Self-sustaining growth creating real wealth

Capitalk Reporter |  11 months ago | local

Zimbabwe’s economy is doing well and can continue to grow fast despite the stresses and strains from global changes and those unforeseen problems like Covid-19, and President Mnangagwa’s bullish speech on Heroes Day was justified. 

The economy is now predicted to grow by around 7,8 percent this year, with that growth coming almost entirely from production. We have grown more crops, we have manufactured more things, we have dug more metal out of the ground, we have built more structures. 

It is critical to stress this production-orientated growth of the Second Republic, because this sort of growth is real and long-lasting. Zimbabwe had a record of modest booms followed by bigger busts, largely because previous administrations tried to spend their way into growth, regrettably using other people’s money or even printing their own, and most of that growth was ephemeral consumption, with shops selling what other people made.

The inevitable bursting of these consumption bubbles led to bouts of hyperinflation down the line.

Last year’s inflation bout, for example, was the result of slow fake consumption growth during the US dollar era and that was totally unsustainable.

The switch to production growth, backed by fixing the fiscal and monetary policies and finally imposing discipline in both, was already well advanced, so the crash was minuscule compared to what hit us in the 2000s.

But because of the revolutionary changes overseen by President Mnangagwa when he won his own mandate for the top job this cycle of consumption boom followed by a hyperinflationary bust is now over.

Zimbabweans will become richer because they produce, not because they speculate and spend. Of course the President hired a decent team of technocrats to put together and administer and the changes. But as we know from our history, when we had decent teams doing the right things before, without the political direction, political will and political determination to push through the economic revolution it simply will not happen.

With determined political leadership, the technocrats can do their jobs. And important point, which the President insisted on, is that this real growth had to be spread and the results of that growth spread.

It is possible to grow an economy in a way that makes the few rich richer and the many poor poorer, and that can be made worse by high inflation which is a very effective way of robbing the poor to pay the rich. But while that might make a country richer it does not make a country a middle-income nation.

A good example of good growth in an exceptionally unequal society is the old colonial Rhodesia. A small minority had a wonderful standard of living in a really decent climate.

More than 95 percent of the population were doomed to perpetual poverty. That perhaps explains why the privileged minority fought so hard to keep the inequality and while the condemned majority fought so hard to end it.

While there were major gains at independence, education and health services spread to all and at least equality of opportunity, the fundamental division of society into a small group of haves in a sea of have nots largely remained, with just a rotation of the haves. From the start of the Second Republic there was a stress on bringing the nation up as a nation. The biggest single example of this has been seen in rural areas. Land reform might well have redistributed the land far more fairly, but it not done much to spread the wealth.

The major Government programme to convert subsistence farmers, who now had land, into commercial farmers involved a whole range of policies. Farmers had to be taught to farm better, and to learn how to farm as a business.

Tightly administered financial schemes had to be put in place to ensure these retrained farmers had the required inputs, on credit not as gifts since we were setting up a long-term business arrangement.

Anti-corruption and anticheating mechanisms had to be strengthened. Roads had to be fixed so fertiliser and seed could get in and the massive harvest brought out. Irrigation, new dams and the like had to be added to the infrastructure.

The result was that 34 percent jump in just one year in the value of agricultural production, and we are talking about real production that can be measured in the contents of silos, in bags of grain, in bales of tobacco and cotton.

As has been noted, the tens of billions of dollars being paid for that harvest is very widely spread, among more than a million families, and because those families will be spending that money largely on things made in Zimbabwe it will provide a major boost for industrialists who can now make more things, and so make their contribution to national growth, again through production. This starts creating the self-sustaining productive growth we need across the nation. Of course most small-scale farmers are not rich, but they this year have some money.

hey also know how to make a bit more next season, by growing more and starting to grow other crops using their new skills, and we need a big jump in oil seed harvests for example.

Shortly before he made his Heroes Day address, President Mnangagwa, and the rest of us, had the opportunity to study the report cards of his economic team: the Mid-Term Budget Review of Minister of Finance and Economic Development Mthuli Ncube and the Mid-Term Monetary Policy Review of Reserve Bank of Zimbabwe Governor John Mangudya issued a week later, with the tables of statistics, the graphs, the trend lines and what they were doing to cope with the strains of growth rather than the strains of retreat.

The most interesting point though, in both reviews, was the stress on what had been done, what had worked, what had been produced as a result. They were recording successes, on what by operating as a good team they had done, and by getting things right had allowed millions of Zimbabweans to start getting the rewards for their hard work.

Neither review made any wild promises, and both in fact said, in summary, that future progress in both areas was to be “more of the same”. As a country we are on the right path; our individual and family efforts are creating real new wealth; communities are not being left behind; and all we really have to do, as a Government and a people, is continue pushing forward together and we can achieve our Vision 2030.