Zimbabwe and the Development Dilemma

Diamond polishing workers in the Southern African state of Zimbabwe. The country is a large repository of gems., a photo by Pan-African News Wire File Photos on Flickr.

Zimbabwe and the development dilemma

Sunday, 26 January 2014 00:00
Tau Tawengwa
Zimbabwe Sunday Mail

As the World Economic Forum commenced in Davos, it was interesting to observe the Iranian leader, Mr Hassan Rouhani, relay his judicious address at the prestigious symposium. Mr Rouhani used the opportunity
to explain Iran’s energy programme, and to invite the world to invest in Iran.
A first, indeed.

In Zimbabwe, local commentators recently congregated at the Mandel/Gibbs Economic Outlook Symposium to discuss the Zimbabwean economy and to proffer possible solutions to the prevailing liquidity crisis.

While Zimbabweans have unanimously acknowledged the urgent need to mobilise funding for all sectors in order to arrest the economic stagnation that is currently gripping the nation, there seems to be a discrepancy in terms of how this will be achieved.

Zim Asset declares that during the period 2013-2018, Government will see to:
improved liquidity and access to credit by key sectors of the economy such as agriculture;
the establishment of a Sovereign Wealth Fund;
improved revenue-collection from key sectors of the economy such as mining;
increased investment in infrastructure (power development, roads, rail, aviation, telecommunications, water and sanitation) through acceleration in the implementation of Public Private Partnerships (PPPs) and other private sector-driven initiatives;
increased Foreign Direct Investment (FDI).

However, it remains to be seen if and how these goals will be achieved.

Nonetheless, while trying to understand the complexities around accessing multilateral funding, I came across some material that may be of interest to the Zimbabwean public.

Firstly, a work published by the World Bank entitled: “Aid and reform in Africa: Lessons from 10 case studies” is notable.

In this work, former World Bank director Mr James Wolfensohn makes the argument that any development programme has to be country-owned and not owned by the donors.

In other words, in order to achieve sustained growth, development and poverty alleviation, the development programme of each country should be initiated and executed by that country.

He argues that if reforms are imposed, they are sure to fail.

In the Zimbabwean context, Zim Asset is the Government’s development programme, and its cornerstone is the indigenisation policy.

Now, after decades of analysing aid, development and policy reform experiences in 10 different countries in Africa (Cote de’Ivoire, Democratic Republic Congo, Ethiopia, Ghana, Kenya, Tanzania, Uganda, Mali, Nigeria and Zambia), Mr Wolfensohn makes the following statement: “Foreign aid has a strong positive effect on a country’s economic performance, if the country has undertaken certain policy reforms.

“Aid cannot buy reform; aid should be based on actual reforms, and not on promises of reform.

“Foreign aid can deliver critical support when the receivers are seeking reform, it cannot buy it. These lessons are of special importance to Africa, where most aid is received, and where policy reform is weakest.

“Further, the background studies indicated that financial aid is working in a good policy environment, there it leads to faster growth and poverty reduction.”

While I understand that the World Bank-initiated Structural Adjustment Programmes (SAPs) enacted in Zimbabwe in the 1990s had adverse economic effects and, consequently, made African states suspicious of Bretton Woods-related institutions, I also appreciate that in this particular instance, Mr James Wolfensohn makes the argument that any development programme has to be “country-owned, not owned by the donors”.

In other words, we have to create the environment that attracts foreign capital ourselves. As it stands, our indigenisation policy framework seems too frigid; it must be relaxed.

Looking at Iran, it seems that in recent months, Iran’s relations with the international community are improving steadily, owing to a shift in policy and rhetoric towards the West.

Also, it is notable that Zambia, Zimbabwe’s northern neighbour, attracted foreign direct investment (FDI) worth US$10,1 billion in 2012; the highest ever recorded in the history of that country.

This is owing to three main factors:
The Zambia Development Agency Act offers a wide range of incentives in the form of allowances, exemptions and concessions to companies investing in Zambia;

General incentives to investors in various sectors are provided by an assortment of legislation that governs the Zambia Revenue Authority (ZRA);

The Zambian Companies Act of 1994 attracts foreign investment. Although in 2012, proposed changes to the Companies Act invited the imposition of indigenisation requirements ranging from zero to 51 percent on foreign-invested companies, those changes to the Act remain in draft form.

Tau Tawengwa is a researcher.