The land is the small economy, the small economy is the land, we need a new economic vision

OPINION – Since the onset of the Zimbabwean land reform program in 2000 ZANU PF has held on fast to the theme of “The land is the economy and the economy is the land”.

Unless an alternative party actually wins and assumes office or in the absence of an alternative economic blueprint one therefore assumes that this is what the country can expect going forward , a return to its previous status of reliance on Agriculture but only this time with a greater number of participants and a poorer economy as a whole.

Professor Craig Richardson in his article "The loss of property rights and the collapse of Zimbabwe" clearly shows that the country’s economy only ever grew or contracted in line with rainfall patterns between 1980 and 1999 the onset of the land reform program. The causal culprits of this latter reform program, resultant collapse and beyond are the subject of much contestation within the current political landscape but what is inescapable is that in the 19 years prior, when ZANU PF were the sole architects of the country’s economy it was left to the heavens. The purpose of this article is to demonstrate that a continued reliance on primary agriculture will only lead to a perpetuation of poverty for Zimbabwe.

Out of curiosity I sought out an old university friend who is quite heavily involved with ZANU PF and asked if indeed the theme "The land is the economy and the economy is the land" was genuinely at the core of ZANU PF conscious beliefs and he confirmed that indeed it was so. Not only that he too had just retreated back to the Zimbabwean rural areas and started a farming project, never mind his high tech training. While I do not wish to belittle the original ideals of both the 1890s uprisings as well as the late twentieth century Zimbabwean liberation struggle which to a large extent both centered around land, as well as its utility value in terms of feeding the nation, I find it hard to believe that outside of election gimmickry there might actually be people who still see a potential link between agriculture and a prosperous modern economy.

While it is true that the historical Zimbabwean economy was indeed agriculturally based it is my hope that no one else in the new generation of Zimbabweans actually believes in such an attainment of a new beginning all from farming. This is simply not possible. It is not just me saying this but a statement of fact that: Land (Agriculture) is the small economy and the small economy is land (Agriculture). At this point I would ask the reader to allow me to delve into what at first may appear somewhat academic details yet very simple concepts which in my view we should all attempt to understand if we are to hold our politicians accountable as far as African economies are concerned.

According to Erik Reinert the author of "How rich countries became rich … and why poor countries stay poor", there is a very simple reason why Agricultural has not led many countries to first world status and it is called "The law of diminishing returns". Even in the world’s most advanced economies Agriculture continues to rely on subsidies to survive. While the use of the words, "law of" and "returns" might create the impression of some complicated scientific phenomenon, this is actually a very simple concept to understand and in fact my own father was an environmentalist introduced this to me in junior high school. In very simple terms, a piece of land utilized for virtually any agricultural pursuit yields a given level of output up to a maximum, for a given level of capital and resources invested. However you eventually reach a point where this increase is resources and capital actually begins to diminish the level of output, if you employ too many tractors and fertilizer you will simply not reap all you sowed. Put simply where a single tractor and ten bags of fertilizer could give you amazing yields, for the exact same piece of land, if you brought in five more tractors and quadrupled the number of bags of fertilizer you will actually realize spectacular losses. Thus the only way that you will eventually increase output is by acquiring more land. But as we all know land is a limited resource.

Apart from other factors including the location of oligopolistic if not favourable and sympathetic markets the most basic thing that made Zimbabwe’s former white commercial farmers as successful as they were is that they were few in number and still retained large tracts of land on which they could still increase output up to a given level, in an environment where there was limited competition. It was only after some time that Zimbabwe’s communal farmers eventually overtook the commercial farmers in terms of output in the 90s. What we never got to understand however was the comparative cost of production from each of these two broad sectors. My own guess is that our communal farmers actually produced at a greater unit cost. We may therefore have mistaken individually acquired wealth for potential national wealth.

Industry is the modern economy, not agriculture

The diminishing returns problem is one that’s shared by other activities we are so heavily into on the continent including specifically mining. The deeper, wider and more complex a mining operation becomes the higher the cost of mining. Most of the world’s poorest countries are largely engaged in such activities including the likes of Burundi where 90% of the working population are employed in Agriculture, Somalia where 65% of their GDP is from Agriculture, Nepal where 40% of their GDP is agriculture, all ranking in the bottom 10 of the poorest countries by GDP per capita.

Industrialized economies however rely on activities that accrue economies of scale, in other words for every additional BMW vehicle that comes out of a factory, it becomes cheaper when you take into account capital invested due to the effect of spreading out fixed costs. The richest countries by GDP per capita including the likes of Norway, Switzerland, the United States of America are all industrialized. Recent entrants to this club of the rich almost all evolved towards industrialization including the BRIC countries, the Asian Tigers, China you name it. In fact China is now the world’s biggest exporter of manufactured goods for the very reason of seeking sustainable growth.

Sadly in Zimbabwe’s case at independence manufacturing made up 20.7% of our GDP and 13.4% (1999) and by 2005 only 9.4% (Encyclopedia of the Nations). According to the same source the total value added industry (beyond just manufacturing) made up 27.9% of our GDP at independence but by 2005 only made up 16.8%. Contraction in this sector, a sector which should have been the hub around which the economic spokes and wheel should have been turning is in my view what precipitated the pressures that led to the land reform program. A population which should have been absorbed by industry as well as related sectors eventually put pressure on the only resource they were familiar with, land.

Most astonishingly though according to another source the CIA Fact Book’s 2009 estimates Zimbabwean Agriculture employed the largest number of people no doubt mainly subsistence or low income employment, two thirds of the employed population (66 %) while only contributing a paltry 19.1% of the country’s gross domestic product. Categories defined as Industry (employing 10%) and Services (employing 24%) on the other hand contribute more than twice their respective proportions to GDP relative to the percentage of people employed, 23.9% and 56.9% respectively. This is a classic 80/20 rule scenario where the bulk of our people are employed in sectors providing the lowest value activities. Most unfortunately, an extension of this will be a magnified and hopefully unintended meaning of the theme "The land is the economy, the economy is the land".

Apart from an insatiable and destructive contest for political power, this is the real problem facing Zimbabwe and quite possibly many other African countries as well. Zimbabwe (Africa) it is time for a new vision.

Lovemore Fuyane is Zimbabwean born and writes from South Africa