Key elements in the model of development
We should not get caught in the sandstorm of oversimplification. Africa has to get its basics right. Zimbabwe is perhaps at the stage where Ireland once was – huge budget deficits, high unemployment and diminished industrial capacity. ‘What happened? The Irish focused on costs in the economy. The government reduced costs under its control, steadily cutting taxes since 1987 and lessening the uncertainty costs related to large deficits.’ Uncontrolled expenditure on arms, ammunition; huge subsidies on education and health, a bloated civil service and unwieldy Parliament are some of the variables that Africans need to address if they are to remain in charge of their development.
Shunning aid and debt
Aid-dependency has to be eliminated. From Egypt to Mozambique, Ghana to Ethiopia, finance ministers plan their economies with budgetary support from either Bretton Woods institutions or multilateral partners. It is fashionable for left-wing ‘Pan Africans’ to direct their wrath at these institutions that ‘exploit’ gullible African states. I differ slightly in that mismanagement by selfish leaders drives nations in the path of permanent expectation of benevolence. Those who lend us money – like any bank – have to be paid back. We voluntarily submit ourselves to ‘punishing’ adjustment programs so as to win favour. Zambian economist Dambisa Moyo defines aid as ‘sum total of both concessional loans and grants has well-documented resentment for handouts. She adds: ‘It is these billions that have hampered, stifled and retarded Africa’s development.’
I agree with Norberg that while it is noble to repay debts, it is cruel to ask ‘innocent’ citizens to pay back a dictator’s debt. Over a period of ten years, Mugabe’s blue eyed prodigy – central bank governor Gideon Gono ran two billion US dollars worth of debts propping up an unpopular dictatorship. The Morgan Tsvangirayi half of government has had to assume half of that debt in order to restore the ‘lender of last resort’ status to our central bank. This is unfair to millions of us who are not beneficiaries of ZANU-PF patronage. It is suggested that government convert a substantial part of its property portfolio into cash for the purpose of reducing government debt.
Most development agencies – whatever that means- have a strong affinity to both development and humanitarian aid. African countries – even ‘developed’ ones like South Africa, have been lulled into this dangerous loop of expectation that a part of national budgets could be sustained by aid, especially infrastructure development. What therefore is Ms Moyo’s alternative path in the matrix of replacing this ‘addiction’ to aid? ‘It would appear, despondent with their record of failure, that the Western donors are increasingly looking at anyone for guidance on how best to tackle Africa’s predicament.’ Issue singular or collective [pooled] government bonds on the international or domestic markets. Have investor friendly policies to attract FDIs. ‘Look East to China,’ Mugabe adds. Subsidy-free, tariff-free trade. Grameen Bank-type microfinance: ‘Small-scale banking to poor people has the capacity to create enterprise and growth in developing countries,’ says Ms Moyo. Zimbabwe has almost four million citizens in exile. ‘Remittances make an important and growing contribution to relieving poverty.’ Savings: recently in Zimbabwe, a popular Western Union and VW agent boss lost four hundred thousand Euros to thieves. He kept this money in his bedroom!
Most African economies tend to be timid and closed. When Zimbabwe discarded its local currency to the multicurrency option, the incentives for foreign direct investment became more tangible. The only challenge being how we stimulate domestic productivity and demand for local goods in the face of punishing cheaper imports from China. Africa has reason to protect her fledgling industry from dumping, but that tends to nurture complacency and xenophobia. South Africa has a culture of strong exports, but whether or not that has alleviated unemployment is debatable, yet they are still considered a dominant economic power-house in the South African Development Community [SADC]. Under free trade, producing for others is producing for yourself. High corporate taxes, anti-investor labour laws, partisan ‘indigenisation’ policies and life-sapping subsidies to state-controlled public utilities have destroyed Zimbabwe’s appetite for foreign direct investment.
Comparative advantage, value addition
A development model that ignores what one country can do best is worthless. Zimbabwe grows some of the best tobacco in the world, yet we pride ourselves as exporting the best leaf to China. Of late, we have stumbled onto ‘priceless’ diamond fields, but local ‘indigenous’ business pressure groups are falling over each other to export uncut stones to India and Israel. Botswana is in a similar situation. Angola has oil, so does Nigeria, Uganda and Ghana. Africa’s development future lies in us being able to process primary commodities and exporting them as finished goods. The truth is that we get rich by exporting what we [can] make best. The challenge though, is how to deal with superior price and quality competition. The answer lies in technology transfer, free market labour laws and supportive infrastructure – factors within our control – and also unfair ‘anti-dumping’ tariffs imposed on our products by vindictive developed nations like USA. Norberg makes reference to Harvard researchers Jeffery Sachs and Andrew Warner, also Sebastian Edwards who noticed a higher, faster growth rate of [2-6 times higher] in free trade countries than protectionist ones.
Fiscal accountability and financial prudence play another role in development resurgence. Africans that are perpetually at conflict like in Zimbabwe, the DRC, Somalia and Sudan will never see the development light of day. During elections, Mugabe’s war machinery launders millions of dollars into clandestine electoral programs ranging from youth and women’s ‘income generating’ projects, farm ‘mechanisation’ offers to employment of thousands of police and army personnel. If these resources were channelled into higher education, skills development, export promotion and paying off the seven-billion dollar external debt, the ‘cost of democracy’ would not be such a burden to the national fiscus. McMahon relates Ireland’s resurgence with reduced taxes, fiscal reform, wage moderation and the promise of higher profits.
Development is as much physical as it is mental. We Africans have to be committed to putting growth plans into motion. Governments or the state, needs to appreciate that its role is only limited to that of policy maker and regulator. I sense that at one stage, Dambisa Moyo’s ‘Dead Aid – Why Aid is Not Working and How There is Another Way for Africa’ seems to insinuate that Themba Sono’s suggestion of ‘selling off family silver’ leaves governments too exposed and with no controlling shares in scarce national resources. Speaking generally, there is no one so fit to conduct any business, or to determine how or by whom it shall be conducted, as those that are personally interested in it. African governments are too paternalistic. Mostly, it is for personal, selfish gain. Whenever the Zimbabwe government tries to do business, for example, disaster occurs. Zimbabwe Iron and Steel Company has two major debts, one to a Chinese bank that was due and has been renegotiated to be paid by end of 2011. The other debt involves US$240 million from a German bank. They have now done the right thing – sell off 60% controlling shareholding to a Mauritian private company to spare us citizens further agony of subsidising an ailing giant.
If development banks are a familiar feature on the landscape of financial services, then they should play an increasing role in Africa’s quest for industrial supremacy. A function of development banking in [southern] Africa would accordingly include the financing of the economic infrastructure of the less developed areas of the region. My country is battling to supply optimum electrical energy. The government’s call for private sector investment is welcome, but rather tentative. Unfortunately, given our high country risk factor, the answer to financing such projects would lie in the Zimbabwe Infrastructure Development Bank, Development Bank of South Africa or African Development Bank. However, J.A. Lombard proposes that government underwrites such projects to ease loan servicing burden. Lombard continues: ‘Most of the true regional development banks of the world are in fact the banking element of a broader strategy of economic cooperation among governments in the region.’
Africa’s left-wing movement is habitually livid about liberal structural adjustment prescription on what they term ‘a neo-colonialist imperialist driven agenda’. I differ not because I am a liberal, but argue that collective condemnation of wholesome policy reform is inspired mostly by a desire for attention than noble cause. Most countries that improved their policies have returned to positive rates of GDP per capita growth. How else can we take charge of our development if we do not cut wasteful government spending, encourage private sector competition, commercialise public enterprises or minimise state interference in markets?
In Zimbabwe, 60-70% of our national budget is recurrent expenditure – mostly wages for civil servants. State enterprises – like Zimbabwe Broadcast Corporation, National Oil Company of Zimbabwe, Zimbabwe Electricity Supply Authority, Air Zimbabwe and the Grain Marketing Board – receive 100% subsidies to sustain the political agenda of Mugabe and ZANU-PF. While the argument is how such a fragile, cash budget economy can cushion the poor, my point is that if Africa generates more employment opportunities and taxes flow to the state, economies can sustain social development programs.
Poverty does make us mere objects of Geldorf- Bono type pity. The curse of Africa South of the Sahara is political instability, failure to manage transition, bad politics, flight of human capital, depressed domestic demand, failure to attract FDI, collapsed infrastructure, weak financial markets, and over-reliance on rain-fed agriculture, no value-addition of primary commodities, overly protected exchange rates, worker-centric labour, an obsession with public enterprises and the debt burden. Perhaps part of the answer is sustainable development, which, according to Wikipedia is a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come.
By Rejoice Ngwenya,
Coalition for Market and Liberation Solutions, Harare, Zimbabwe.
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