ENABLING ECONOMIC GROWTH IN ZIMBABWE – challenge of Rear View Mirror and Windscreen View Syndromes
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.
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.
 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