Transforming Zimbabwe to a Private Sector-Led Economy
The Government of Zimbabwe launched its economic blueprint, the Transitional Stabilisation Programme (TSP), in October 2018. This policy document is aimed at achieving fiscal consolidation, creating economic stabilisation, and stimulating growth over the period 2018 – 2020. The TSP is meant to lay a robust base for sustained and inclusive growth and make the country more conducive to doing business. It is an essential tool to overcoming economic fragility, inequality, poverty and lacklustre private sector performance. It is also crucial in developing the policy and institutional reforms required to create a vibrant private sector economy.
For the programme to succeed, there is a need for cooperation of all stakeholders, as it requires the engagement and commitment of business, labour, civil society and development partners. There is a need for the New Administration to also focus on reducing red tape so that decisions are made fast, to avoid stifling development. Furthermore, there is a need to do more on the ease of doing business front in areas such as legislation and taxation, among others. The strategic goals outlined in the programme identify the issues that are affecting the more productive segments of the economy and provide policy interventions designed to boost investor confidence and drive private sector growth.
Zimbabwe needs to improve its investment and business climate and, according to the TSP report, it will do so through the “consistent application of credible and sustainable policy interventions underpinned by strengthening the rule of law”.
To encourage industry competitiveness, the TSP will be implementing measures that mitigate the high cost of doing business. It addresses concerns around the cost of finance, more flexible labour laws, access to public utilities and the supply chain. Government is paying close attention to institutional efficiency and policy design to further reinvigorate the private sector and its growth.
Already, the government’s steady strides towards change have had a positive economic impact. The overall economic growth for 2018 is sitting at a projected 6.3%, exceeding the initial projection of 4.5%, and an expected growth of 9% is projected for 2019. It is a renewed sense of business confidence that has already ignited segments of the economy and this has to be nurtured to further growth in the private sector and to keep the economy on track.
In the agricultural sector, the programme is focused on returning Zimbabwe to its original glory as the breadbasket of Africa. The measures support full recovery of the livestock market and provides benefits for improved supply along the livestock value chain. This is bolstered by initiatives designed to improve private sector support, which will reduce reliance on government. The introduction of bankable 99-year leases will grant farmers funding from financial institutions and there has been a marked improvement in access to markets for farmers.
The mining sector is receiving just as much attention. Closed mines are set to be re-opened while those that operate below capacity are to be expanded. Mining is already responsible for more than 70% of the country’s export earnings and this makes it critical for the economy.
Manufacturing will receive increased investment with an emphasis on value adds and the use of agricultural and mineral production to increase employment opportunities and export income. Government is set to roll out initiatives that partner both foreign and local investors so as to drive growth and collaborative opportunities. And throughout all sectors, there runs the thread of the small, medium and micro enterprise (SMME) — long considered fundamental to thriving economic growth, SMMEs form one of the foundations of the programme. Business linkages, market access, cluster development and support services are outlined as critical for SMMEs in the report.
In addition to sector-focused improvements and measures, the TSP will be paying attention to public infrastructure. This is key to unlocking economic growth potential and driving a more competitive business environment. The programme focuses on completing ongoing infrastructure projects and has increased the budget spend from 16% to more than 25% from 2019. Priority projects include infrastructure developments in energy, transmission infrastructure, water and sanitation, transport and communication, environmental protection and reclamation, health, education, housing, ICT and irrigation development.
Through these ongoing measures, the Transitional Stabilisation Programme represents the commitment of the Zimbabwean government to creating a more prosperous and sustainable country while overcoming many of the challenges that make up its past. It’s success hinges on government remaining focused on achieving these strategic goals and remaining aligned with Vision 2030.
Opening the economy for business
The Zimbabwean government has been paying attention. Consistent and targeted economic reform sits on the proverbial table, while programmes and strategic plans have been carefully curated to meet specific economic, social and developmental needs. The Transitional Stabilisation Programme (TSP), which commenced in October 2018 and runs until December 2020, is a two-year programme focused on driving economic growth by shifting policy and implementing prudent macroeconomic policies. One of its primary focuses is on enhancing the attractiveness of the country when it comes to business.
In a nutshell, Zimbabwe is putting significant efforts in opening up the country for business. In order to achieve this cardinal goal, government has put in place robust policy reform measures that are designed to achieve the growth trajectory targeted under the TSP. Furthermore, to achieve this desired growth trajectory, government needs to do more on ease of doing business, improving competitiveness and opening the country to international investors and financiers, according to the TSP Report.
Institutional efficiency, regulation and policy design will become a clear focus for the government. They have to. To facilitate private sector engagement and business involvement, these three factors need to be addressed. Complex red tape and incomprehensible legislation limit investor and business interest. Further, the report highlights the importance of harnessing the potential of the digital economy.
Digital entrepreneurship and the Fourth Industrial Revolution can transform employment, skills development and economic strength.
To support this, the government has committed to developing concrete plans that will create an enabling environment for the digital economy, particularly with regards to improved connectivity. It is also paying attention to the development of a macro-prudential policy framework that focuses on reducing systemic financial risks and encourages steady financial and economic growth. This has seen the prioritisation of financial stability assessment models and early warning tools such as macro stress tests and inter-bank contagion models.
Alongside easier access to credit, initiatives targeted at small, medium and micro enterprises, inclusive economic growth and sector-relevant planning, Zimbabwe is making the right moves that are conducive for business growth. This is a good start for the Government of Zimbabwe, although it is not going to be easy to resolve all the challenges in a short space of time, as envisaged under the Transitional Stabilisation Programme and Vision 2030.