We said we would never get into the morass we are in right now. How wrong we were! The Zambians are laughing at us and so are the Congolese! It never seizes to amaze, how Zimbabwe continues to break records in as far as misrule is concerned. Why have we allowed ourselves to be the laughing stock of the free world? Zimbabwe is now a case study in how to run a once stable economy into the ground and blame it on everyone but us. However, there seems to be a glimmer of hope.Zimbabwe could take at least 24 months to recover if things normalized tomorrow. So says economist Professor Tony Hawkins of the University of Zimbabwe (UZ). The venerable don believes there is light at the end of the tunnel as long as the authorities address economic fundamentals as a matter of urgency.
Commenting on the prospects of recovery, Prof Hawkins gives the examples of the same Zambia and the Democratic Republic of Congo whose economies have rapidly come out of the doldrums in a short space of time. In terms of investment, it would be wise to bank on mining, tourism, Health care and utilities, sectors which all exhibited a high potential of good medium term recovery. Manufacturing, agriculture and probably financial services faced tougher prospects.
Prof Hawkins, a lecturer in UZ’s Faculty of Commerce, puts in figures what we all already know, that all the sectors are depressed and that the Zimbabwe dollar is in freefall predicting that the official rate will drop further to Z$50,000 to the US dollar by Christmas and probably $100,000 to the US$ by December, 2006. This is assuming that inflation rises by 15% per month for the rest of the year. Effectively this means that people are poorer now than they were in 1970.
Structural factors and not the drought are the major cause of economic decline, says Prof Hawkins, a fervent critic of the government’s tinkering with the economy.
“This is the seventh year of decline that has seen the Gross Domestic Product go down to 5%. GDP will decline by a further 10% by the end of the year and that for as long as agriculture, once the mainstay of the economy failed to recover, exports will continue to decline. Investment therefore cannot take place in a high inflationary, declining economy,” he says.
Professor Hawkins draws similarities to what happened in 2000 when property prices doubled, the parallel market increased five-fold and price controls were revived. Massive structural changes have indeed taken place particularly the demise of large-scale agriculture, de-industrialization, shifts in demographics and market segments. This presents industrialists with challenges that point to a sink or swim scenario.
In order for them to stay afloat, industrialists will have to find an answer to China’s new low cost, low price, and low wage approach. Secondly, they have to take cognizance of the fact that the middle-income group has shrunk significantly either through migration or down to the poor sector of the population. At least 55% of the population is living on US$1 a day. This means that the lower income group has expanded indicating that in order to survive, manufacturers should downgrade their goods in order to target this group. The alternative will be to cater for the rather static upper bracket of ‘fat cats’ with mostly imported, high price luxury goods.
Prof Hawkins says that the best prospects come from what he terms ‘Demand Innovation.’ There is need for industrialists to ‘think outside the box’ and redefine their markets by finding new ways of doing things, making products and providing services in addition to meeting demand. This points out to new collaborative opportunities where local companies should explore production links with firms in South Africa in the areas of research and development.
Therefore, focus should be on soft technologies of human capital; technology and knowledge transfer rather than hard ones. However, in an economy as volatile as ours with an equally unpredictable leadership, the light at the end of the tunnel could well be that of a speeding train bearing down on us.
