern hemisphere by meeting stringent supply and quality standards.

·      In South Africa, farmers have successfully responded to rising purchasing power inside the country and across the African continent by increasing production at competitive prices.

·      In Ghana, farmers have successfully organized to produce organic cacao for the production of fair trade chocolates that compete with the best in the world.

·      In several countries across Africa, farmers have successfully tapped into agricultural expertise developed in Zimbabwe over the last one hundred years and adapted it for local production in the last decade.

There are enough experiences from around the region, Africa, and the world at large for The Federation to learn from, then copy, adapt, improve, innovate and then share with others faced with similarly difficult issues around land, agriculture, and development.

 

Mungai N. Lenneiye, Founder Trustee, Udugu Institute: For a Better Innovated Africa.  

Udugu Institute promotes innovation in Institutions, Systems, and Technology (IST).  This note is an example of how Institutional Innovation can be approached in a particularly complex sector.

[1] Based on an address during the launch of “ Federation of Farmers’ Unions” on 21 September 2017 at Robbie Mupawose Centre, Harare Agricultural Show Grounds

CAN ZIMBABWE AVOID BOND NOTES FROM TURNING INTO BEARER CHEQUES?[1]

November 27, 2016  /  Mungai N. Lenneiye

Bond Notes is another attempt to innovate the Zimbabwe financial sector; but like all innovations, its success will depend on market uptake driven by the functionality it delivers to users and the trust it builds in the market. US$-based Bond Notes can only avoid the fate of the Zimdollar-based Bearer Cheques of 2006 through consistent policies and coordinated actions by Monetary (RBZ), Fiscal (Ministry of Finance), and Trade (Ministry of Industry) leadership working with the productive sector of Agriculture, Mining, and Manufacturing to restore market-driven confidence and trust underpinned by transparent and predictable economic recovery and development strategies.

The 2006 Zimdollar denominated Bearer Cheques were the first “Bond Note-alike” to be issued in Zimbabwe, and drove the emergence of parallel trade using South African Rand, US$, British Pound, and even local currencies from neighbouring countries as hyper-inflation took root during the 2006-08.  In the same period, citizens also resorted to barter trade, but as goods for barter are cumbersome to handle and the supply of hard currencies was limited as well as illegal, citizens had to find alternative means to effect transactions. Fuel Coupons emerged as the first US$-denominated “Bond Notes”, but issued by a private company.  Fuel Coupons were backed by of fuel sold locally and imported from international traders.  Lessons of how the Fuel Coupons (the most famous and enduring of which was the Redan Fuel Coupon) worked alongside the hard currencies even before they were legalized in 2009 as the Bearer Cheques died should provide a pointer as to how the proposed RBZ Bond Notes might fare. During the 2000-2010 decade, Zimbabweans went through experiences that resonate with the historical emergence of money, and these lessons are still relevant as the country re-formulates future monetary policies inclusive of Bond Notes.

Historical evolution: In what is now present day Iraq, merchant bankers gave loans to farmers and traders engaged in carrying goods between cities at least 2000 years Before Christ (BC). By the time of the Roman Empire, temples were making loans and they had further innovated by taking deposits and changing money – a story familiar with those who read the Bible where Jesus drove out moneychangers.  Money lending had by now spread to China and India.  However, modern banking is less than 700 years old, starting with Renaissance Italy in all the large cities, where the earliest known State Deposit Bank was established in Genoa in 1407. 

By the 17th and 18th centuries, banknotes were issued as merchants in London started storing their gold with goldsmiths for safe keeping in private vaults for a small fee.  Receipts issued for these gold deposits clearly certified the quantity of and purity of gold and other precious metals held.  Soon, goldsmiths were lending out money on behalf of the depositor, a practice that gave rise to Promissory Notes that later evolved into Banknotes to represent the value loaned to the goldsmith.  Borrowers paid interest to the goldsmiths on these deposits.  Promissory notes were payable on demand, repayable over a longer period (with interest).  This marked the birth of money based on credit. 

The Bank of England issued the first banknotes in 1695, and bankers’ clearance house was established in London in the 19th century to facilitate transactions clearance by multiple banks.  At the same time, international finance on a large-scale was being pioneered by the Rothschilds; financiers of the British government to purchase the Suez Canal.

Knowledge accumulated over centuries of human history in banking has produced banks that generate revenue from interest, transaction fees, and financial advice.  In response to the economic and business cycles of boom and bust, banks have progressively relied on fees and financial advice; and have become less dependent on interest on loans to smoothen their financial performance.  This kind of response to market conditions by banks has become a major subject for policy makers, bankers, analysts, and others concerned with the direction of world economic development.  It is in this world that Zimbabwe is reviving a hybrid instrument (Bond Notes) that so far sounds like a cross between a promissory and a regular banknote. 

Will Bond Notes go the way of the Bearer Cheques of 2006 or the Goldsmiths promissory notes from a few centuries back?  The ability of RBZ to innovate and to skilfully build trust, empathy, and integrity will to a large extent determine whether Bond Notes will follow the Bearer Cheque to the heap of history or fly like the Fuel Coupons.  The following five sub-headings speak to this challenge.

Innovation: Banking has shown innovation, going from financiers of grains, to traders in temples, to using goldsmiths to store wealth, to issuing promissory notes and banknotes, to establishing dedicated institutions for financial transactions, and finally working with Governments to establish central banks. Mobile banking is the most recent innovation where traditional bankers were hauled kicking and screaming into 21st century mobile digital banking.   The RBZ Governor in 2006 innovated by issuing Bearer Cheques while the owners of Fuel Petroleum innovated by issuing Fuel Coupons to enable motorists to draw fuel from designated fuel outlets. Bearer Cheques lost value as their supply exceeded available Zimdollar notes, and eventually became worthless when their supply exceeded the value of goods in the market; while Fuel Coupons retained value because supply was carefully matched with fuel stocks.  Thus, even innovation must play within old rules of economics, which balance supply with demand.  In 2014, the RBZ and Ministry of Finance innovated to produce Bond Coins to ease transactions and address pricing problems because small change coins were in short supply; and bond coins primarily succeeded because they followed market forces.

Skills: It takes more than innovation to connect the dots (as observed by Steve Jobs), linking what is happening today with what happened in the past; and then using the resulting pattern to predict what is likely to happen in the future.  The ability of RBZ management to connect the dots over the last Century will inform decisions that can nurture or kill the Bond Notes initiative.  The skill of balancing income with expenditure is crucial in maintaining the value of Bond Notes, failure of which led to an over-printing of Bearer Cheques that were not backed by corresponding government revenues and economic production.  The wear and tear of one US$ notes had informed a 2014 policy option to produce a Bond Dollar Coin to complete the family of Bond coins; but it was instead overtaken by the 2016 proposal to issue Bond Notes of $2 and $5 at a time of acute cash shortage in the market which effectively removed the principle of voluntary adoption associated with Bond coins, and triggered panic in the market.  Fuel Coupons succeeded because fuel was immediately available on demand; and similarly with Bond coins, sweets and other small items as well as Rand and US$ coins were still freely available.

Trust: Whether by a farmer or trader, the early banker had to be trusted by those who handed over their grain for inter-city trading.  Equally, goldsmiths who became the early gold-backed currency traders had to be trusted by both the owners of gold in the vaults and those accepting promissory notes against the gold value.  This trust remains a key ingredient of good banking – whether commercial or state central banking.  Trust is still king in any banking and RBZ is still in the early stages of regaining trust lost during the hyper-inflationary period that saw forced conversion of US$ deposits into Zimdollars without the consent of account holders.

The global use of gold standard was abandoned in 1971 when it became clear that the value of US$ in the market was more than the gold held in the vaults of central banks as a result of aggressive “quantitative easing” – simply, money printing!  The result of extreme quantitative easing in Zimbabwe was hyperinflation during the last decade; and it is quite understandable for bankers and others in the business world to be sceptical about the idea of a gold-backed currency in a US$14 billion Zimbabwe economy when even an US$18 trillion US economy cannot realistically go down that road. Bond Notes, with the right measures in place, are a realistic route to take.

By December 2009, Zimbabweans had lost all trust in the RBZ and as a result traders and merchants refused to accept the Z$100 trillion note for transactions.  Over a 5-year period, Zimbabweans learnt to live within their means, produced a trading economy, but still fell short of being a production economy as long as obstacles to the full exercise of private property rights remained.  Government borrowing during the 2014-15 period produced early indications that the pre-2006 economic conditions were being recreated, only to be confirmed by the emergence of cash shortages, restrictions on cash withdrawal, the announcement of Bond Notes, and the re-introduction of bureaucratic restrictions in 2016 to regulate trade and related economic activities.

Empathy: Successful bankers have had to show empathy to their customers or clients (that excludes the mythical Shakespearean Shylock character – who by all accounts was probably not a successful trading banker anyway!).  Understanding the difficulties, possibilities for growth and development, and working with clients to find solutions has been a feature of successful banking; a feature that has gone from commercial to state to international development banks – the ability to see both sides of the coin so that those whose accounts are in the black can be supported to avoid going in the red, and those in the red are mentored and coached on their path back to black.

The Lima process was a sign that International Financial Institutions (IFIs) were ready to be empathetic with Zimbabwe’s national debt and arrears clearance strategy.  Locally, the RBZ’s focus on issues of competitiveness was also a sign that appropriate monetary policies would be in place to stimulate production and grow the economy.  However, the Monetary Policy of 4 May 2016 followed by a reversal of measures by the Ministry of Finance in the Mid-Term Budget to manage expenditures badly dented the Lima Process; as only import restrictions (in the form of Statutory Instrument 64) were left in place to address complex policies that required comprehensive Monetary, Fiscal, Production, and Trade Policies.  It is as though the economy is in the hands of the proverbial carpenter with only a hammer after losing the saw, planer, and other tools needed in the trade; while the population continues to expect government empathy with its myriad of basic needs.

Integrity: Integrity is the combined successful coming together of trust, empathy, skills, and innovation.  Integrity on the part of leadership in the banking sector is the one value that explains the presence or absence of “Banking Ethics” that has been a scourge of bank failures across Africa and around the world; and eroded trust in banks.   Ultimately, professionals with integrity give rise to leaders of integrity; and it is such leaders who work with the generality of the population to define historical periods when humans successfully exploit the prevailing environment to attain progress in human development.  Handling the Bond Notes policy with integrity (including a functional Currency Board in a broader framework of unleashing Zimbabwe’s production capacities) would go a long way in rebuilding the trust populations have lost in the RBZ; and therein could lie the difference between Bond Notes dying the Bearer Cheques death or living the Fuel Coupons’ life.

 

 

 

[1] This article was issued under the title “The emergence of bond notes” in the Financial Gazeete 2016 Top Companies Survey magazine sponsored by Old Mutual.

CAN ZIMBABWE AVOID BOND NOTES FROM TURNING INTO BEARER CHEQUES?[1]

Bond Notes is another attempt to innovate the Zimbabwe financial sector; but like all innovations, its success will depend on market uptake driven by the functionality it delivers to users and the trust it builds in the market. US$-based Bond Notes can only avoid the fate of the Zimdollar-based Bearer Cheques of 2006 through consistent policies and coordinated actions by Monetary (RBZ), Fiscal (Ministry of Finance), and Trade (Ministry of Industry) leadership working with the productive sector of Agriculture, Mining, and Manufacturing to restore market-driven confidence and trust underpinned by transparent and predictable economic recovery and development strategies.

The 2006 Zimdollar denominated Bearer Cheques were the first “Bond Note-alike” to be issued in Zimbabwe, and drove the emergence of parallel trade using South African Rand, US$, British Pound, and even local currencies from neighbouring countries as hyper-inflation took root during the 2006-08.  In the same period, citizens also resorted to barter trade, but as goods for barter are cumbersome to handle and the supply of hard currencies was limited as well as illegal, citizens had to find alternative means to effect transactions. Fuel Coupons emerged as the first US$-denominated “Bond Notes”, but issued by a private company.  Fuel Coupons were backed by of fuel sold locally and imported from international traders.  Lessons of how the Fuel Coupons (the most famous and enduring of which was the Redan Fuel Coupon) worked alongside the hard currencies even before they were legalized in 2009 as the Bearer Cheques died should provide a pointer as to how the proposed RBZ Bond Notes might fare. During the 2000-2010 decade, Zimbabweans went through experiences that resonate with the historical emergence of money, and these lessons are still relevant as the country re-formulates future monetary policies inclusive of Bond Notes.

Historical evolution: In what is now present day Iraq, merchant bankers gave loans to farmers and traders engaged in carrying goods between cities at least 2000 years Before Christ (BC). By the time of the Roman Empire, temples were making loans and they had further innovated by taking deposits and changing money – a story familiar with those who read the Bible where Jesus drove out moneychangers.  Money lending had by now spread to China and India.  However, modern banking is less than 700 years old, starting with Renaissance Italy in all the large cities, where the earliest known State Deposit Bank was established in Genoa in 1407. 

By the 17th and 18th centuries, banknotes were issued as merchants in London started storing their gold with goldsmiths for safe keeping in private vaults for a small fee.  Receipts issued for these gold deposits clearly certified the quantity of and purity of gold and other precious metals held.  Soon, goldsmiths were lending out money on behalf of the depositor, a practice that gave rise to Promissory Notes that later evolved into Banknotes to represent the value loaned to the goldsmith.  Borrowers paid interest to the goldsmiths on these deposits.  Promissory notes were payable on demand, repayable over a longer period (with interest).  This marked the birth of money based on credit. 

The Bank of England issued the first banknotes in 1695, and bankers’ clearance house was established in London in the 19th century to facilitate transactions clearance by multiple banks.  At the same time, international finance on a large-scale was being pioneered by the Rothschilds; financiers of the British government to purchase the Suez Canal.

Knowledge accumulated over centuries of human history in banking has produced banks that generate revenue from interest, transaction fees, and financial advice.  In response to the economic and business cycles of boom and bust, banks have progressively relied on fees and financial advice; and have become less dependent on interest on loans to smoothen their financial performance.  This kind of response to market conditions by banks has become a major subject for policy makers, bankers, analysts, and others concerned with the direction of world economic development.  It is in this world that Zimbabwe is reviving a hybrid instrument (Bond Notes) that so far sounds like a cross between a promissory and a regular banknote. 

Will Bond Notes go the way of the Bearer Cheques of 2006 or the Goldsmiths promissory notes from a few centuries back?  The ability of RBZ to innovate and to skilfully build trust, empathy, and integrity will to a large extent determine whether Bond Notes will follow the Bearer Cheque to the heap of history or fly like the Fuel Coupons.  The following five sub-headings speak to this challenge.

Innovation: Banking has shown innovation, going from financiers of grains, to traders in temples, to using goldsmiths to store wealth, to issuing promissory notes and banknotes, to establishing dedicated institutions for financial transactions, and finally working with Governments to establish central banks. Mobile banking is the most recent innovation where traditional bankers were hauled kicking and screaming into 21st century mobile digital banking.   The RBZ Governor in 2006 innovated by issuing Bearer Cheques while the owners of Fuel Petroleum innovated by issuing Fuel Coupons to enable motorists to draw fuel from designated fuel outlets. Bearer Cheques lost value as their supply exceeded available Zimdollar notes, and eventually became worthless when their supply exceeded the value of goods in the market; while Fuel Coupons retained value because supply was carefully matched with fuel stocks.  Thus, even innovation must play within old rules of economics, which balance supply with demand.  In 2014, the RBZ and Ministry of Finance innovated to produce Bond Coins to ease transactions and address pricing problems because small change coins were in short supply; and bond coins primarily succeeded because they followed market forces.

Skills: It takes more than innovation to connect the dots (as observed by Steve Jobs), linking what is happening today with what happened in the past; and then using the resulting pattern to predict what is likely to happen in the future.  The ability of RBZ management to connect the dots over the last Century will inform decisions that can nurture or kill the Bond Notes initiative.  The skill of balancing income with expenditure is crucial in maintaining the value of Bond Notes, failure of which led to an over-printing of Bearer Cheques that were not backed by corresponding government revenues and economic production.  The wear and tear of one US$ notes had informed a 2014 policy option to produce a Bond Dollar Coin to complete the family of Bond coins; but it was instead overtaken by the 2016 proposal to issue Bond Notes of $2 and $5 at a time of acute cash shortage in the market which effectively removed the principle of voluntary adoption associated with Bond coins, and triggered panic in the market.  Fuel Coupons succeeded because fuel was immediately available on demand; and similarly with Bond coins, sweets and other small items as well as Rand and US$ coins were still freely available.

Trust: Whether by a farmer or trader, the early banker had to be trusted by those who handed over their grain for inter-city trading.  Equally, goldsmiths who became the early gold-backed currency traders had to be trusted by both the owners of gold in the vaults and those accepting promissory notes against the gold value.  This trust remains a key ingredient of good banking – whether commercial or state central banking.  Trust is still king in any banking and RBZ is still in the early stages of regaining trust lost during the hyper-inflationary period that saw forced conversion of US$ deposits into Zimdollars without the consent of account holders.

The global use of gold standard was abandoned in 1971 when it became clear that the value of US$ in the market was more than the gold held in the vaults of central banks as a result of aggressive “quantitative easing” – simply, money printing!  The result of extreme quantitative easing in Zimbabwe was hyperinflation during the last decade; and it is quite understandable for bankers and others in the business world to be sceptical about the idea of a gold-backed currency in a US$14 billion Zimbabwe economy when even an US$18 trillion US economy cannot realistically go down that road. Bond Notes, with the right measures in place, are a realistic route to take.

By December 2009, Zimbabweans had lost all trust in the RBZ and as a result traders and merchants refused to accept the Z$100 trillion note for transactions.  Over a 5-year period, Zimbabweans learnt to live within their means, produced a trading economy, but still fell short of being a production economy as long as obstacles to the full exercise of private property rights remained.  Government borrowing during the 2014-15 period produced early indications that the pre-2006 economic conditions were being recreated, only to be confirmed by the emergence of cash shortages, restrictions on cash withdrawal, the announcement of Bond Notes, and the re-introduction of bureaucratic restrictions in 2016 to regulate trade and related economic activities.

Empathy: Successful bankers have had to show empathy to their customers or clients (that excludes the mythical Shakespearean Shylock character – who by all accounts was probably not a successful trading banker anyway!).  Understanding the difficulties, possibilities for growth and development, and working with clients to find solutions has been a feature of successful banking; a feature that has gone from commercial to state to international development banks – the ability to see both sides of the coin so that those whose accounts are in the black can be supported to avoid going in the red, and those in the red are mentored and coached on their path back to black.

The Lima process was a sign that International Financial Institutions (IFIs) were ready to be empathetic with Zimbabwe’s national debt and arrears clearance strategy.  Locally, the RBZ’s focus on issues of competitiveness was also a sign that appropriate monetary policies would be in place to stimulate production and grow the economy.  However, the Monetary Policy of 4 May 2016 followed by a reversal of measures by the Ministry of Finance in the Mid-Term Budget to manage expenditures badly dented the Lima Process; as only import restrictions (in the form of Statutory Instrument 64) were left in place to address complex policies that required comprehensive Monetary, Fiscal, Production, and Trade Policies.  It is as though the economy is in the hands of the proverbial carpenter with only a hammer after losing the saw, planer, and other tools needed in the trade; while the population continues to expect government empathy with its myriad of basic needs.

Integrity: Integrity is the combined successful coming together of trust, empathy, skills, and innovation.  Integrity on the part of leadership in the banking sector is the one value that explains the presence or absence of “Banking Ethics” that has been a scourge of bank failures across Africa and around the world; and eroded trust in banks.   Ultimately, professionals with integrity give rise to leaders of integrity; and it is such leaders who work with the generality of the population to define historical periods when humans successfully exploit the prevailing environment to attain progress in human development.  Handling the Bond Notes policy with integrity (including a functional Currency Board in a broader framework of unleashing Zimbabwe’s production capacities) would go a long way in rebuilding the trust populations have lost in the RBZ; and therein could lie the difference between Bond Notes dying the Bearer Cheques death or living the Fuel Coupons’ life.

 

[1] This article was issued under the title “The emergence of bond notes” in the Financial Gazeete 2016 Top Companies Survey magazine sponsored by Old Mutual.

POLITICAL ECONOMY TRANSITION SEEN THROUGH FOUR EMOTIONS

On 2 July 2016, I was invited to a SAPES Trust “Zimbabwe-in-transition Colloquium” to reflect on lessons from nearly forty years of being a student of the dynamics that are generated at the intersection between politics and economics. Transitions are continuously taking place around us – in families, in public and private organizations, in countries, globally, and generations – and they are always loaded with emotions; and seeking to understand these is an important exercise in any attempt to predict the future based on what individuals do today and why they do it.  The idea of transition involves change, mostly of passing on responsibilities from one group to the next, and often with wider implications throughout the institution and even society. Change inevitably involves winners and losers, and each group experiences these four emotions differently.

 Below I summarize my reflections at the Colloquium, working with the theme of “four emotions evoked by the idea of a transition” – the four being anxiety, panic, uncertainty, and hope.

1. Anxiety

When faced with a deterioration of present conditions, we become nervous about our future and what might happen; and if the changes will improve or worsen the conditions.  This fear of something unpleasant happening in the future is often triggered by perceived dangers inherent in the environment where we find ourselves. Africans first encountered European explorers and traders, curiosity quickly gave way to anxiety, a fear that the arrival of outsiders with new technologies was going to change their lives.

 Similarly, when colonial administrators watched the education efforts of missionaries among the Africans, there was anxiety and fear over what the Africans would do with the knowledge so gained. It was a similar emotion when Africans returned from fighting alongside the Europeans during World War II, with the colonial administration unsure of what ideas African ex-fighters brought back from as far afield as Burma and the Arab deserts.

 In most post-colonial Africa, the promise of improved services and economic opportunities fairly quickly gave way to anxiety – the new nationalist administration concerned that independence had created expectations that were too high to be met with available resources.  Kept away from gaining an inner understanding of the colonial state, the new African leaders were also anxious that they might not muster the art of running these states.  On the part of the population, the demand for continuity and expansion in state operations created anxiety after realizing that the changes they had been promised during the anti-colonial struggle were going to come at a slower pace than promised.

 Although regular elections of political representatives for groups of people has become a standard feature of democratic practices around the world, it is a process that generates anxiety in society; more so where these practices are recent or where resources are so constrained that the acquisition of political power is an important mechanism for accessing state resources for personal use.  Elections that have the potential to remove one group from power create major anxiety among potential losers afraid of what will become of them, but also among the winners worried that the losers might be unwilling to transfer state power without violence.

 In many instances where extreme anxiety comes before a transition, fear often gives way to Panic. 

2. Panic

This is the stage when a sense of urgency goes from individuals to the collective, giving rise to group desire for action, often poorly planned and executed.  Early efforts to resist colonial rule were very much driven by panic, with groups of warriors with spears and arrows taking on the crude guns that conquered Africa.  Equally, faced by the rise of nationalist peaceful protests in British India, the administrators panicked and took actions that were to mark the beginning of the unravelling of the British Empire around the world.  Panic exposed the ill-preparedness of the colonial administration to handle a crisis on the one hand, and the weak organizational structures of Indian population groups to resist unjust colonial laws on the other hand.  These were lessons that became the foundations of anti-colonial struggles in India and elsewhere as nationalist leaders learnt from each other.

 In many African countries, the first five years after independence were characterized by the promise of a new and prosperous society for all in the general population.  For the political leaders, deep differences quickly came to the fore between on the one hand those who had idealized an African society based on a hybrid welfare model with elements of traditional societies and the life colonial rulers had enjoyed; and on the other hand those who found themselves administering a state whose resources were fallings short of demands.

 In countries where the political leadership failed to recognize that ideological positions (like Ujamaa in Tanzania, Humanism in Zambia, and African Authenticity in Zaire) could not over-ride sound economic making processes, material poverty became widespread.  In other countries like Kenya and Malawi where political leaders recognized the need to free economic policy-making from political considerations, technical leadership oversaw a steady growth in materials well-being, but often at a cost to social cohesion.  Although the policy of economic empowerment and indigenization has successfully been used around the world to create wealthier societies, its political variant in Zimbabwe has yet to produce equivalent economic development.

The panic that set in on the part of many of these new post-colonial administrations often saw the emergence of state repression targeted at “political leaders whose populist ideals made them accuse the new African rulers of neo-colonialism”.  In these instances, panic did not lead to dialogue to resolve internal differences over resource sharing strategies between different groups in the post-colonial governments; opposition parties emerged, and were initially banned – again as a result of panic on the part of the ruling group afraid of losing power.

Panic in these circumstances grew over time and gave way to Uncertainty over the society’s future.

 3. Uncertainty

Having seen what the white man’s “stick that smokes” can do to African warriors armed with bows and arrows, African chiefs and their populations became doubtful of their ability to resist the advance of colonial occupation.  Similarly, colonial administrators panicked by the rise of post-World War II African nationalist consciousness and the emergence of global notions of human equality became uncertain over Europe’s ability to hold on to the colonies that were often many times bigger in terms of population and geographical size.

 In the post-colonial African states, the emergence of internal opposition generated uncertainty among the ruling group.  Having initially been convinced that a single strong political movement that spearheaded the attainment of independence needed to be succeeded by a Single Party State; internal opposition generated uncertainty and gave rise to a doubting of the viability of societies without pluralism.  A combination of national doubt and global pressures on the post-colonial African rulers saw the spread of multi-party politics and a proliferation of new socio-political movements.

Populations in many countries in Africa find themselves in this transition from Uncertainty to Hope, with the spread of wealth as a result of greater use of markets to improve production and economic growth.  This continuum nature of this transition means that countries are at different points, some even looking like the transition will never come.

Uncertainty has gradually given way to Hope as Africans have started to see a positive link between pluralism and socio-economic improvements at household and societal levels.

4. Hope

At independence, African societies were generally convinced that the future was bright and great improvements would take place in peoples lives – and this largely did happen.  The departing colonial administration often had hope that those left in charge of the African state had acquired the requisite skills to run a modern state; and significant inflows of development aid were maintained in the hope that sustainable development could be stimulated.  This belief in continuous improvement on the material conditions of life in Africa has been at the heart of “Africa Rising” narrative, a feeling with some evidence that life for the majority of people in Africa is recording significant improvements; although there are societies that feel that they are being left behind by this wave of economic development and change.

 Challenge of generational transition

 These four emotions associated with transition have characterised generational changes in Africa. 

 The decolonizing generation of leaders started off anxious and unsure if their efforts to bring about independence would be achieved in their lifetime; but the cause was one they were prepared to fight for and if need be die for.  The “wind of change” sweeping across Africa in the 1960s saw panic set in among leaders of newly independent countries – and the immediate reaction was to urge the decolonising power not to withdraw all its administrators, but to leave some behind to impart technical managerial and administrative skills to the new administrations. Even with the old colonial administrators still around to bolster the new African states, there was a quick realization that socio-economic development was slow and uncertain.  This uncertainty led to the implementation of a large-scale expansion in the education system in most countries with the goal of producing a new cadre of African public sector managers to run the new states.  The decolonizing generation thought that it could then leave the stage, with the hope and confidence that a new generation of leaders was in place to take African societies to the next level.

 This new post-independence public sector generation was not immune from the four emotions of transition either. 

 Given the moderate wages of public sector employees across Africa, the new class of public sector management were initially anxious over their economic future.  Faced with rising demands for services, low levels of skills in the economy, and declining economic growth, the public sector generation panicked and started appropriating public resources for their personal use.  Those occupying the senior levels of public sector management gradually became uncertain over their future, having watched military coups and counter coups destroy economic and social life in many African countries.  One consequence of an uncertain future in Africa was the rapid externalization of state resources from Africa to industrialized countries with more stable and predictable institutions for personal use.  These external resources were often used to educate the children of the public sector generation and gave them greater material comfort with the hope that they would become part of a global elite.  Public knowledge over these develops generates resentment and anger among the general population and feeds into greater uncertainty among the senior public sector management group.

 Transitions are unpredictable and often take place at many levels.  Thus, technological changes have produced a global digital generation that is spreading its influence across the world – linking the African youth with the hopes, ideas, and aspirations of other youths around the world.  In the transition from a public sector generation to the new global digital generation, the full cycle of emotions (anxiety, panic, uncertainty, and hope) are being played out and taking on inter-generational characteristics.

 The decolonizing generation only partially succeeded in transmitting their hopes for a successful society to the public sector generation; and it is equally going to be difficult for the public sector generation to fully transmit their hopes to the digital global generation.  The decolonizing generation had hoped to transmit the value of sacrifice to the public sector generation, but the drive for personal wealth saw a rapid growth in corruption that has national and international dimensions characteristic of a managerial class that is blind to race, colour or religion.  The idea that the public sector generation can pass on their hopes for greater political engagement with higher levels of material wealth to the global digital generation is likely to run into obstacles as this later generation becomes politically cynical and acutely aware that resources are finite and need better management.

 I am hopeful that this global digital generation will continue the trend to innovate and apply the results of such innovation to create new political, economic, social and cultural engagement processes.  At the same time, it is important for our public sector generation to recognize our inability to define the future using the very limited tools we bring from our past – with prescriptions likely to handicap rather than aid the next generation as they become global players; we must give the digital global generation the space to soar into the global sky.

 

MUHAMMAD ALI - FIVE LESSONS YOUNG AFRICAN INNOVATORS COULD LEARN FROM ‘THE WORLD’S GREATEST”

Today, we learnt that the world had lost an iconic figure from the last Century.  Although a man from our generation, there are useful lessons the young generation of African innovators could learn from the “World’s Greatest”.  He lived a life and at a time when the world was undergoing many changes, and with potentially many lessons for those who cared to look.  Below, I pull out the five lessons that I think were not only relevant to our generation, but also to the generation of Young African Innovators.

1. You can keep your principles, and still become rich and famous

When Ali was 18, he won a boxing gold medal at the Rome Olympics and returned home an American Hero – enough to propel a poor “Negro” from Kentucky to fame and fortune.  However, when he was denied service in a restaurant because of his colour, Ali surrendered the Olympic medal in protest against racism in America.

When he was was called up to join the US Army in 1967 because America – his beloved country – was at war with the Vietnamese. Ali refused to go and “drop bombs and bullets” on the Vietnamese – those “other brown people” who had done him no wrong or bothered him.  He was arrested, sentence to jail which he did not serve, but was denied a boxing licence for four years; only to come out and become the most famous man in boxing history.

Sticking to your principles can delay the outcome you seek, but it cannot cancel the journey, only delay arrival at the destination (and the generation of Mandela is a daily reminder of this for us in post-colonial Africa).

2. Be a person of the present

Surrendering his Olympic gold medal was a principled act, but it was also an act that showed Ali’s awareness of the growing Civil Rights Movement in America and the Anti-Colonial Struggles in Africa.  It was an act that set him apart from other sportspersons and famous African Americans of his time.  He threw in his lot with Malcolm X and others, and eventually was joined by Martin Luther Jr. and others in America; and became part of the global consciousness movement on the need to decolonize “the brown” people Ali had refused to fight.  He refused to be a “Negro” and became a “Black Man”.

Knowing the issues of your generation and being alert to their demands on the self are important tools for personal development and contributing to society.

3. Whatever you do, start early if you want to be the best

Armed with basic education and even less by way of family inherited wealth, Ali followed the footsteps of many “Negro” men with the talent and physique to enter boxing.  But he also turned a brutal sport watched by a few into a global sport, with fans waking up at 3 am in parts of the world to watch Ali fight.  He changed sports training methods, he innovated on footwork (with Ali Shuffle) as well on jabbing (Floating like a Butterfly and Stinging like a Bee) in the boxing ring, and brought global media to the service of his profession.  He won 56 fights of the 61 he fought in his career – an example of being the best in what you do.  His old schoolmates say he would run behind the school bus as part of his training routine – propelling him to become a global icon.

Ali approached every fight as though it was his first and last; and for every innovator trying to solve Africa’s problems, each task should be undertaken as though it is the first and last – no matter how big or small the development challenge.

4. Your competitors are not your enemies

Ali understood the need to separate issues from the person.  His giving up of a Olympic gold medal was more to do with his protest against racism and prejudice in America than against the person who denied him service in a restaurant.  Similarly, his refusal to fight in Vietnam was not against the AmeriCan white people, but against the injustice of his country (which he loved) fighting what he saw as an unjust war – years before many others around the world came to the same conclusion.

Ali’s continuous goading of Joe Frazier was often portrayed by the media as personal enmity, but in reality he used that personal tension to keep boxing fans keenly interested in the encounters of these two great boxers.   Similarly, few people could get away with a slogan like “Ali Boumaye” (Ali Kill Him – referring to the slogan he had coined on the streets of Kinshasha); a slogan that fans chanted in the stadium as he fought George Foreman – and eventually defeated him.  In his transition from being just a boxer to an activist, Ali had incensed  Sony Liston by public insults that Ali had used in pre-fight publicity to emphasise changes that were taking place in America as the "Negro" was about to rebrand as "Black Man".  Ali was a master at mentally-defeating his opponents long before the bell for the first round in the boxing ring – he understood that to win, all tools of the trade has to be brought to winning; not to kill your competitors, but to defeat them for an-going contest in the market.

Competitors in the market or in the field you excel in are not your enemies, just entrepreneurs trying to get their products and ideas in the market ahead of your own; and them beating you in the market of products and ideas is good for keeping you on your toes.

5. Relentlessly build and promote your brand

Ali was a master showman, and with Don King on his side, he was unmatched by any of his contemporary sportspeople in fame, income, or influence in global culture.  He loudly and cheekily praised his looks, his brains, his skills, and everything about himself while promoting boxing – he understood that it was a business with a global footprint.  He used humour and laughter to great effect while putting together his personality, that of the opponent, and that of boxing – all rolled into one huge media fireball.

Ali learnt to brand every one of his major fights – from the Rumble in the Jungle in Zaire (today’s Democratic Republic of the Congo) against George Foreman, to the Thriller in Manilla against Joe Frazier.  He never missed an opportunity to tease his opponents, goad them, and publicly ridicule them while knowing very well that it was all a game to entertain the world.

Cassius Clay (the name given to him by his parents) was a name to be lost in the sea of many “Italian” names; but Muhammad Ali was a signature name (just like Barack Obama who years later became the first African American President of the United States of America).  He had a knack for understanding how to build a brand.

Even in adversity as a sufferer from Parkinson’s disease, Ali remained a brand builder and did a lot to raise people’s awareness over this terrible affliction.

Whether you are down on your luck, or at the height of your career, or faced by adversity, your brand is important.  Ali managed to weave his personal brand into boxing, social consciousness, and global awareness – that was his brand: that is how he became The Greatest.

Muhammad in his own words

http://www.usatoday.com/story/sports/boxing/2016/06/03/muhammad-ali-best-quotes-boxing/85370850/

OFFICIAL VS CITIZEN ECONOMY IN ZIMBABWE - reading the crystal ball by looking into the rear view mirror

As a student of policy making in Africa for nearly 40 years, I have learnt to apply a two-step process when giving policy advice.  One: can I accurately predict the cause-and-effect six steps from the time a policy decision is made?  Two: if the answer is yes, then I recommend to implement the policy; but I recommend to revisit the policy measure if the answer is no.

In the last week, I have watched the queues grow inside Banks and at ATMs, and then they vanished by the ATMs – they had ran out of cash and everyone who needed cash in Harare has had to either join long queues inside the banks or resort to a few emerging informal means.  This has taken me back to 2006-08 during the hyper-inflationary days in Zimbabwe – and the citizens seem to be falling back into the very Zimbabwean strategy of “making a plan”.

It is always difficult to prepare for the future by looking in the rear view mirror to predict tomorrow; but as we are in unchartered waters, I have only the past to help me read the crystal ball on the future evolution of the Zimbabwe economy. 

On 4 May 2016, the Governor of the Reserve Bank of Zimbabwe (RBZ) in a press conference announced a set of measures meant to address emerging economic problems in the multi-currency monetary system (nearly 100% dominated by the US$) in Zimbabwe.  Two days earlier, the International Monetary Fund (IMF) in Washington DC had just completed a Board meeting where the decision was made to continue the constructive engagement that has been under way for over six years towards a debt clearance program.  In spite of the usually close collaboration between IMF and Central Banks, the decision of May 4 was apparently not communicated to the IMF (a bad strategy when trying to maintain trust between “partners in development”).

After the hyperinflation period that ended in 2008 and Zimbabwe abandoned the Z$, confidence in the banking system (including the RBZ) was the major casualty.  Since February 2009, a major conversation guaranteed to leave Zimbabweans terrified about their economic future has been any discussion of re-introducing the Z$; and Government has consistently reassured the population that the Z$ will only return when the economy is sufficiently recovered and confidence restored.  So when the RBZ Governor on 4 May 2016 promised to introduce Bond Notes (backed by a loan of US$200 million) and reassured the citizens that a Bond would be at par with the US$, nervousness gripped the market.  Once the Governor explained that half of export proceeds would be channelled through the Reserve Bank, the citizens recalled a similar practice in 2008 – and nervousness turned into panic; made worse by an announcement that cash withdrawal limits would be severely curtailed in order to stop outward US$ cash flows out of Zimbabwe.

On 5 May 2016, commercial banks started dealing with irate citizens wishing to close their accounts and empty all the cash they had; but could not if the account had more than US$1,000 (maximum daily withdrawal limit).  Queues for cash at banks started building up slowly, but grew longer as Banks failed to even meet the daily withdrawal limit allowed by the RBZ.  By 31 May 2016, one international commercial bank had closed most of its ATMs and set a US$300 daily withdrawal limit for individuals and was even suggesting that a weekly limit of US$500 be put in place; while a second international bank had introduced a US$500 daily limit and a new rule that customers would have their identity documents inspected before they could withdraw money from the ATM.  My three-day attempts to withdraw cash from the ATM ceased after realizing that the ATMs were always out of cash whenever I went there.

So how did we end up with low reserves of US$?  First, the country imports twice what it exports; so the banking system has experienced short-term cash shortages while waiting for remittances and other inflows to build up.  Secondly, Government has resorted to issuing Treasury Bills - a promissory note while available cash is used to meet expenditure needs – only to make the cash shortage worse.  Thirdly, the fifteen-year economic decline has left the economy poorly placed to cope with declining global commodity prices. 

The market had over time adjusted and worked around this steadily deteriorating cash shortage – until unusually long bank queues towards the end of April 2016 convinced the Government that action was needed: and the press conference of 4 May was held.  With Treasury bills sucking the limited US$ out of the system, the electronic money transfer system operated by the RBZ to facilitate external payments found itself without the resources needed to fulfil customer requests, and importers of raw materials found themselves in trouble; and shortages of some commodities are re-appearing – a pre-2008 phenomenon.

Low exports have resulted in low US$ inflows, high imports have led to high US$ outflows, and the demand for US$ around the region has put more pressure on available cash as traders and other travellers come to Zimbabwe to collect US$ from their international accounts or from the sale of goods.  Commercial banks, suffering as a result of low economic activities in the country cannot bring fresh US$ fast enough to meet the demand, but the market had until 4 May adjusted to this strange equilibrium.

As citizens watch the bank queues and empty ATMs while they are unable to access cash in the bank, they have resorted to electronic transfers using credit cards and mobile money transfers for local payments.  The RBZ has in the past been trying to promote increased use of electronic payments (“plastic money”) without success, but now it seems to be succeeding.  The policy is working, but firstly, it is estimated that Banks were early this year holding deposits worth US$4 billion and although there are no figures of how much has been withdrawn from Banks this last month, it is small on account of limits set for daily withdrawals.  Nevertheless, there is evidence that inflows are lower than outflows – leaving fewer resources to cover local electronic payments; and certainly inadequate for foreign payments.  Secondly, electronic payments will continue to have a positive impact until customers try to turn the transfers into cash and they find out that they cannot – and the downward trend will set in.

As long as daily withdrawal limits are low and exporters continue to bring US$ into the economy through the RBZ, some resources will remain available to cover local electronic transfers.  This is the economy the RBZ can keep an eye on and regulate, but it is bound to be a declining economy as outflows continually exceed inflows.  With the Bond Note promised for October 2016, the theory is that this local money will stabilize the official economy by fuelling it with money that cannot be converted into external US$.  This scenario assumes that those selling goods will continue to accept the Bond Notes and will not devalue it to the extent of the currency becoming a liability.

The prognosis does not look good.  Already, the market is charging anything up to 15% on US$ cash for those wishing to lay their hands on hard cash in exchange for bank electronic transfers.  With the Rand having suffered a similar fate since it hit the skids and depreciated, it is difficult to see how a Bond Note backed by US$200 million in a US$12 billion economy can avoid the fate of a Rand backed by a US$330 billion economy or even the US$ backed by an US$18 trillion economy.  Back in 2008 when there was a local cash shortage in the market, the cash premium was so high that an electronic transfer of Z$ for US$100 at the parallel market rate was enough to purchase a new pick-up truck worth $20,000 from the RBZ at the official Z$ exchange rate.  It would be prudent to assume that the official economy will decrease rapidly during the remainder of 2016 unless new market-driven monetary policy measures are put in place; and bureaucratic-driven policies could even accelerate the decline in the official economy.

This leaves us with the real economy – where goods are exchanged for hard US$ cash; and in some instances for the Rand when dealing in consumer goods from South Africa (even though the story is that South African traders also prefer to be paid using the US$).  It is estimated that the real economy – which is citizen-managed – is worth about US$7 billion; and this can only grow if remittances, money withdrawn from the banks, and incomes from unofficial trading all flow into this economy

It is unrealistic to expect a shrinking official economy (driven by the dwindling bank deposits of US$4 billion) to match or even overtake a growing citizens economy of US$7 billion).  Any resistance to or rejection of the Bond Note by the market risks it going the way of the Z$ in 2008, and would put bank deposits at risk of becoming unusable – and put the official economy at risk.

In the short-term, the “pre-May 4 situation” can be restored by policy measures, but a “future scenario” would have to wait until production in the economy, local investor confidence, and an enabling business environment are restored.   While waiting for the restoration of these economic production measures, the continued integration of Citizens’ Economy into the regional and global economy is like to continue.  This is likely to push more Zimbabweans into the international labour and trade markets to earn the required hard currency incomes.

The idea of a predictable six-step cause-and-effect approach to policy making should give the policy implementer a chance to make adjustments if by step 3 the policy is not working; or to even consider abandoning or radically altering it if poor performance persists by step 4. With the policies of 4 May 2016, I would say we are at step 2 and the results are mixed.  The next step will be critical and I am not sure what predictions policy-makers made during the period they formulated the policy.

FROM MARCUS GARVEY TO ROBERT MUGABE - Exploring the historical purpose of three generations in modern Africa[1]

Purpose is “an ideal worth dying for”

 “I have cherished the ideal of a democratic and free society in which all persons will live together in harmony and with equal opportunities.   It is an ideal for which I hope to live for and to see realised.  But, if it needs be, it is an ideal for which I am prepared to die.” — Nelson Mandela, at the conclusion of his Rivonia Trial speech, 20 April 1964

Personal context

When my country of birth (Kenya) became independent, I was only eleven years old: too young to be fully aware of the brutality of anti-colonial life and equally too young to be part of the early post-colonial state administrative cadres.  I was to benefit from the post-colonial state investment in education aimed at producing a future technocratic administration cadre.  When as a student activist I was drawn into liberation politics around the decolonization of Southern Africa, I got an opportunity to be part of the early post-colonial administrative cadres I had missed in my country.  That was in the 1980s.

On May 21, I was invited by the organizers of The Shift to their event because of my engagement with young innovators, and I found myself reflecting on the topic of the day (Purpose) from my generational rather than individual context.  My conclusion was around the nature of historical purposes thrust on each African generation.

Generational context

The first, Nationalist Struggle Generation, had a leadership drawn from teachers, traders, farmers, and others; and was made up of some of the most impressive orators of modern Africa. The second, Post Independence Generation, was made up of well-educated professionals, some with the theory of administration and other with hands-on administration from the colonial administration. The Post-Independence Generation invested heavily in educating its children, and these have come to constitute the Digital Generation we see today.

Nationalist Struggle Generation – with a purpose of Decolonization and Independence

Marcus Garvey was born in 1887 in Jamaica, two years after the Berlin Conference (1884-85) to carve up Africa between European States.  Garvey became a proponent of Black Nationalism and Pan-Africanism (articulated by the American W.E.B. Du Bois – born in 1868 – around the goal of equal rights for black people in the USA).  Garvey was convinced that black people needed to have a permanent homeland in Africa and founded a newspaper and a shipping line to pursue this goal.  One outcome of this movement for an African homeland was the convening of Pan-African Conferences to address the issues facing Africa after the Berlin Conference.  The manifesto given by Pan-African Congresses included the political and economic demands for a new world base on international cooperation. 

Four Pan African Congresses were particularly significant in the shaping of Africa today:-

1. The First Pan-African Conference of 1900 in London, barely two decades after the Berlin Conference.

2. The second Pan-African Congress of 1921 in London was soon after World War I had ended, leaving behind a nascent awareness of global inter-connectedness, even between slave, master, colonized, and the colonizer.

3. The Fifth Pan-African Congress of 1945 in Manchester at end of World War II was pivotal in turning the sense of global connectedness to an awareness of equality on the part of the colonized, whether in Africa, Asia, and every part of the world where colonial administrations existed.  This Congress became the launching pad for most liberation movements in Africa, which culminated with the Wind of Change sweeping away colonial administrations in Africa in the 1960s.

4. The Sixth Pan-African Congress of 1972 in Dar es Salaam marked the beginning of an end to Apartheid-linked colonisation – first with Mozambique and Angola in 1974 and finally with South Africa in 1994 (with Zimbababwe and Namibia in-between).

African Liberation movements led by Nationalists were to bring about independence to most African countries (starting with Ghana in 1958). 

The Nationalist Struggle Generation – one of legendary leaders – had achieved its purpose of Decolonization and Independence.  It was nevertheless a generation without the requisite skills in administration and economics; and as a generation continued to focus on politics while blaming neo-colonial forces for he failed economic policies Africa witnessed in the years after gaining independence.

Post Independence Generation – with a purpose of Socio-Economic Reconstruction

The Post-Independence Generation was handed the responsibility of transforming the Colonial State to a Developmental State capable of delivering socio-economic transformation – expanding education, health, and various economic opportunities for the largest possible number of Africans.  The post-colonial State invested heavily in education with the hope of turning out the thousands of skilled workers and managers needed by a modern state.

Finding itself in an environment of enormous economic oppportunities, but with weak governance systems often disconnected from cultural norms,  the Post Independence Generation became consumed by a culture of “get rich quick”.  Working around laws and regulations, often weakening their effectiveness and even breaking them, it became a Generation of Corruption.  The result was an Africa characterized by weak states, growing povery, and often disintegrated systems (Failed States).

When the get-rich- quick drive destroyed African societies, the Post-Independence Generation blamed the Decolonization Generation for corrupt leadership, but failed to see that corruption was first and foremost driven by the way the generation had mismanaged the state entrusted to it by the Decolonization Generation.  This Post Independence Generation all over Africa continues to display a narcissistic culture that accepts no responsibility for its failures – it is never the generation’s fault that Africa has not produced developmental states to serve its citizens.

Digital Generation- with a purpose of Global Inclusion

The Post Independence Generation invested heavily in the education of its off-springs, but without economically functional states, jobs became scarce and these highly educated youth continued to live in the world of social media and parental homes. Across Africa, this generation is faced by a crisis of living unproductive lives, and an inheritance of dysfunctional societies they got from the declining Post Independence Generation.

Faced by a collective feeling of alienation, The Digital Generation has turned to an online cyber culture – and evolved into collaborative consumerism that links young people from round the world through social media, internet, technology, and creativity.  In Africa, this Digital Generation is faced by to choices:-

To either blame the two generations: the Decolonization Generation for its sole focus on politics and the Socio-Economic Reconstruction Generation for not creating jobs; or To accept their generational purpose of leading Africa towards global inclusion by creating products that will solve Africa’s problems while stimulating global demand.

Concluding observations

Purpose needs personal commitment, and that often needs personal sacrifice.  The Nationalist Struggle Generation succeeded in its Purpose of Decolonization and Independence; the Post-Independent Generation has failed in its Purpose of Socio-Economic Reconstruction; and The Digital Generation’s Purpose of Global Inclusion is work in progress.

 

[1] Notes from a conversation at The Shift event, 21 May 2016, Meikles Hotel, Harare, Zimbabwe whose agenda on the day was titled “Purpose”

ZIMBABWE COULD FORUMLATE US$-DRIVEN ECONOMIC POLICIES FOR SUCCESSFUL GROWTH Notes from a talk to business leaders at a Deloitte get-together evening on 21 April 2016, Harare, Zimbabwe

Summary: Since Zimbabwe predominantly uses the US$, it could take full advantage of the currency by a better alignment of its macro-economic policies with hard currency economies (the way EU insists on common macro-economic performance indicators; or even the way members of the South African Customs Union, SACU, generally harmonise their macro-economic policies with the Rand monetary policy to avoid serious economic distortions).  By not aligning its macro-economic policies with those of hard currency zone countries, Zimbabwe has generated unnecessary distortions in the economy and delayed the prospects for quick economic recovery.  Furthermore, since Zimbabwe is the only economy using the US$ in SADC, is geographically-located at the heart of the region, and has a large base of skilled human resource, the country could carry out comprehensive structural economic reforms aligned with hard currency zones, achieve greater global integration, and lay the foundation for the country to become the centre of a regional economic revival and expansion this Century.  In these discussion notes, policy ideas have been presented in a series of “what if” questions after a short outline of the global and regional contexts as well as a summary of a few key current national economic indicators.

Global context

The world economy in 2014 had a total GDP (nominal) of $78 trillion, with the two largest economic players (USA and China) accounting for 37% of the GDP – 23% by USA and 14% by China.  With an economy of $18 trillion, the USA was also the “holder of the global currency”; while China with the smaller economy of $11 trillion held the title of “manufacturer for the world”

The USA has in the last decade emerged as the leader in technological innovation, with steady economic growth driven by low interest rates, growth of a green economy, and perception of a safe currency by investors in an environment of concerns over growing global insecurity.  The US has used its status as holder of global currency to engage in quantitative easing (money printing) to help the world stabilize financial markets after the 2008 global food and financial crisis.

China on the other is in the middle of major changes in its economic development, particularly with its monetary policy of moving towards global convertibility of its currency once the Yuan becomes part of the IMF Special Drawing Rights (SDR) currency reserve.  Contrary to popular perceptions, China’s economy is not declining, but it is changing; moving away from manufacturing to services: and some might say to a more balanced economy in the long-term.  As a result of these changes at the global level;

·      Commodity prices have steadily declined  (oil, platinum, gold, and others) as demand for raw materials has fallen. New orders for finished products and consumption of energy to carry out manufacturing have also declined.

·      New relations are emerging that will shape the division of labour between nations in the global economy.

·      Many currencies have depreciated against the US$, the global trading currency, at a time when Europe is pinned down by a major crisis in migration that is turning into a political and economic crisis; and Japan and a few other hard currency zones have remained in deflation.

·      There is expectation that significant consumption of nickel, copper, zinc, tin, steel, aluminium, and others will recover somewhat once stockpiles from the period of over-supply are used up.  Equally, China still has plans to implement big infrastructure programs, e.g. the “One Road, One Belt” initiative of a $46 billion infrastructure corridor through Pakistan to the sea.

  This policy shift in China gained momentum in 2012 and it is expected that by 2022, the Chinese economy will have shifted away from manufacturing to :

·      Consumption and service industries.

·      Financial services,

·      Insurance,

·      Entertainment, and

·      Tourism and more;

although the shift will not be fast enough to offset the massive size of the manufacturing sector.  China has also relaxed rules for foreigners to purchase mainland property, and strong commodity imports will remain steady.

 Regional setting

South Africa is the dominant economy in the SADC region, with a GDP (nominal) of over US$0.3 trillion.  Zimbabwe’s nominal GDP per capita of US$1,054 compares with its PPP GDP of $2,133; but this is less than 20% of South Africa numbers(nominal GDP of $5,859 and PPP GDP of $13,321).  With its membership of 14 countries, SADC has a population of 280 million, with a land mass slightly bigger than that of the US or China.  While India is only one-third the geographical size of SADC, it has five times the population; but India and SADC have the same economy as measured by nominal GDP of US$ 2 trillion each.  With its “mineral belt” comprising of Mozambique, Zimbabwe, Zambia, DRC, Angola, and Tanzania (South Africa and Namibia are part of the same belt, but with significant depletion from past exploitation); the SADC region has great potential to become a centre of economic growth in the world.

National situation

Like every other nation, economic performance is the product of national policies and how well they take into account domestic, regional and global political-economic trends.  It is for this reason that the above summary of both global and regional context provides the backdrop to discussing the Zimbabwe economy in 2016 and beyond.

After the 2010-2012 high growth rates of just over 10%, the post-2013 economy has growth rates of around 3% per annum.  Government revenue collections are near stagnant after 2012; with a growing share of government revenue going towards employment costs for civil service (which one estimate shows the wages as having increased faster than economic growth by a factor of 5).  The economy is also facing a severe drought requiring high food imports, has a severe shortage of cash given low economic production combined with high imports), and is showing growing indebtedness (around US$10 billion).

During the first Quarter of 2016, Zimbabwe exports were worth $0.63 billion against imports of $1.32 billion (more than double the exports as has been the pattern over the years since dollarization in 2009).  This pattern has led the RBZ Deputy Governor, Dr Kuphukile Mlambo, to observe that “Every year we are exporting cash up to $3 billion through the importation of goods from other countries. If we are exporting $3 billion every year that is the reason we don’t have cash in the economy” and lamented that these imports largely meet consumption needs and for some products that are manufactured locally (with such items as apples accounting for US$1 million; while, chewing gum, and mineral water account for another US$1 million of imports during the quarter).

Government revenue already accounts for close to 30% of GDP, making it difficult for taxes to be raised to meet growing spending needs, and especially so for a highly informal economy.  Options for higher government revenue to finance service provision would have to come from higher production, but this is made difficult by high production costs (especially in the mining secor where depressed commodity prices undermine viability, and help for these mines might be needed to help them survive this period while waiting for global commodity prices to recover).

Zimbabwe is ranked 125th out of 140 countries in the 2015/2016 Global Competitiveness Index (GCI) report compiled by the World Economic Forum; with the main obstacles to competitiveness being poor access to finance, policy instability, restrictive labour regulations, and overvalued exchange.  It is also difficult for Zimbabwe to compete with its neigbours when its price for fuel (petrol and diesel) are the highest and at least 20% above the regional average.

What if Zimbabweans could…

1. learn lessons in economic reform from the Look East Policy?

A major lesson from China is that “if you are going to reform, be bold, be decisive, be deliberate”.  China has since 1948 used ten-year policy shifts to transform its economy and society:-

       1949: Peoples Republic of China established

       1958: Great Leap Forward launched

       1966: Cultural Revulition started

       1978: Den Xiaoping economic reforms started a transition from Planned to Mixed Economy

       1990s: China pulled 150 million peasants out of poverty

       1912: Large-scale economic reforms commenced

There is recognition that reforms are difficult, but that useful lessons also exist from around the world if the policy makers seek out these lessons.

2. realize the great promise of Lima debt and arrears clearance?

To clear its debts (inclusive of arrears), Zimbabwe will need to formulate and commence implementation of a Transformative Economic Policy Agenda that includes:-

       Government “living within its means” as being formulated by Government

       Reforms around areas impacting on “Improved Business Environment” as led by OPC/NECF

Implementation of such an agenda should trigger debt clearance processes for:-

       IBRD ($1 billion) using a soft loan from a third party  

       IDA ($200 million) from internal WB provisions

       AfDB ($600 million) from internal AfDB provisions

       IMF ($120 million) from Escrow Account held by IMF

       Paris Club after suitable negotiations

3. formulate structural economic policy reforms after Lima?

Government has made a number of policy commitments as part of realizing the promise of Lima on debt and arrears clearance; and especially to:-

—  Progressively stagger the reduction of wage bill to 52 percent from 82 percent of expenditure by 2019

—  Remove Indigenization and Economic Empowerment (IEE) from the list of issues hindering the improvement of Business and Investment Climate in Zimbabwe.  In this regard,

(a) The Ministry of IEE will co-ordinate implementation of legislation by line ministers and agencies like RBZ;

(b) Empowerment will mainly be by “ensuring that the local content retained in Zimbabwe by businesses is not less than 75% of gross value of exploited resources - in the form of wages, salaries, taxation, community share ownership schemes and other activities such as procurement and linkage programmes”; and

(c) Government is “prepared to amend the law “forthwith” to reflect a refined policy thrust”; and hopefully align Regulations with any such ammended Act (extracted from latest clarification by the President of Zimbabwe, R.G. Mugabe).

4. make Special Economic Zones (SEZs) work?

—  China’s Shenzhen SEZ was established in May 1980, paved the way for seven more SEZs, and made China the global manufacturing centre. These lessons are relevant for Zimbabwe and SADC.

—  Since Zimbabwe is the only dollarized economy in SADC, could the declaration of Zimbabwe as an SEZ drive both national and regional economic take-off?

—  Can SEZs become magnets for global private sector investments in infrastructure, mining, agriculture, and services to drive the region towards greater growth and prosperity?

—  How can we work so that the new SEZ policy use more predictable than IIE (Act and Regulations)?

—  Government is commited to formulating an SEZ Bill that will become law by mid-2016  (to be followed with aligned Regulations) after lessons from global experiences to attract Foreign Direct Investments and increase economic production are taken into account.

—  Proposed provisions in the SEZ bill are that licenced investorswill be able to seek approval to not have the Labour Act (Chapter 28:01) and the IEE Act (Chapter 14:33”).

5. reach a Compact on Reforms between Business and Government leadership?

—  Can Business show Government that 75% of earnings from mines and other businesses are retained in Zimbabwe (i.e. a 25% ROI?)?

—  In return, can Business ask Government to:-

       Honour the above commitment on Indigenisation and Economic Empowerment; and amend the law and attendant regulations?

       Conclude the Fast Track Land Reform Program, as 16 years after it started is quite a long revolution (most revolutions are of a shorter duration)?

— Could Business commit to ensuring that at least 40% of future imports will be on capital goods (which should be attractive given that Chinese and South African currencies have depreciated and capital goods are cheaper in US$)?  This could pave the way for a compact over higher duties on a few luxury items for a fixed period while the Zimbabwe economy recovers its productive capacity in areas where the country is competitive in areas the country has a comparative advantage.

6. make a commitment to pick ourselves up?

To paraphrase Obama on America: “we must pick ourselves up, dust ourselves off, and begin again the work of remaking [Africa, or Zimbabwe]” Obama Inauguration Speech, 20 January 2009

What if the business leadership and population committed to:-

       Saving at least 10% of current incomes?

       Buying from Mbare and satellite community markets for local produce as long as they can at least demonstrate SA price equivalence?

       Finding new and innovative ways to invest in the Youth as the creators of tomorrow’s enterprises?

7. agree to join hands?

And say that we are

       Tired of complaining

       Tired of seeing the glass half-full

       Tired of Afro-pessimism

       Tired of hearing “This is Africa – TIA”

       Tired of not seeing the rainbow

       Tired of behaving as though we are just here in transit

       Tired of not believing in the future

And take our US$ to the Region and become the Foreign Direct Investors wherever favourable structural economic policy policies are in place?

And place national economic development goals above personal political interests?

ENABLING ECONOMIC GROWTH IN ZIMBABWE – challenge of Rear View Mirror and Windscreen View Syndromes[1]

On 8 December 2015, I was invited to give a keynote address at the Financial Gazette 2015 Zimbabwe Top Companies Awards Ceremony on the subject of 'enabling economic growth in Zimbabwe".  TheTop Companies Awards are in recognition of the best corporate performers, and by so doing putting their best foot forward so that Zimbabweans can get a glimpse of achievements by corporations as major players in the economy. 

Keynote address:

The theme for this year’s event (“enabling economic growth”) is a subject that is on the minds of everyone in this room, as well as in Zimbabwe, and in many countries around the world. I hope my comments on the theme this evening will be reflective of this global concern with the foundations of improved livelihoods for ordinary citizens, and which in turn measures the influence and power of nations.

It is this link between the welfare of individuals and national economic development that has given rise to the idea of inclusive growth.  Furthermore, global thinking on this goal of inclusive growth has identified its key drivers as improved governance, higher ethical standards, and increased social responsibility.  At the corporation level, these three elements of improved governance, higher ethics, and increased social responsibility are seen as the drivers for better financial performance as well as greater returns to the owners of capital.  The resulting corporate growth is expected to translate into national development; which in turn should translate into inclusive growth if Government observes the same principles of improved governance, higher ethical standards, and increased social responsibility.

That in summary is what the Virtuous Cycle is all about: linking citizens, corporations, and governments in a chain that generates ever-improving citizen welfare, corporate growth, and national development.  It is also about engaging in comparative thinking and assessments – using variables that have no absolute truths, but driven by what others are doing in a given moment.  It is this relativism that creates globally changing virtuous cycles as countries at different stages of development are measured against constantly evolving standards.

 So, where are we as citizens, corporations, and nation in the creation of this virtuous cycle in the Zimbabwe of 2015?

 In search of greater understanding of this question, I have organized my thoughts for this evening around a theme I hear a lot about in Zimbabwe: that “if you keep your eyes fixed on the rear view mirror, you will benefit from a small 5 by 20 centimetres rear mirror on your past; but you will miss out on the big 100 by 200 centimetre windscreen view into your future”.  Both the Rear View Mirror (RVM) and Wind Screen (WSV) Syndromes are not peculiar to Zimbabwe, they are part of human development the RVM predominant among the old, and the WSV predominant among the youth.

First, the small rear view mirror on the past:-

Let us for example consider what the sponsors of tonight’s event might see in their rear view mirror.  Old Mutual has been in Zimbabwe for over 110 years, and it has during that time developed a diversified range of financial products. The other sponsor is Fingaz which has been providing weekly financial and political news to Zimbabwens for 45 years and today has a readership of close to half a million.

 Like others in this room that have been in business for decades, Old Mutual and Financial Gazette (Fingaz) could either stare at the rear view mirror, recall the good old days with some nostalgia, and be fearful of the future; or they could take a quick glance in the mirror, re-focus on where they are today, and look at the wide horizon of possibilities in front of them.  What course of action they take is a function of Leadership (theutungamiri/uongozi); that ever-changing product created by an interaction between leaders (watungamiri/viongozi), their followers (povo/wananchi), and the environment.  That is the choice that faces everyone in this room tonight; just as it faces everyone in leadership positions.

 This is the same choice that faces every nation: finding its Leadership product (the utungamiri) so that leaders can chart a path for their followers while remaining critically aware of the environment.  Those leaders who develop a strategy based on a realistic ‘reading’ of the environment and then excite their followers about the resulting vision often produce a Leadership product that defines success in implementatation and fosters societies characterized by successfulhouseholds, companies, and nations.

In our rear view mirror going back to nearly a century, we see a highly successful industrialisation strategy based on import substitution, raw material extraction, rising agricultural production, and a growing economy.  At a second glance, we see great social and economic inequalities without any possiblity of fostering inclusive growth; where households, companies and a nation have limited scope for growth – factors that led to a struggle that ended Rhodesia and ushered in Zimbabwe.  At a third glance, we see a post-colonial society with potential to attain inclusive growth, but which gave way to periods of growth and severe decline, with ever-receding hopes of attaining the promised inclusive growth.

An article entitled “A bleak future” in the magazine given to you tonight ably paints this rear view mirror picture; and it is written by a leading private sector Reader of the Economy.

On the other hand, the Zimbabwe Government Spokesman on the economy, Hon. Minister Patrick Chinamasa, has also glanced in the rear view mirror and has from time to time told us what he sees: a nation that has (a) resolved its ‘colonial legacy over land’, (b) accumulated unsustainable debts, (c) suffered hyper-inflation leading to a collapse of its currency, (d) an uncompetitive cost structure in its production systems, and (e) a world that at times appears indifferent to the plight of Zimbabweans.  I admit that my summary does the Minister a disservice to his eloquent articulation of issues as found in various Government policy statements.

When it comes to seeing the past, I think many would agree with all the above perspectives from our rear view mirror; only disagreeing on the margins by way of apportioning blame for why the past has brought us to where we are.  What we cannot disagree with is where we find ourselves today; although we should expect many disagreements on what the future might look like.

The Zimbabwe of 2015 economy is characterized by: (1) its relatively small size measured in GDP numbers (below US$15 billion); (2) a large external debt that is almost the size of the GDP (just over US$10 billion; (3) low levels of exports compared to high levels of imports; (4) a collapse in agricultural as well as industrial production; (5) poor implementation of well-written but often unrealistic plans and programs, (6) high levels of informality (over 80%) of the economy, and (7) the absence of a non-partisan national vision on several critical economic issues (in particular land reforms and indigenization policies); to name what I consider as the main ones.

What of the wide windscreen view of our future?

 Hon. Minister Chinamasa as the Government economic spokesman has given us a positive read, and gives us three critical features of the road ahead:-

 First, the nation is working to live within its means in a sustainable way by promising to reduce the cost of its workforce so that more funds can be available for capital investments. 

Secondly, the nation is prepared to clear its arrears to international creditors by producing a Comprehensive Country Financing Program (CCFP) spelling out structural economic reforms that will lay the foundations for sustained economic growth.

 Thirdly, government will engage creditors (banks and developed nations) to clear arrears though concessional and bridging loans on the back of a rapidly growing economy based on a successful formulation and implementation of the CCFP.

 The success of this future demands that there is consensus among citizens and leaders from corporations and government on the contents of the CCFP; and a binding compact to support its implementation.  These measures should set the country on a path of economic growth, and with the right support could rapidly bring about inclusive growth.

 While the CCFP can bring about national growth, more is needed from the corporations of today if they wish to be part of that future.

 When Zimbabwean companies look at their production infrastructure, they see dilapidated buildings and obsolete machinery.  They also see their skilled labour force dwindling as individuals emigrate in search of greater economic opportunities. This is no different from what companies in Europe, America, and Asia saw at different times for over a century.

 In some of these respects, the world looks the same, but it has changed radically in many other ways.  Although human needs when it comes to food, clothes, housing, transportation, health, education, entertainment, and many others have largely remained constant over the last fifty years; the methods for their production and consumption have in fact changed beyond recognition. 

 In Europe, America, and Asia, many companies from a hundred years ago have either become extinct, or have been taken over by visionary Leadership that is acutely aware that the new environment and followership has created many new opportunities for growth.  One only has to look at several famous British brands and their new Indian owners to comprehend this change (especially in the motor industry).  It is not that we need fewer cars today than we did fifty years ago, but we definitely need new designs, changed functionalities, revolutionary production methods, and greater aesthetic feel to a cheaper product that is no longer owned by the very few in society.  And that is only in the motor industry: you can apply the same view to practically every aspect of life today.

 The Zimbabwe of tomorrow is young; with over half of the population being under 35 years old, but factories and products are old.  It is therefore no longer sufficient to replace obsolete equipment with new ones to just produce old products; the new generation is demanding an overhaul of consumption patterns.  It is also not necessary to knock down dilapidated buildings if they can be renovated to house new systems that foster and bring about new production relations in a world that has become highly differentiated in the division of labour.  It is equally not necessary to insist that Zimbabweans can only contribute to the economy by coming back home when we live a world with lightening first communication and movement of both ideas and products. 

 These Zimbabweans, both at home and in the Diaspora, are on the whole well educated and capable of designing and managing the needed physical infrastructure (be it power, roads, communications, and others) on which the digital revolution will run.  They are part of a global generation that expects even greater changes in the way the read, seek health care, consume foods, earn a living, communicate, entertain, and generally live wherever they are.

 It can be said that innovation and adaptation across all value chains are likely to be features of survivors while dinosaurs exit the Zimbabwe entrepreneurial savannah.  In this, Zimbabwe is no different from other countries around the world where changes have been enormous – for instance the global service industry now makes up over 60% of GDP; way ahead of agriculture and manufacturing.  It is not that we produce fewer goods, but this change is due to the greater integration of service provision into the delivery of goods in a way that was unimaginable just two decades ago (bookshops are dying and so are newspapers; while the production unit costs have dropped as service charges have risen to change this balance between costs in production, distribution, marketing, and other aspects of bringing products to the consumer.

 The young in Zimbabwe (and in Africa as a whole) are making such radically different demands on entrepreneurs that an overhaul is needed in our entrepreneurial thinking.  On the one hand, we can opt to be like the Fleet Street workers using a hundred-year old Caxton printing technology in the face of digital printing; or the coal miners of South Yorkshire in the face of new energy demands by industry.  These two industries became extinct before we entered the 21st Century.

 On the other hand, we can act like the Sheffield owners of steel mills with the coming of plastics; or the wool merchants of Manchester with the growth of man-made fibres; these industries adapted and survived.

Asian Leadership has successfully studied lessons on global manufacturing from the last century and formulated strategies that have turned them into manufacturing centres for the world.  The same Leadership is grappling with the digital revolution and what it might mean for their highly successful industrial development strategies these last fifty years.

 We are also seeing the seeds of a new African Leadership adapting and innovating around the digital revolution – with promising nodes in parts of East, West, and North Africa.  On the other hand, Southern and Central Africa are places that stand out as being a few steps behind in this innovation and adaptation ladder, but the seeds are already planted and some even germinating if you look around us.

 Ladies and gentlemen, in conclusion let me make two final observations;

 First: in preparation for the next Top Companies Survey, the organisers might find it useful to explore new variables (in addition to the ones used for 2014) that can start identifying success factors in response to the global digital revolution as Africa strives to harvest high economic growth from the demographic dividend; and that would be my only advice.

 Second: I can safely predict that in a few years, an event like this will only be possible if it can reward the Top New Companies (whether from a re-engineering of existing ones, or from the ashes of the old).  I am sure we have in this room the leaders (watungamiri) with the foresight and staying power to create a Leadership (the utungamiri) to make this possible.

 

 [1] A talk at the 2015 Top Companies Awards Presentation Ceremony Jointly hosted by The Financial Gazette) and Old Mutual Zimbabwe; December 8, 2015, Meikles Hotel, from 6:00pm to 8:00pm

 

 

ECONOMIC DEVELOPMENT IN ZIMBABWE AND THE OPTIMIST-PESSIMIST DILEMMA

Context and background

On 1 December 2015, Deloitte held a seminar in Harare and I was asked to reflect on the likely economic impact of the 2016 budget presented by the Minister of Finance, Hon. Patrick Chinamasa, on 26 November 2015.  I chose to explore what evidence the budget had presented to suggest that the budget’s theme, “Building a Conducive Environment that Attracts Foreign Direct Investment”, could be realized.

In terms of the macro-economic context presented in the budget statement, GDP growth for 2016 was revised upwards from 1.5% to 2.7%; which is low compared with the projected average annual growth rate of 7% contained in Zim-Asset.  Thus, rather than the GDP doubling after 10 years as per Zim-Asset projected growth rates, it will need over 20 years with this new growth rate.  The proposed budget of $4 billion allocates 92% to recurrent expenditures; with 80% going to employment costs.  The projected savings of $170 million from civil service rationalization are less than 5% of budget.  Although financial stabilization efforts will be continued, the above economic performance numbers suggest that most impact on the attraction ofFDIs will depend on the impact of structural reforms discussed below.

While the Zimbabwe Government continues to produce well-written policy documents, there is always the two-legged elephant in the budget and other policy statements characterized by:-

(a) Politics (both national and international) that continues to hold economic reforms hostage, and

(b) A consistent gap between policy statements and implementation and which is still in the 2016 budget (without targets and timelines except Multi-lateral Debt Clearance by April 2016). 

It is this two-legged elephant that produces an Optimist-Pessimist dilemma: “I believe it when the Minister of Finance states what he intends to do, but I have difficulty believing he will get it done”.

Conditions Precedent for Foreigh Direct Investments (FDI): Investors, whether local or foreign require security for their investments; and these concerns revolve around the issues of (a) property rights associated with land and various investments; (b) clarity and enforcement of laws and regulations, and (c) space and opportunities for private sector growth.

Past concerns for investors in Zimbabwe have revolved around four issues of:-

1.     Continuing “agrarian revolution” fifteen years after it began in 2000 – an unusually long time as far as other revolutions go.

2.     Threat of losing 51% of investments for foreigners to local population on account of their nationality and not work.

3.     Seeming selective application and enforcement of laws and regulations.

4.     A crowding out of private sector on account of unsustainable debt and Government wage/employment costs.

How the budget addressed these issues is important in assessing the potential to attract FDIs.

Debt and arrears clearance

The budget is optimistic about attracting FDIs once its current arrears to the international community have been cleared on the basis of a Strategy presented to creditors during the October 2015 Annual Meetings of the World Bank and the International Monetary Fund (IMF) in in Lima, Peru.  The arrears clearance strategy discussed and supported by the international community in Lima is “premised on a non-HIPC debt resolution strategy, and supported by a credible economic reform agenda to ensure debt sustainability, unleashing economic transformation and poverty eradication” (paragraph 38, page 13 in the 2016 Budget Statement).

In the strategy, Government plans to mobilize bridge loan and long-term loan facilities from regional and international banks to clear debts to the World Bank and the African Development Bank, while IMF arrears will be cleared using Zimbabwe’s SDRs balance held by the IMF.  The clearnace of multi-lateral debts will be followed by engagement with the Paris Club members; but details of terms and conditions are yet to be clarified. 

Secondly, Government expects to meet its economic targets as set out in a Staff Monitored Program (SMP) approved by IMF Management. 

Thirdaly, Government expects to prepare a new Comprehensive Country Financing Program CCFP) – with the process for its preparation yet to be outlined.  This CCFP will be a medium-term reform program crafted in time for debt and arrears clearnace.  This program will be approved by the IMF Board rather than management, and it is not clear if politics will at that time rear its head.

Critical policy issues of agriculture, land, and indigenization

The country faces the threat of El Nino, and shortages of food associated with droughts. 

There are proposals to increase Government control of cotton industry, and to establish a Horticultural Development Board to improve performance of the industry.  It is not clear how this is expected to work given the poor performance of the 80-odd State Owned Enterprises that have been a constant drain on the fiscus.

An objective reading of the budget statement assumes that the proposed reforms will come with:-

(a) A Bankable and Tradable lease for Banks to lend farmers the $1 billion said to be available to support agriculture.

(b) A proper targeting in place distribute the $28 million allocated to agricultural inputs for 300,000 vulnerable households

(c)  A closing of the gap between maize prices from GMB and regional sources will put a check arbitrage and restore viable local maize production.  It is difficult to see why a farmer would continue producing maize after deliver it to the GMB for $395 per ton and then waiting to be paid for over a year.

The budget introduces a Land Rental Levy of $5 per hectare per year for A2 farmers, but it is not clear what is the incentive for farmers to pay the levy as long as they are not in possession tradable leases.  The penalty for non-payment is cancellation of offer letters – which in themselves are a source of uncertainty for many farmers.

The budget promises that Statutory Instrument on implementation of indigenization policies will be implemented; but it not clear if this will be sufficient to reassure investors as long as the law is not amended to clarify that 51% only applies to natural resource exploitation.

In view of past gap between plans and implementation, will investors feel reassured by these very positive promises, or will they take a wait and see attitude until there are positive implementation results?

 

CAN THE STUDY OF CORRUPTION BE INNOVATED? Transparency International Zimbabwe preparations for 2015 Annual State of Corruption Report​

The 2015 Transparency International Zimbabwe (TIZ) Annual State of Corruption Report (ASCR) will focus on what has fuelled corruption, what impact has it had, and what practical recommendations can be made.  Thus a good understanding of the corruption and its drivers, impacts, and remedies will make the report accessible to a wider audience. 

A possible approach to studying corruption in a way that mobilizes the general public can be strengthened if its authors can show readers that they have a good understanding of the society they are studying. 

Invited to critique the proposed study methodology and nominated as a reviewer of the report once produced, I took the approach of exploring issues that the study could tackle in terms of what should be (a) avoided, (b) promoted, (c) watched out for, and (d) strengthened.

(A) TO BE AVOIDED

1. LCD. Tendency across Africa to approach a Lowest Common Denominator (LCD) approach when comparing how a country is faring compared to its neighbours; and expressions of satisfaction as long as the neighbours are doing worse (be it corruption, violence, hunger, or whatever measure of development is under consideration).

2. Accommodation of corruption.  In societies where resources acquired through corrupt practices are then invested locally have a tendency to be more accommodative of corruption by comparing themselves with societies where the proceeds of corruption are externalized and invested in safe havens and out of legal reach by local administrations.   Jobs and economic benefits accruing from the investment of such resources can lead to local excuses and acceptance.

3. Weak enforcement frameworks.  While many countries have in place anti-corruption laws, sanctions are often weak, and the regulatory environment inadequate in terms of enforcement.

(B) TO BE PROMOTED

1. HCF. Instead of LCD, adoption of a Highest Common Factor (HCF) approach by comparing performance with the best in the neighbourhood and aiming to do better.  Thus, the study should benchmark itself against the country with least corruption in the sub-region.  The LCD approach tends to promote a “Culture of Acceptance” when dealing with corruption as citizens give up on being able to doing anything and instead “throw their hands in the air”.

2. Putting good rules in place.  In environments where rules are weak and inadequate safeguards for resource use in place, an environment that promotes corrupt practices can prevail and even encourage honest people to engage in activities that lead to corruption. 

3. Social entrepreneurship.  The growth of social entrepreneurship around the world has had positive impacts on the fight against corruption as young innovators develop tools that monitor, report, and maintain debates on accountability over resource use, service provision, and shortcomings of leadership at all levels.

4. Rules and laws that promote justice.  Where citizens consider rules and laws unfair, breaking them becomes acceptable and is even promoted by citizens.  For instance, Africans who broke colonial rules often got community support: especially where the colonial administrator put in place an unfair law and then proceeded to appoint judges and policemen to enforce the law – which although lawful was unjust.

5. Shine a light on corruption. Officials and citizens carry out corruption behind closed doors and dislike visibility; hence finding ways to expose these practices as well as showing how and where such practices take place is important.

6. Understand social base of corruption.  Corruption does not take place in a vacuum and understanding its social base is important.  A clear exposition of these dynamics can assist citizens put corruption and ways to tackle it in place.

7. Good leadership.  The inclination of citizens is to believe leaders who promise to fight corruption; but trust is quickly lost when citizens discover that their leaders are for “anti-corruption during the day” and “bribe takers at night”.  A case in point was when Kenyans welcomed Government anti-corruption policies after 2002, only to discover that corruption continued to grow and was accepted by higher leadership levels.  Citizens then went from harassing petty policemen who took small bribes to focusing on the culture of “it is our turn to eat” so eloquently articulated in the anti-corruption publication of John Githong’o – and belief with hope had given way to disillusionment!

(C) TO BE WATCHED OUT FOR

1. Theft versus Corruption.  One view from discussions in Africa is that the collection of bribes to deliver a service is corruption; but becomes theft when full payment for services and goods is received and no delivery takes place.  It is not clear if Zimbabwean corruption has escalated from petty to major corruption; or has transitioned into theft.

2. Cost of corruption.  This is often measured in money terms, but measurement should also move into lives and other measures.  For instance, if sub-standard water treatment chemicals or drugs are supplied, should resulting deaths not be attributed to the corruption?  Similarly, when power utilities fail to deliver power to hospitals, where should accountability for any deaths or losses to the economy be? 

3. State versus Societal Corruption.  Societal corruption is sometimes passed over in the name of culture – a traditional Chief who demands and gets livestock for settling a dispute might be seen as part of cultural conflict resolution costs; but becomes State Corruption if the same Chief becomes an employee of the State and asks for the same livestock.  Equally, when traditional exchange of gifts goes into State-government procedures, citizens might start off accepting the demand “for something small”, but becomes unacceptable when “small” becomes “large and then everything”.  This transition of corruption from cultural to State practices is an area for further exploration; and understanding such power dynamics is important. 

4. Corruption versus State failures.  State can lose revenue on account of deliberate efforts by some citizens to gain unfair benefits; but it can also be due to inadequate State regulations and capacities to collect due taxes.  State failure creates conditions for corruption – an important lesson from “narco States” in Latin America.

(D) TO BE STRENGTHENED

1. Diagnostics.  Clearly-defined variables for analysis will strengthen study results and help the reader differentiate between subjective and objective study findings.

2. Evidence-based foundation.  A sound situation analysis that lays out facts about corruption will assist and strengthen evidence-based discussions and follow on actions.

3. Scope for citizen interpretations.  It will not be sufficient for the report to address issues that are of concern to the elite (local and international), or the better organized urban residents.  The inclusion of issues that are important to rural populations (e.g. distribution of agricultural inputs, allocation of land parcels, behaviour of government officials far away from their supervisors in urban centres, etc.) will make for a strong and effective report that draws in citizens to interpret the findings.

4. Resonance with reality.  Report findings should give citizens a chance to confirm a resonance between study findings and the reality these citizens experience in their lives.

5. New learnings.  New dimensions of corruption that document issues that affect the majority of the population will make for a more effective report, especially if it captures insights from ordinary citizens and not just the views of activists.

BANKING SECTOR STABILITY IN ZIMBABWE: Strengthening Transparency and Accountability

On 10 September 2015, the Southern African Political Economy Series (SAPES) Trust held a Policy Dialogue Forum on the subject of stabilizing the banking sector within the context of greater transparency and accountability.  The two presenters were Messrs Sam Malaba, President of the Bankers’ Association of Zimbabwe, and Prosper Chitambara from the Labour and Economic Development Institute of Zimbabwe (LEDRIZ); with Dr Phineas Kadenge, Chairperson of Economic Department at the University of Zimbabwe, as discussant.  I chaired the session that was set in the background of a recent Presidential State of the Nation Address and an IMF mission to Zimbabwe.

Mr Malaba’s presentation covered the current state of banking and outlined a positive picture of growing reforms.  The coming into effect of Zimbabwe Asset Management Company (ZAMCO) and the RBZ Debt Assumption Bill had reduced indebtedness in the banking sector (by at least $15.7 million) after taking over Non-Performing Loans (NPLs), but not those arising from insider trading.  Bank supervision by the RBZ was including stress tests and monitoring capital adequacy.  The BAZ, Ministry of Finance and RBZ held regular consultative meetings, and working relationships were generally good under this “partnership in policy making and management” of the banking sector.

The establishment of a Credit Reference Bureau was under way and this would help bankers improve their lending practices by avoiding chronic defaulters.  The forthcoming Banking Act would address issues of good corporate governance, improve bank supervision, prescribe that each bank must have a Risk and Audit Committee, while failing banks were “quietly negotiating a surrender of their licences to the RBZ”. There was still need to address the loan to deposit ratios in the sector, as well as increasing liquidity issues in an environment where exports were only half the volume of imports – leading to a persistently high trade deficit.  Although there was a view that Zimbabwe was over-banked, this was not the view of BAZ; although there is room for some consolidation.

Mr Chitambara provided a broad overview of the Zimbabwe banking sector very much along the lines outlined by Mr Malaba, but added the dimension of size comparison between Zimbabwe, South Africa, and Nigeria – concluding that the Zimbabwe banking sector faced major growth challenges.  Both Messrs Chitambara and Kadenge concurred with Mr Malaba that there was promise of improved governance in the forthcoming Banking Act, but wanted more done in terms of past shortcomings in the sector – especially over money lost by clients when the RBZ took over accounts and used these funds during the hyperinflationary period.

During discussions, the audience expressed concern over several issues, among them the quality of bonds being issued by the RBZ, problems of disclosure in the sector, lack of liability on the part of RBZ and indigenous banks that had collapsed, uncertainty over stability in the sector especially in view of the impact Rand/US$ value is having on the Zimbabwe economy, fear about future banking policies, and an overall mistrust of the banking sector by the population.

RBZ Debt Assumption Bill

The audience was concerned about problems of accountability and transparency in the way this Bill had been formulated and passed into law.  From an accountability perspective, concern was expressed that individuals and institutions that handled and benefitted from the funds had not been asked to account for their activities or use of funds and accept responsibility.  Instead, Government had assumed the debt, which would be repaid by the whole population while benefits had gone to a few individuals.  Secondly, there had been little transparency in the handling of the bill and its provisions, especially the poor disclosure, clarity, and accuracy of information as to who had benefitted and by how much.  Concern was expressed that the bill had set a bad precedence of impunity, and this did not give the population confidence that similar actions would be punished in future.

Background to the Bill and emerging issues

Objectives of the Bill:  The bill was an attempt to clean up the Reserve Bank balance sheet; while putting in place a mechanism to document details of the debt.  It consolidated domestic and external debt within the total sovereign debt; clearing the way for a less encumbered RBZ to resume its normal activities.

Some details of the debt: The bill covered an amount of US$1.3 billion.  The debtors were left on the RBZ balance sheet as an asset while liability to pay the creditors was shifted to the MOF.  Thus, the MOF cannot collect from debtors, but must pay the creditors.  From a study of the schedule of bill, close to $600 million was owed to domestic creditors,  just under $700 million was owed to external creditors, but there was no breakdown of debtors.   The total money borrowed by RBZ had risen from $165 million in 1998 to $1.3 billion in 2008; and with a 5% interest rate, the total debt had risen to $2 billion by 2015.

Beneficiaries of $1.3 billion: Most of money financed quasi-fiscal activities undertaken by RBZ “to rescue the country”, with the agricultural sector being the main beneficiary in order to revive agriculture through A2 farmer equipment loans.  Some of the money went towards the purchase of drugs and other consumables considered strategic national goods; while the MOF adopted some of the external bank borrowings during the period of Inclusive Government.

Looking ahead: The Debt Management Office in the MOF maintains all records of sovereign debts, and a breakdown of the $1.3 billion (and $2 billion with interest) will be collected and maintained in this office.  A resolution of the national debt (over $10 billion) will in future include this RBZ-incurred debt; while debt owed to dispossessed former white farmers has yet to be tackled. 

RBZ debt challenge: Should farmers who received equipment under RBZ quasi-fiscal activities assume debt liabilities to RBZ?  Who should assume liability for debts incurred to purchase public goods like drugs, food, water treatment chemicals?  With the CSOs calling for an audit of the RBZ as well as the national debt, how will results from these audits be used?

Development challenge: To what extent should the results of a review of past debts be used to reform the future system, as opposed to “settling problems from past shortcomings”? For a country with the potential to produce a $100 billion economy within a few decades, how much should a Debt Resolution Strategy be about recovering lost monies, and how much about informing forward-looking policies and strategies?

Debt resolution strategy: At the time Zimbabwe Government sits down with its Creditors to discuss debt restructuring, rescheduling, write-off, or any other option; the final mix of instruments will depend on the state of the economy and realism of proposed policies.

Mutual accountability.

While the Policy Dialogue Forum focused on the accountability of those in authority to the citizens, little was said about the obligations of citizens in demanding accountability - in this case from those responsible for the banking crisis.  It was for instance not clear why commercial banks had not asked customers to come for their money when the RBZ threatened to take over these accounts without permission from bank account holders; or why the latter did not immediately withdraw their money when it was clear that the RBZ was taking over clients’ funds without seeking the permission of owners.

A discussion on mutual accountability would not just focus on the actions of those in authority, but also of those demanding accountability.  The printing of money by the RBZ led to hyperinflation that wiped out the value of such assets as houses to the extent that home mortgage repayments in local currency dropped dramatically in relation to hard currencies to the extent that a mortgage worth US$400,000 could be repaid with an equivalent of US$1,000 when exchanged at the RBZ controlled exchange rates.  This transfer of value from banks and building societies to a few individuals meant that the value of insurance, pensions, and other instruments held by these institutions for the majority was wiped out - and it became patently clear when the economy was dollarized.

Similarly, Government price controls of maize and other goods meant that value was being transferred from traders to the buying public who paid in local currency while traders paid for imports in US$ and Rands.  There is no evidence that the general public or its advocates resisted these developments, happily accepting the benefits while enterprises lost their stocks and any ability to replace them.  Some of the farmers who had received free inputs and produced crops had to sell at heavily subsidized prices – often lower than the total cost of production; but the consuming population did not advocate for fair trading practices at the time.

In this respect, the Zimbabwean population is not any different from other peoples around the world.  The destruction of production systems that produce short-term benefits often lead to long-term economic difficulties; but individual consumers in the population generally do not make the connections in order to demand accountability from their own actions.  It is this dimension of mutual accountability that requires activation to maintain a healthy balance with regular mechanisms for accountability demanded from those in authority.