Sunday, 5 July 2015

Dr Grace Mugabe: a pragmatic First Lady

By Bernard Bwoni

The realm of politics and policy-making, just like any society, is intricate and unpredictable. It has its fair share of those who exist just for the sake of protraction (just to breath air, but make no difference to society) and on the other end of the scale those people who make things happen and make noticeable differences to the lives of others. The latter group possess that cutting edge trademark and those pacesetter attributes that the former group is clearly deprived of. These are the movers and shakers who have the undeniable gift of pragmatic influence and a people-centred genetic make-up. These are the individuals who walk the ground and at the same time listen to the sounds the ground they walk on makes. They hear and feel the grassroots, they get the basics and they speak the dialect of their environment and duet with the soul and systems that surrounds them. They seek no glory or reputation but rather that commitment for the greater good of society. In Zimbabwe, men of mettle and women of weight are among us, those who inspire and constantly remind us of the higher purpose of society. They seek no praise or worship but only to refocus society’s thrust on pertinent issues that affect the grassroots. Dr Grace Mugabe easily falls within the ranks of the non-theoretical craftswoman of action, a charming, confident, charitable and very normal First Lady of meaning.

The First Lady, Dr Grace Mugabe by virtue of being the wife of President Mugabe (an African Icon) has had to blaze trails, suffer trials and tribulations. She has been labelled all manner of despicable names but she has remained true to her core values and beliefs. She has dedicated her life to things that gives meaning and purpose to others, possess attributes strikingly similar to her husband and hence the negative onslaught to stifle her progressive national pursuits. The Zimbabwe First Lady is driven, focused, committed, not easily deterred or distracted just like President Mugabe himself and those are the hallmarks of nation builders. She lays it on the table as it is and that is refreshingly different and endears her even to those opposed to her. The issues she brings to the forefront, most people certainly agree with her, but many are constrained and restricted by their misinformed perception of the woman behind the words. There are heated debates going on Social Media sites on certain issues Dr Mugabe has raised recently and you often hear statements like “I don’t like the woman but I completely agree with what she has said about the girl child and marriage” or “I know I don’t often agree with Grace Mugabe but it is refreshing the way she has exposed corruption”. The fact of the matter is that any statement she makes triggers debate that cut across political divides. You have those in the opposition ranks privately agreeing with her and publicly slaying her for political mileage. The bottom line though is that people do listen when the First Lady speaks and it gets them thinking and hence the many news headlines that follow after every address she makes. It is this sense of meaning and purpose in the First Lady’s presence that intrigues the nation and the world.

Dr Grace Mugabe has never made any claims to perfection and true to fact no one in this world can claim stewardship to such. In one of her addresses Dr Mugabe said this with her usual honesty and refreshing honesty “I am not a person who is afraid to ask, I always ask the President when I am not sure about anything”. People who shape the world have a compassionate heart, and they see and learn to better equip themselves to serve. She has been right down on the ground and taking time to support and care for disadvantaged children. In one of her addresses Dr Mugabe highlighted that she has over 88 children at the children’s home she runs and when you read newspaper news article that paint the picture of self-absorption it just does not make any sense. The Grace Mugabe Foundation does a lot of charity work in Zimbabwe and it is unfortunate that international media sources are awash with falsehoods and misleading narratives about the First Lady. One of the many reasons why the First Lady’s addresses and statements engross the nation is because of the potent content and the fact that they focus on issues that are dear to most people’s hearts. Those are the issues that affect people in their day-to-day lives. She has a practical awareness of the links with the grassroots and how to connect with people right down to the basics of life and living in society. She is not restricted by the pretentions of politics hence why she is not afraid to be who she really is. She is authentic, she holds views that resonate with many and she does not settle for conformity just for the sake of it. The First Lady is passionate about her charity work and about the country, her actions and words are from the heart and there is a level of respect she accords the people of Zimbabwe.

The First Lady, in her addresses, is uniquely blunt to the point of being miles away from all correctness yet she leaves no stone unturned. She does not seek to preserve reputations nor does she seek to garner a reputation but rather displays an unparalleled commitment to ‘serve the people’. If one listens to most of her addresses, her key words are often about the people ahead of all else. In her recent address in Kadoma, she was talking about “the leadership we want, leaders who know they are servants of the people”.

Many speak about ZimAsset the document, but few focus on the actual technicalities of implementation. Dr Mugabe recently pointed out “For ZimAsset to work, we must work, we are the foot soldiers”. The key to the implementation of ZimAsset is to break the programme down to its bare basics and then roll it top down to the people. The economic blueprint is an excellent but complex document that needs to be simplified at the implementation phase. Zimbabwe has an educated population and possibly the best-educated people on the African continent and that is a crucial resource for national development. The First Lady complemented that by stating, “We are educated enough, but we have to deliver, we have to work, we have to grab the opportunities and run-off with these opportunities”.

ZimAsset is not going to miraculously register successes without the collective strength of the people of Zimbabwe that will see the economic blueprint through. The collective strength of a unit is far much stronger than the individualistic spirit that has of recent pervaded our society. As Dr Grace Mugabe rightly put it, “there are elements in the country who are retrogressive, as Zimbabweans we have to be positive, progressive and we have to put emphasis on working”. The number of times the First Lady mentions the word ‘work’ in her addresses clearly shows a woman who is committed to seeing Zimbabwe moving and moving forward. What Zimbabwe is presenting to her citizens are opportunities currently camouflaged by challenges and as Dr Grace Mugabe rightly said, now is the time to seize those opportunities and run away with them.

Sunday, 28 June 2015

Protectionism: lets be specific then

By Bernard bwoni

In Africa, if you mention the word ‘protectionism’ you are immediately branded ‘anti-progress’, you will have statements like ‘build up competitiveness’ hurled at you and end of story. Well, the more I look into the history of Africa’s economic development or lack of, the more I am convinced that a period of infant industry protection and promotion is exactly what is required to get to that stage where domestic industry can effectively compete on the global stage. Zimbabwe is my point of focus and when protectionism is used in this article this is not to suggest that the country should seal off all its borders to all foreign imports, but rather adopt strategies for imports and exports that facilitates domestic production to build up capacity. The government has to continue considering protectionist policies in specific sectors where the country has the greatest potential to develop comparative advantage and eventually economies of scale. The key terms are strategic and selective protection and promotion. Our neighbours in South Africa have similar protectionist provisions on their key strategic industries and these industries are heavily protected by the country’s domestic procurement threshold policy. There is absolutely no reason why Zimbabwe should not provide this initial period of systematic protection of domestic industry and allow them time to absorb new technologies, build on capacity and thus be able to compete on the global stage.

The infant industry protection debate in Zimbabwe is often limited to the competitiveness argument without further exploration and in-depth analysis of the many crippling constraints domestic producers and industry face. Zimbabwean industries are currently operating at below 40% capacity utilization and it is unrealistic to expect domestic manufacturing to build capacity amid unrestrained competition from cheap foreign imports in sectors where products could easily be produced locally. This then begs the question, where is the sense in exposing fledgling domestic industries to competition from more established external producers who already benefit from greater economies of scale? A good example is the Zimbabwe tea blenders and packers who have been facing stiff competition from cheap imports, which constitutes 25% of the domestic market share. Tanganda Tea Company and Arda Katiyo Tea produces 15000 tonnes of tea against local consumption of 4000 tonnes and about 3000 tonnes are supplied to the local market whilst the rest is exported. Local tea blenders and packers have however lost 25% of this market share to imported teas that have flooded the market. The irony is that the imported tea, which constitutes this 25%, is originally Zimbabwe, which is, exported as bulk tea. What this basically means is that the country exports raw tea and then imports that very same tea packaged and more expensive. Now here is an opportunity for the country to protect such a specific sector to allow them time to build capacity and competiveness. Zimbabwe currently has no tariffs on imported packaged tea products from South Africa yet the South Africans have a number of heavy duties, local content provisions and government procurement provisions all that makes it very expensive for Zimbabwe to put her tea products on South African shelves. These are concerns that have been repeatedly raised by relevant stakeholders in these sectors and such concerns have to be taken seriously.

The case for strategic, selective and systematic infant industry protection remains very relevant in the context of Zimbabwe. The South African auto assembling industry is heavily protected and industries such as clothing and textiles are also strategically protected and have been designated under the country’s local content protectionist policies. In Zimbabwe the local car assemblers such as Willowvale and Quest do not appear to benefit from the same South African-style protection and promotion strategies, which is unfortunate.  In 2011, President Mugabe gave a clear directive that all government institutions should buy their vehicles locally in order to support the local industry and preserve the country’s limited foreign reserves. The recent case of the State Procurement Board (SPB) awarding the tender for the purchase of 139 pick-up trucks at a cost in excess of US$3 million for the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) to Croco Motors and Paza Buster (PVT) Ltd certainly goes against infant industry protection. This is a clear case for domestic industry promotion where Willowvale or Quest would have been given the tender to assemble these vehicles and the knock-on effect on employment creation and on GDP would have been significant. The idea of awarding the tender to a car import company at the expense of local assemblers goes directly against infant industry protection.

In 2014 Zimbabwe imported close to US$500 million worth of cars mainly from Japan, South Africa and UK at a time when Willowvale and Quest local assemblers are operating at below 10% capacity utilization. Of that US$500 million, how much goes towards the national GDP and how many jobs are created from that? If strategic protectionist policies are implemented and assemblers such as Willowvale and Quest are cushioned from competition to enable them to increase their capacity utilization the gains in GDP terms and employment creation would be significant. Sometimes policy makers have to bite the bullet to forge ahead with certain policies for society to realize the gains of such policies.

Zimbabwe’s borders are way too wide open to facilitate domestic industry revival and growth. There are a number of key sectors that require strategic protection and promotion to enable them to build their capacity. Protection and promotion will have the long-term effects of increased employment creation in local industry and tariffs can help offset foreign dumping and help industries like the clothing and textiles and car assembly industry. Protection in the right sectors will boost domestic industry rather stifle it as many have argued otherwise.

During the Ministry of Finance’s First Quarter Treasury Bulletin of 2015, exports for January 2015 alone amounted to US$276 million and imports amounted to US$538.1 million creating a trade gap of US$262.1 million. Merchandise imports, excluding fuel and electricity and services account for 60% of the country’s import bill, indicating the country’s over-reliance on imported goods and services that can easily be produced locally. There is a highly unbalanced relationship between the country’s exports and imports hence the huge trade deficit. The First Quarter Treasury Bulletin of 2014 from January to June the country’s total exports stood at US$1.2 billion down from US$1.5 billion in the same period in 2013. During the same quarter of January to June 2014 the total import bill stood at US$3 billion, down from US$3.9 billion during the same period in 2013. The major imports for the period January to June 2014 were fuel, food, machinery and equipment, wood, paper and plastic and motor vehicles. Fuel accounted for 25.2% of total imports, machinery and equipment 16.5%, food and beverages 16%, wood, paper and plastic products 12%, motor vehicles 8.2%, metal products 6%, fertilizers and chemicals 4.6%, other manufactured goods 2.7%, clothing and fabrics 2.4%, building materials 1% and transport equipment 0.3%. The 16% share of food and beverages in total imports for this First Quarter of 2014 clearly indicates that the country is importing items that can be made locally and in so doing promote the revival and growth of domestic industry. This is where the infant industry protection argument continues to be relevant and this is not just about protecting everything but rather gradual and strategic opening of the economy.

The First Quarter Treasury Bulletin from January to March 2015 clearly highlights the issue of constraints that impact on competitiveness of domestic industry and hence the urgent need for strategic infant industry protection and promotion. Domestic manufacturing remains severely depressed due to infrastructure and financial constraints. The period from January to March 2015, exports amounted to US$716 million compared to US$627 million in the same quarter in 2014. The import bill for the quarter January to March 2015 stood at US$1.5 billion and the major imports were fuel, food, clothes and textiles and motor accessories. The export of textiles and clothing from Zimbabwe has remained constant at around US$25 million over the period from 2005-2015. Zimbabwe has exported over 74000 tonnes of cotton lint on average over the last 25 years, which is reflective of a lack of value addition and transformation domestically. Fabric exports from Zimbabwe represented total earnings of US$24.4 million between 2009 and 2013.  In 2013 alone the fabric export value reached about US$4.2 million. The value of import of fabrics into Zimbabwe between 2009 and 2013 was US$221 million. This trade deficit of US$196.6 million is unsustainable and makes a very strong case for infant industry protection and promotion. The export of clothing from Zimbabwe amounted to US$42.6 million between 2009 and 2013 and during the same period imports of clothes amounted to a total value of US$98.5 million.

There are many examples in Zimbabwe where protectionism would facilitate growth if guided by specific indicators and guidelines. Domestic industry protection has to be combined with a robust export strategy. There is however the counter argument against protectionism.

Bernard Bwoni

Monday, 22 June 2015

Protectionism, why not and what makes Africa special?

By Bernard bwoni

There is no denying the fact that we all live in a global village and that we have to integrate with the world economy. This is well recognised on the African continent and across the globe. However our integration has to be selective, gradual and strategic. We have to prioritise and pursue policy autonomy, a state led industrialisation (this we can argue in detail if required), and import-substitution-industrialisation and Zimbabwe’s current policies of indigenisation, empowerment and land reform are the key catalysts of this industrialisation drive and economic transformation that has roots on the ground. All the developed countries of today without exception had to go through the same. There are no short cuts. Free market policies have their place but for our industry to get off the ground they require a period of strategic protection and promotion. Protection sounds like such a dirty word in today’s economic order but the developed world of today cleaned up their act and developed through protectionist policies. I deliberately started by mentioning that we live in a global village and it sounds like a contradiction when I make the case for protectionism, but hear me out. Some will argue that Zimbabwe does not have the industry to protect and that is a valid argument but for Zimbabwe to have an industry to protect, the industry needs to come off the ground first and to do that requires promotion and protection.

The German Economist, Friedrich List (1841) makes very interesting observations about trade liberalisation and the double standards of those who are now the developed countries of today. He makes particular reference to Britain, accusing the British of preaching free trade to developing countries while having achieved economic supremacy through high tariffs and massive subsidies (protectionist policies). List accused the British of ‘kicking away the ladder’ that they climbed to reach the world’s economic summit and pole position in the world economic order. In his 1841 masterpiece, ‘The National System of Political Economy’, List makes a very compelling argument for infant industry protection “It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him”. Most developing countries today are advised to embrace free market policies by countries that developed strictly on the back of strict protectionist tariffs. South Korea, China, USA, Japan, the UK and other EU developed economies have used infant industry protection strategies in the earlier days of their economic development.

List (1841) goes on to say “Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth”. Today, countries like Zimbabwe are lectured on the economic benefits of free markets and free trade yet these rich developed countries of today do give this advice not to benefit Zimbabwe and other developing countries, but to capture larger shares of these countries’ markets and to stifle the emergence of possible competitors. I am not at all stating that free trade is entirely flawed, but rather it has its place in the history of economic development of any nation.

Free trade in the developed world of today was out of choice and necessity, and in the developing world of today it has been an imposition from outside by the developed countries. These countries stand to gain from offering such advice they did not use when they were at this stage of development. The best performing economies of today are those that opened their economies selectively and gradually and examples include USA, EU developed countries at large, Britain, China, South Korea, Japan and others. Yet in Africa and other developing countries, free market policies are paraded as if they are the panacea of all our economic transformation and industrialisation yet they have in fact hindered economic growth. Ha-Joon Chang (2007) argues that ‘free trade reduces freedom of choice for poor countries and that keeping companies out may be good for them in the long run’. A valid argument in that by allowing big already established companies, you inevitably destroy the capacity of domestic infant industry, but then the counter-argument is that FDI is key to industrial growth. In Zimbabwe, indigenisation, empowerment and land reform are good policies in the long run. There may be losses rather than gains in the first 15 to 20 years but eventually growth will be achieved, the difference is that these are home-grown initiatives of growth. Alexander Hamilton in 1791, also made sound arguments on infant industry protection insisting that American industries were still in their infancy and as such could not be expected to compete against the mature industries in the more advanced economies without an initial period of deliberate government promotion and protection.

The strength of producing wealth is more fundamental than the wealth itself and history has shown that each and every country that reached the heights of being called a developed economy did so on the back of protective tariffs. 

There is no arguing the fact that initially protectionism can make the price of manufactured goods very expensive but with time as a country build its manufacturing capacity the same goods will be produced more cheaply domestically than the price they will be imported. These are the long run economic benefits of protectionism. Without a strong manufacturing base Zimbabwe and the continent at large will remain unprogressive. For them to become complex industrial forces, there is need for that period of infant industry protection. I am aware that some will argue that in the case of Zimbabwe, there is no industry to protect, but then the other argument is that you can never have the industry unless and until you have protected and promoted it first. 

The argument here is not purely anti-free market economy nor is it a case of arguing that protection should stifle healthy competition. The fundamental point is that there is need to build up capacity and to do that you have to go through a period of deliberate infant industry protection. In the case of Zimbabwe it is a rebuilding exercise and to rebuild you have to cushion the collapsed industry and along the way offer them protection until full capacity has been built. At this stage of our economic development, free trade only serves to expose us to the economic supremacy of the developed countries. Protectionism is the only system that has throughout history sustained nations to a stage where eventually free trade has been made possible and not counterproductive. We will talk and talk but bottom line is that period of infant industry protection.

Bernard Bwoni

Monday, 25 May 2015

Africa's chronic case of Aid addiction

By Bernard Bwoni

In the case of Africa, aid is like the dreaded gonorrhoea, it seems to stick with most countries for life. African governments however cannot continue to rely on aid forever surely because something is going to give or to put it bluntly, something might already have given in. President Jakaya Kikwete was recently quoted as saying ‘Western donors were setting degrading conditions for aid’ and that his government could be forced to tell them to ‘keep their aid’. This comes following delays in donor payments over concerns from Western donors about ‘corruption, poor governance, slow pace of reforms’ and a host of other conditions often reserved for African governments. The worrying thing is that the withheld $500 million in budget support for Tanzania has a knock on effect on government budget and government capacity to provide public goods for the people of Tanzania. Malawi has had her aid suspended on several occasions ‘for failure to address concerns over economic management,  governance and allegations of corruption’. The suspension of aid to a country like Malawi where nearly 40% of its budget comes from donors has damaging effects on public services.
This is the same story on the African continent with nearly all governments heavily reliant on international donor funding to provide services such as healthcare provision, education, sanitation, education, infrastructure and so on. President Kikwete is right in saying that his government would start working on ‘weaning itself from this dependence on aid’ to fund services for the people. The reality is that anywhere else in the world it is a function of government to provide these services through taxation and other public funding mechanisms. Public services and goods should not be funded by charity for it is governments that pay for such.

It is said that African governments receive roughly over $50 billion of international aid assistance annually. This is not free money by the way because yearly the same recipient African governments have to pay back in the region of $20 billion in debt repayments per year. It is a vicious cycle in that paying back $20 billion will inevitably mean they will have to borrow again to be able to pay for these public goods. When Mr Kikwete says his government will ‘wean itself from this dependence in the 2016 budget’ what he is basically stating is that his government will in future not abandon the basic mandated function of government to provide public services. What Mr Kikwete is bringing to the fore is courageous and commendable but then it comes with a heavy price tag. This will mean people will have to go through a dark period to eventually emerge at the light end of the shaft. In the case of Tanzania if $500 million is going towards government budget, if then this amount is removed, how else is the government going to fund such essential services to the public? The key is for African governments to take the ultimate responsibility for funding public services or public goods and this can be achieved through self-sustaining growth models.

The lectures continue to come thick and fast on how African governments should grow their economies. It is now nearly over 50 years since most African countries gained their independence but their economic growth remains mostly stagnant if not negative and poverty remains rife. The question to pose is, how do you expect positive economic growth when you do not own the means of production? The reality is that Aid is not a catalyst for economic development but rather fosters dependence. There is enough available literature, evidence and case studies  to that effect. As Mr Kikwete lamented, the aid freeze has now led to the domestic currency weakening significantly. Aid in most African countries and other developing countries is often associated with rising exchange rates which undermines export competitiveness and thus a negative effect on economic growth. It is expecting too much for economies that dependent on aid and imports to post any real growth. Aid greatly contributes to low productivity in this sense because it inevitably depresses exports. According to a 2005 IMF Report ‘Aid will not lift growth in Africa’, it highlighted a fundamental point that productivity growth is the most important determinant of living standards.

There are many types of aid namely food aid, technical assistance, project aid, programme aid, budgetary support aid, aid that is given in the form of loans or grants. There is aid that is given to promote growth and there is humanitarian aid. Those around the world who provide humanitarian assistance should be commended for there are cases when it is urgent and required for example in disaster zones, war torn regions of this world, natural disasters such as the recent Nepal earthquake, flood victims, the tsunami in Asia, famine in drought prone regions and many other humanitarian requirements which local governments are not able to cope on their own. As human beings we are compassionate beings, we have a conscience and empathy and many who give selflessly to those in need.

There are of course arguments to the discourse that food aid can have a negative impact on farming in the recipient country in that farmers may become over reliant on food aid, food aid can drastically reduce the price of locally produced products to that point that it becomes less viable to farm. Some have even argued that food aid is a way of some governments in the developed world to dispose of their excess agricultural produce. The counter argument is should the developed world governments let famine persist and allow people perish? That would be inhuman and the world is made up of many good people with noble motives. The other counter argument is that by continuing to aid the same governments, this means that they may never take responsibility. They will just continue to be happy to have the electorate fed and people who are not hungry often do not take their governments to account. How then do you create  balance? That of course is the $50 billion question. With aid being used to fund government budgets then why would any government seriously work towards a self-sustaining economy? There is nothing as easy and free as free money. The problem comes when you are entangled in the web of ‘degrading’ conditions and the vicious cycle of having to repay the money. There is also the other argument that with free money the propensity for corruption is high and there could some truth to that.

It is not rocket, the reality is that by its very subtle nature,  the aid culture especially in Africa has not brought about economic growth but rather further sunk most governments into a vicious cycle of debt and  unsustainable debt repayment terms. As Mr Kikwete highlighted that without that $500 million, Tanzania would be more vulnerable to rising exchange rates, inflation, reduced export capacity and low productivity. Foreign direct investment remains scarce as African governments are accused of poor governance, corruption and slow progress in reforms. These accusations against African governments makes investors especially those from the west view the countries as risky investment destinations. The key is for African governments to get their priorities in order and start looking at empowering citizens to own the means of production, to own their God-given abundant natural resources and prioritise productivity. Indigenisation and economic empowerment are home grown initiatives that have the best hope of lifting the continent out of this mire and mud. It is economically empowered citizens who will eventually create jobs and jobs will eventually lead to a bigger middle class that pays taxes to fund public services.

It is the government-to-government aid and aid from large institutions like the World Bank and IMF which continue to sink African countries into economic abyss. The case of Tanzania as highlighted by Mr Kikwete is clear evidence that the free flow of aid money fosters dependence rather than aid growth.  That is the reason why Kikwete is talking about weaning his country off aid dependency. If governments continue to receive billions in aid year in, year out it basically makes them complacent and there is no need whatsoever to work toward home grown initiatives to grow the economy. Dambisa Moyo in her book ‘Dead Aid’ makes a very compelling argument that ‘Aid allows African governments to abdicate their responsibility to provide public goods’ and contributes to the dysfunctionality of Africa. The ‘degrading’ conditions that Mr Kikwete was lamenting will persist for he who blows the piper dictates the tune. At the end of the day it is their money and it is important to play by the rules of the game or just do not accept it.