Mnangagwa on the Economy: Signs not good.

I have been waiting eagerly to hear Mnangagwa's ideas on the economy.

I was a bit crest-fallen when I heard him repeats the words jobs, jobs, jobs. Yes jobs are need but job creation as a policy has no chance of working in Zimbabwe.

Zimbabwe has only 32% urban population as of 2016 data. That means 68% of Zimbabwe's population are rural and mostly not even looking for jobs.

Zimbabwe's rural people subsist on their own land meaning their entire labour-time is occupied in their own economic endeavours, not on those of employers. Therefore job creation as a core policy is likely to leave the large rural section of the population in poverty.

The number one economic enhancement policy for me is rural infrastructure improvement particularly roads. Number two is a free agricultural market accompanied by prompt payment for agricultural produce by government bodies. Number three is protection of rural farmers from exploitative middlemen.

What the rural population need is sound agricultural policies and access to an unfettered free market, a market free from excessive government interference and protected from corrupt middlemen.

Zimbabwe's Demographic is Mainly Rural So Jobs Alone not enough

Number four is seeking markets. Highly urbanised countries need their people to be fed. Some countries here in Africa are importing food from as far afield as Brazil and the USA. Zimbabwe needs to focus on raising the quality of agricultural produce as well relaxing its own export regulations and working to lower tariff and regulatory barriers to such markets.

Jobs are important to only 32% of Zimbabwe's population. Mnangagwa should not fall into the trap of thumb-sucking policies that work in Western economies and hoping they will work in a largely rural economy. The demographics are simply too different. The West have much higher urbanisation rates as well as bigger populations.

State Expenditure Must Come Down To Be in Line with Revenue

For example the USA is 81% urbanised with a population of more than 300 million. There is a huge market for factories to supply. Therefore there is a huge demand for jobs to man those factories. The United Kingdom is 83% urbanised. Urbanisation in the rest of Europe also hovers above 80%.

Urban people largely do not have access to land thus do not have other means of sustenance except being employed. For rural people employment is a secondary option. In short for 68% of Zimbabwe's population, employment is not a primary economic activity.

The other big problem is government expenditure, especially the propensity for unbudgeted for expenditure. For a long time I have argued that Zimbabwe's economy cannot recover because of an oversized executive. That means there is no room for patronage.

Political Hands Should be Kept Out of State Coffers

Overally what is important for Zimbabwe's economy is sound free market policies and responsible governance. Politicians should never ever be allowed to treat state funds as their petty cash kitty.

When the so called not-a-coup Operation Restore Legacy was launched it turned out that a substantial number of ministers and the remaining vice-president were outside the country. The primary purpose of such foreign trips is to milk state coffers of per diem allowances. Such practices need to end.

Perhaps the biggest draw down of Zimbabwe's economy is the culture of entitlement that pervades Zimbabwean political and management class. People no longer treat management roles as ensuring sustainable management of enterprises. Rather they treat management roles and an entitlement vehicle that gives them access to all kinds of perks and allowances, even if it means running the organisation into the ground.

A number of state enterprises and some private companies have been paying management amounts that are more than their turnover.

Culture of Entitlement Must End

Then there is the practice evading tax and other payments that is quite common in the higher classes. Senior politicians run "businesses" that get by essentially by not paying taxes. Most of these so called businesses are nothing but operations to launder money obtained from the state by hook and by crook.

It does not help that a very strong stench of rumours involving corruption and appropriation of state resources emanates from Mnangagwa's own political past.

I have serious doubts that ED will take serious and meaningful action against corruption. Indeed over the past few weeks people targeted for 'investigation' and arrest have largely been members of the vanquished faction of Zanu-PF. In my books factional victimisation of a few individuals does not amount to a serious fight against corruption.

Lastly the Zimbabwe state needs to make a conscious effort to support local economic activities. Instead of importing finished products the government should be trying to support products with as much local content as possible.

The Elite Must Buy Made in Zimbabwe

Generally there is a mentality among the elite that it is prestigious to import things. That mentality is one of the biggest reasons why there is perpetual cash shortage in Zimbabwe. The moment money gets into the hands of the elite it is exported and they buy trinkets, go on expensive sojourns and holidays not to mention wasteful parties.

My favourite example is motor vehicles. Of late the government has virtually stopped purchasing from local assemblers like Willowvale Motor Industries, Quest Motors, Deven and Dahmer.

I wonder exactly how the government hopes to create jobs when they don't mostly buy products made by local labour. If I had my way cabinet ministers should be wearing clothing made by local tailors. If there are issues with quality point them out to the manufacturers. That is the only way yo can give them a chance to improve and catch up with the rest of the world.

In short, the jury is still out on whether Mnangagwa has got what it takes to turn around the economy. It takes impeccable personal integrity, honesty, firm but very fair application of the law to tackle the concrete blocks weighing down Zimbabwe's economy as it tries to swim in a crocodile infested river. Excuse the unintended pun.