Suggestions to Prof Mthuli Ncube from a keen fellow Economist

 Suggestions to Prof Mthuli Ncube from a keen fellow Economist
Published: 10 September 2018
I am grateful that the key Ministry of Finance has been judiciously assigned to Prof Mthuli Ncube at a time such as this. I believe the Minister is well on course to transform the country's economic footprints if an enabling environment is created for him. As this is expectations season and everyone during times like harbours a desire to add a thought or two to the many that the Minister is already pondering. Like the African proverb goes one finger does not crush lice. Here go some of my thoughts:

The government urgently needs to restore both domestic and foreign investor confidence in the country. The restoration of investor confidence will enable the country to attract a significant share of the global and local investment cake. It is a matter of elementary economics that, without confidence, in the economy little or no investment will be registered in that economy. How do we then build that confidence in the economy? The safest and probably simplest starting point for doing so is working on the ease of doing business initiatives. Here, the cost of setting up a business in terms of the monetary outlay and the time spent in getting a company incorporated are aspects that are well within our powers to re-configure for our own good. The lethargic processing of business incorporation activities could be sped up by having a one-stop shop system in place which eradicates the multiple office visits before a company may be incorporated. The system should be made to become like what happens at ports of entry (border posts). In a way, this is in itself, a port of entry albeit a business border. The costs of business name searches et al may need to significantly cut. The argument that these costs are low for a business person are the very same arguments that keep our domestic small scale investors locked out of the formal system. The large scale investors are put off by unnecessary bureaucratic processes. Let us go the one stop shop route in the incorporation of businesses.

The country will remain on the periphery of real investment attraction if she does not adopt an indefatigably prompt fighting stance against corruption as part of her DNA. Corruption scares away investors like nothing else does. An investor fears that they could easily lose their money were they to invest in a corrupt country. Only through the establishment of robust institutions that promptly bring all the corrupt elements to book can Zimbabwe attract real investment. Corruption is like poison that can easily kill any investment initiative. In addition to robust institutions, there must be systems in place to prevent the persecution and victimization of whistle blowers like what is happening to me and a colleague where our reputations are being soiled by the corrupt through malicious publications of our names and photographs with arrant falsehoods being attached to the photographs simply because we elect to stand against corruption. Strange enough using State funds to so slander us! Once potential whistle blowers realize that there are no systems in place to protect them, their numbers will dwindle by the second and before long corruption would quickly overtake a significant number of the country's engines of growth. Corruption is a cancer which must be attended to promptly. Leaving it to fester may result in economic malaise and morbidity. Once a corrupt person has been identified and their corruption investigated, prompt legal action must be taken against that person and the matter should be expedited through the courts to enable that person to be rehabilitated in the country's prison system.

Import substitution industrialisation (ISI) should also be the country's aspiration. There is an urgent need to revamp antiquated business models and embrace modern technologies with their attendant cost efficiencies. Antediluvian business models and methods cannot usher the economy to middle income status no matter how hard working the economic agents could be. We need to move with the times. We could attract some of the key industry players that are whisking away our hard earned foreign currency (by way of imports of those industries' goods) to set up shop within our borders.

State owned enterprises' boards of directors ought to be renewed as a matter of urgency. Men and women of integrity should take over the running of these boards. Integrity should be mark one in the selection criteria of board members. A lot of corrupt or corruptible individuals on our state owned enterprises are not doing us any good. Board members should be appointed on merit. Those board members that are tired must be retired. Every board member must be made to sign a pledge of value addition which demands their integrity, boldness and skills at all times and a commitment that when they are tired they would resign. It is high time board members are made to earn the fees they pocket. There are some board members who have no clue whatsoever what their roles are supposed to be in the boards. Some believe that boards are just a rendezvous for meeting their friends and collecting fees and allowances at the end of the meeting. A lot of boards are guilty of mass dereliction of duty. The government should adopt a new government, new board mantra in the state owned enterprises. Those members that are adding value could be retained but those that are just fleecing the state owned enterprises must be relieved of the unmerited burden they are placing on the country.

Bureaux de change must be re-introduced. Black markets create price distortions in any market. The re-introduction of bureaux de change formalizes the market for foreign currencies. These reduce information asymmetries. When there are formal institutions for trading currencies, the market forces will be given free rein to interplay in determining the price of one currency in terms of another. Not everyone wants to keep forex neatly tucked in pillow cases. Such is becoming the resort to or default mode of keeping forex due to the fear of walking up to the money changers in the streets of major towns due to the inherent peril of transacting with these unlicensed, hence unregulated money changers. Establishing bureaux de change will enable tourists to simply offload forex into the coffers of these institutions. Companies would also afforded a potentially cheaper source of the much needed foreign currencies. Banks could be forced to lower their commissions on forex deals once institutions that are dedicated to forex transactions are re-introduced. With increased supply of forex, ceteris paribus, will come price reductions. When the price of foreign currencies come down, the cost of imported inputs would also go down. That bodes well for cost efficiencies which lead to potential output price reductions or increased profits if prices are not adjusted. Either way, the economy stands to benefit as one may translate to higher standards of living in a circular way or potential re-investment of the profits.

The country's banking model also needs to be revisited. Some of the bank charges appear to be out of sync with the services rendered and the state of the economy. Imagine, some banks even charge a whole dollar per page of a bank statement if an account holder happens to need one as a result of the bank's own inefficiencies (for instance when you need a statement to take to a retailer so as to reverse a debit effected on one's account for a transaction that did not go through yet one's account was debited) in spite of the fact that they would be deducting USD 5 per month from one's account as a monthly account maintenance fee.

Honourable Minister, your work is clearly cut out for you, but, in parting, allow me to say that if you, as a government, fail to deal decisively and promptly with corruption, all the economic models in existence and yet to be will never be able to salvage the country from the economic doldrums that she finds herself in. When the Chinese leaders resolved to deal a lethal blow on corruption within her borders, the country began to record massive economic growth strides. No country has ever progressed while the corrupt are left to victimize, persecute and denigrate those who are against corruption, like I said earlier using State funds which ought to be put to better use than defaming innocent corruption free individuals. I am convinced that you will scrutinize all the boards that are under your control and renew all of them. I hope that will apply to fellow Ministers as well. We have so many capable men and women of integrity to turn this country around to better fortunes for ourselves and posterity. May God bless our country, so that we could soon be the jewel of Africa that God created our beautiful land to be with all her mineral wealth and enviable human capital, inter alia!

Prosper Munyedza MSc B. Ana & Fin (Uni of Leicester), BSc Econ (Hon) (Uni of Zimbabwe).

For feedback email:
- Prosper Munyedza


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