Time for public procurement reforms to yield fruit

The Chronicle

Prosper Ndlovu, Feature

ZIMBABWE should capitalise on the multiplier effect of public procurement reform to rejuvenate its economy and widen the domestic job market to achieve the middle–income vision by 2030. 

At a time when Government is seized with fiscal and monetary reforms to stabilise the macro-economic environment, economic experts believe enhanced public procurement could be a game changer for economic growth.

The World Bank already acknowledges that the new dispensation led by President Mnangagwa has taken bold steps to reform the public procurement system through a comprehensive multi-faceted programme that should catalyse further development. It is now time for the economy to enjoy the fruits of this reform exercise.

As earlier indicated, the country has set its eyes on middle-income status of average $3 500 by 2030 with Gross Domestic Product (GDP) per capita of $1 079. 

However, with growth average of four percent in 2018, the country remains shy of desired annual growth rate of 5,2 percent. 

Economic growth for 2019 has already been frustrated by unforeseen shocks such as Cyclone Idai, which left a trail of destruction in the eastern parts of the country. 

Poor agriculture production due to drought has also been a major drawback with cash crops such as tobacco suffering reduced output. Agriculture is the mainstay of the country’s economy whose subdued performance has a crippling effect on agro-processing industries and food security. 

Meanwhile, importation of goods and outsourcing of key services continue to overshadow exports with the annual trade deficit stubborn at US$2,1 billion. 

Although there has been a noticeable reduction in the trade deficit since the beginning of 2019, this has largely been due to foreign currency shortages and not growth in exports as the appetite for imports remains high. 

The current account deficit persists with inflation hovering around 97,9 percent, according to Zimstat, while informal sector employment dominates the economy. This situation has been compounded by the impact of an overvalued exchange rate since late last year, which halted in the past two weeks when Government ditched the multi-currency system in favour of the Zimbabwean dollar.

Economist and lecturer at the Bindura University of Science Education, Mr Lazarus Muchabaiwa, says the overvalued exchange rate has bred problems as exports became uncompetitive thereby creating a fertile ground for cheap imports. This has led to a decline in domestic demand, lower economic growth and higher unemployment as well as current account deficit, which will require huge capital flows to finance.

Given this scenario, Mr Muchabaiwa, suggests the country needs to urgently harness public procurement opportunities as a vehicle to driving robust domestic economic growth. 

In an academic paper titled: “Public Procurement for Economic Revival” presented at the recent Buy Local Summit in Bulawayo, he observed that on average 13-20 percent of the country’s gross domestic product (GDP), estimated at about US$20 billion after its rebasing last year, was being spent in procurement of foreign goods, services and infrastructure for projects such as roads, hospitals or school books, to mention a few. 

Public procurement refers to the manner in which the state through its ministries, departments and agencies, parastatals and local authorities obtain purchases, loans, transfer or hire of supplies or service to provide public services. 

“In Zimbabwe operations and maintenance costs 10,6 percent, capital expenditure and net lending 37,84 percent,” he said. When done properly, Mr Muchabaiwa, is convinced that public procurement could lead to speedy “economy recovery and sustained economic growth and reduced unemployment”.

He adds that the multiplier effect of central and local government spending, if channelled locally, could lead to higher national incomes. 

“Procurement of local quality and competitive goods leads to better service delivery,” says Mr Muchabaiwa.

Such a model would no doubt provide an equity window for women and youth entrepreneurs and assist in successful implementation of the devolution drive and subsequent setting up of desired provincial economies. This would further facilitate buying from small to medium enterprises (SMEs), which will lead to investment in the sector. 

The success of this model would, thus, require the productive sector to play ball by increasing output while procurement processes need to be fine tuned in line with doing business best practice. Local suppliers, Government, labour and public enterprises need to engage on this for the benefit of the economy.

The public procurement reform programme was supported by a US$2 million grant from World Bank’s Zimbabwe Reconstruction Fund, and has made significant progress in advancing reforms through a variety of actions.

“These reforms are trendsetters for broader governance reforms in Zimbabwe but can also be a model to follow by other countries in the region, or the world,” says World Bank. 

Going forward, Mr Muchabaiwa advised local producers to familiarise themselves with the new procurement regulations and come up with a quality cost structure that promotes domestic business viability. 

He says even SMEs can combine in innovation and risk sharing, which is a niche shunned by big companies. This framework demands that local industries should produce quality goods, which reduce public sector wastage by shunning local suppliers for foreign goods.

 Local businesses need to focus on value for money through collaboration for bigger projects for higher production or economics of scale so as to reduce costs. This places urgency in re-tooling and producing locally using domestic inputs.

Government on one hand, through local procurement entities and the new Procurement Regulatory Authority of Zimbabwe (PRAZ) have been advised to reduce cost of bidding to prioritise local content consumption. To Mr Muchabaiwa, more needs to be done to reduce bidding process time for purposes of planning and value of money. 

He says regulations should be tightened to avert corruption in the form of soliciting for kickbacks and discrimination towards foreigners and certain locals. 

Mr Muchabaiwa further says Zimbabwe could consider embracing the Mexico model where public procurement contracts are used as collateral. 

“Design tenders to facilitate innovative technology and local industrialisation, offer contracts targeting particular economic sectors and societies and offer tenders to special economic groups,” he said. 

Higher levels of integrity in public procurement will no doubt reduce wastage and enhance the effectiveness of Government spending and infrastructural development for the benefit of the economy.