OVER the past weeks, Government has relayed a strong message on the need for the country to attract what has come to be termed the “much needed” foreign direct investment.
Yesterday, The Herald’s main story was on steps Government is taking to promote FDI with the underlying belief that FDI brings capital, technology and skills. In addition, new investment projects also create employment.
This tallies well with the Zim-Asset blueprint and more recently the 10-Point Plan. However, while we acknowledge that FDI is part of the solution needed to grow the economy, we are of the view that it is not the most significant.
In any case India and China and most Arab states did not solely rely on FDI for growth proving the much theory (mostly promoted by the Bretton Woods institutions) that foreign capital is the best option to develop emerging markets wrong.
What every country needs is a willing leadership that is committed to the betterment of the lives of the gentle citizenry, through the efficient allocation of resources. And this is what Government is doing with the indigenisation and economic empowerment drive.
Foreign investors use the same template when investing and unfortunately that template almost always ranks Zimbabwe lower whichever index is used, be it Competitiveness, Doing Business etc. The latest on Economic Freedom released yesterday ranks Zimbabwe a lowly 150 out of 157 countries.
According to the head of the IMF Mission to Zimbabwe’s Staff Monitored Programme Domenico Fanizza funding is likely to be possible after three years on condition the arrears are cleared and that the country passes the SMP.
This only means that Zimbabwe will only be able to get funding in the same year that it will hold elections and therefore at this juncture we must not put all our eggs in the “push-for-FDI” basket, but rather concentrate on issues that will revive the economy.
Last week economist Godfrey Kanyenze rightly put it when he said we risk “majoring on the minor.”
Reality says the economy remains in a fragile state, with an unsustainably high external debt and depressed industry and informalisation. The main concern, in our view is lack of institutional functionality as there is not much the Government can do in terms of policy.
What is required to kick-start the growth process is not FDI rather it’s structural adjustment and the ability to get things working particularly in key enterprises such as National Railways of Zimbabwe and Air Zimbabwe.
State-owned enterprises are at the point where they have to justify their worth to the country and economic growth is almost always linked to power, transport among other things.
As it is now Zesa, NRZ, Air Zimbabwe and all the other State-owned enterprises have been inefficient and corruptly run for long no one knows their economic potential.
If NRZ starts working efficiently the whole agro and mining industry will change. The same for Zesa, Zinara and other key institutions.
There is a multiplier effect if these institutions start functioning, but at the moment this is unknown. And this is where Government should concentrate on after which FDI will naturally follow.