The economy and business: Connecting the lines

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BY Joseph Brian Madhimba
ZIMBABWE is endowed with an array of natural resources, yet paradoxically the generality of the people are poor. The level of poverty is unacceptable for such a resource-rich country.

We are caught up in a trap of unemployment and poverty. It is now time we pulled ourselves out of the quagmire through public and private partnerships. Government and captains of industry should work together to create long-term jobs.

Manufacturing

Manufacturing is key in creating long-term jobs. Zimbabwe’s manufacturing base must be expanded through beneficiation or adding value to the country’s vast natural resources. We must identify key areas of the economy’s value chain and make them the focus of value-addition.

Given that the country’s domestic market potential is limited, Zimbabwe should strive for export-led growth. The forex earned would be ploughed back into the manufacturing sector to create more jobs.

The Asian tigers, Hong Kong, Singapore, South Korea and Taiwan, have become economic powerhouses by producing quality manufactured goods and exporting them at competitive prices. The economies of these countries are characterised by substantial growth rates and relatively high gross domestic product per capita.

Skills

Value-addition requires both local and imported skills and Zimbabwe needs to expand its skills base.

To attract expatriate skills, Zimbabwe should relax the restrictions on expatriates coming to the country.

While the educationists are busy rejigging our education system the results of which will take time to materialise, we need to import expatriate skills to fill the lacuna.

History is replete with examples of economies that have been built with foreign labour.

A typical example is the United States of America. That country is not a monolithic entity in terms of the demographic composition of the population. It is a melting pot of different nationalities. There are African-Americans, Latino-Americans, Irish-Americans, German-Americans etc. So, there is nothing shameful in having a sizeable expatriate population.

In Europe, Belgium, France, Germany and Luxembourg have benefited from the skills of foreigners.

France has advanced its economy through the skills of immigrants from Italy, Poland, Portugal and Spain.

The Germans used foreign skills to reconstruct the country after the devastation of the second world war when they allowed immigrant workers from Greece, Morocco Portugal, Turkey and the former Yugoslavia.

Since the 1960s, Germany has allowed some foreign workers and their families to live in the country permanently. Today Germany is the largest economy in the European Union.

Luxembourg’s economy was boosted by foreign skills to such an extent that at one point in the 1980s there were more jobs than workers available in the country.

So, it is right for Zimbabwe to bring in foreign skills. It makes perfect economic sense because in addition to transferring skills to locals, expatriate workers also contribute to the fiscus through income tax and VAT.

Foreign Direct Investment FDI

Together with expatriate skills, Zimbabwe needs more foreign direct investment (FDI). Leveraging our vast mineral resources, the  Industry ministry should launch a global campaign to attract more FDI into Zimbabwe’s manufacturing sector.

Because of constraints in mobilising domestic capital, there is need for more extensive liberalisation of Zimbabwe’s investment policy to attract more FDI. This would boost economic growth prospects and break the cycle of unemployment and poverty.

There is need for Zimbabwe to give more investment incentives since these have a bearing on FDI decisions. There is consensus among economists that investment incentives have a substantial impact on export-oriented FDI, particularly where the products emanating from such investment are targeted at export markets throughout the world.

Zimbabwe can take a leaf from the experience of India’s FDI liberalisation programme which yielded considerable results between 1997 and 2002. Also, Zimbabwe should revise its tax regime. For example, it should be possible to considerably reduce the company tax rate.

In Singapore the company tax rate of 17% is a major drawcard for FDI.

  •  Joseph Brian Madhimba is a Zimbabwean academic and former radio and television broadcaster.