Fool's Gold and ZimAsset

Gold or diamonds its all there as promised in Zimbabwe's super economy

If it sounds too good to be true-it is too good to be . The Zimbabwean government is promising economic salvation on the back of Zim Asset. Zim Asset reminds old Zimbabweans of the early 1900s, history surely does repeat itself.

In those olden days, The Chartered Company, or  British South Africa And Company (BSAC), promised everyone Zimbabwe had very large deposits of easily accessible, high quality gold. By 1920, it became obvious Zimbabwe did not have this promised gold. The Chartered Company had over-promised and to preserve its investments BSAC had to move heaven and earth to create a 'bread basket' of Southern Africa.

The so called mineral holdings backing Zim Asset, like the mythical King Solomon's mines also supposedly located in Zimbabwe, do not exist in the promised quantity and quality. Zim Asset is a dream built on the myth of 'mineral wealth'. Such fool's gold economics will not deliver development. As demonstrated in the 1920's, no amount of mineral marketing can save a poorly designed economic strategy.

Promising Zimbabwe Economic Budget

Zimbabwe's budget looks promising. It remains the only credible economic planning tool: as it changes tariffs and indicates sectors of the economy favoured for growth by the state. This budget is linked to Zim Asset and takes some stakeholder views into consideration.

Zim government will have a budget of US$4 Billion, out of a GDP of US$15 Billion. In terms of resourcing, this budget shows how the Zim economy is heavilly reliant on the centralised role of the government. Of all the risks indentified in the budget, a risk of  government again failing to deliver is not identified. Markets have no faith in Zimbabwe, as the result of the state itself and its past repeated economic fumbles.

The budget is a sincerely written document, full of commendable aspiration. If the government again fails to deliver, its side of the bargain, Zimbabwe will return to full on economic crisis. Zim Asset seems to be the only tool in this budget; Zim Asset on the other hand will not solve the crisis if bureaucracy, corruption and a lack of transparency re-haunt Zim plc in 2014. The articulate Minister has a battle on his hands, as even he fights to demonstrate his credibility.

Zimbabwe Economy 2014

Economic growth will contract in 2014, given persistent company closures. Real value will be generated in the susbsistence and dollar funded informal sector. Use of the US$ will ensure at most 2% real economic growth, inflation of 5% and GDP per head of US$200.00.

A return of the Zimbabwe dollar will further drive out capital and reintroduce hyperinflationary pressures, as the institutional dynamics of currency stability have not been reinforced in Zimbabwe's economy. A lack of confidence in Zim dollar still persists encouraged by an absent credible macro-economic plan.

Currency and funding shortages will persist, they is no strategy in place to deal with persisting liquidity challenges. Businesses need working capital, which given the scarcity of commercial paper and high interest rates is hard to come by: companies will continue to close, in 2014. Water and electricity shortages will guarantee difficult trading and living conditions for the nation's citizens. The State's Look East policy is not generating the infrastructural investment required to bring about medium term growth.

Old Systems Die Hard

Rhodesia's economy was based on import-substitution and intense state intervention. On the surface the Rhodesian economy appeared strong, however, below was a clandestine engineered economic ponzi mechanism. Apartheid South Africa subsidized Rhodesia by working with inefficient Rhodesian enterprises as part of their political solidarity. Solidarity between two countries running racial discrimination programs ensured Rhodesia could bust sanctions.

The Rhodesian system guaranteed success for the 3% minority, as the majority earned slave wages and lived in rural poverty. Such an economic system inflated economic outcomes for the 3% minority, this deliberate inequitable infrastructure development system sacrificed future development. As war raged it became apparent Rhodesia's so called 'economic success' exemplified a precarious prosperity.

Zimbabwe has totally ridden itself of Rhodesian style economic policy and practice. It has not engaged import substitution, but a small minority is heavily favored by state sanctioned corruption, patronage and incompetence. Zimbabwe's system is yielding the same outcomes as Rhodesia's: infrastructure is not being developed for the majority and sanctions are in place. With business optimism at Rhodesian lows, only moral force can bring back the confidence required to reignite economic performance.

When The Educated Fail To Write

Films need scripts to stay on course. Plays need scripts so actors know their roles, characters and dialogue. When the script lacks clarity confusion ensues.

Managers depend on the scripting of operational guidelines. The sturdiest organisations have bulky operational guides for everything. One single service operation, in competent banking institutions, has various manuals many pages long to specify: product delivery, service roles and working standards.

Our organisations are depleted as they lack comprehensive practical operational guides. Walking into ZIM corporate and government offices one is aware of the total lack of accountability. Things were different 34 years ago when all organisations had comprehensive written, and applied, practical policy guides. The biggest victim of lacking practical policy guide is the economy. As the policy manuals disappeared, so did Zimbabwe’s economic efficiency.

Competitive Disadvantages

To say business is struggling is  understatement. Firms are shutting down and industry, like the dinosaur, is virtually extinct. It started with disappearing factories, that was late 70's; followed by heavy industry taking a bashing in the 80's, now even retailers are having the fates conspiring against them.

Power cuts, water shortages, exorbitant interest and a lack of funding have been haunting industry since the 1990's. No MBA, and or Msc, in Disaster Recovery can prepare those courageous enough to start formal enterprise in Zimbabwe. The executioner wields the noose of  bureaucracy, legislation and corruption for those with the intelligence to circumvent shortages of resourcing.

Zimbabweans are not moaners, but things aren't right. We still have those working for struggling organizations months on end without pay. We salute and respect all these hard working Zimbabweans. Also, we salute those traders and enterprises, in Zimbabwe, fighting against all odds. Lest I forget, lets salute Gideon Gono, he tried and tried-with dignity he resigned; if only others could let go of power and give  Zimbabwe a chance.