THE preliminary outcome of the foreign currency auction system and other supportive measures introduced by the Reserve Bank of Zimbabwe (RBZ) in June this year has been largely positive and inspiring, thus renewing many people’s belief and hope in the local economy.
That said, Zimbabweans should remain mindful of the sobering reality that no successful nation on earth can trace its success to monetary policy alone or even monetary and fiscal policies on their own.
Without taking anything away from the Governor of the Reserve Bank of Zimbabwe (RBZ)’s recent monetary policy pronouncements that introduced a number of positive measures geared at supporting and sustaining the forex auction system into the medium and long-term, more is required if this platform is to continue to survive.
History has proved that no amount of monetary policy or fiscal policy interventions alone can sustain an economy in the absence of supportive and coherent supply-side policies in key clusters of the economy such as agriculture, mining, manufacturing, tourism and other service sectors.
In other words, no matter how much allocative efficiency the auction may achieve, its sustenance needs the real sector to produce for both export and domestic consumption.
The auction system is only relevant to the extent that exporters are doing their part in earning forex while those producing for domestic consumption are completing the equation to minimise imports.
Monetary and fiscal policy stabilisation measures such as an efficient forex market, monetary restraint and fiscal consolidation cannot replace the need for Zimbabwe to address the long-standing structural disequilibrium problems in the economy. This is important to provide a sound footing for sustainable economic recovery and export growth.
Whilst the commendable progress made on the monetary and fiscal fronts is beginning to bear fruit, other arms of the Government and the private sector now need to step up their acts and support the efforts by the fiscal and monetary authorities to close the supply gaps in the economy, reduce the import bill as well as increase exports.
To be precise, in addition to monetary and fiscal policies, Zimbabwe requires coherent industrial and trade policies to support its precarious balance of payments position.
Furthermore, key sectors such as mining and agriculture should also come up with specific, practical and growth-focused sectoral policies to enhance their optimum contribution to exports in particular and output in general.
For the private sector, there is a fine line separating lobbying authorities to put in place a conducive, macro-economic environment and literally asking authorities to fix defective corporate strategies through inefficient support measures.
At the end of the day, it is companies and not Governments, that compete on the global arena.
The private sector, for it to stand true to its description as the engine for growth, has to be innovative, astute and long-term growth focused at firm level instead of focusing on short-term lobbying outcomes such as tariff protection, cheap loans, and subsidies.
Previously, the manufacturing sector has recorded transient growth, largely on the backdrop of import management measures such as Statutory Instrument 64 of 2016 whose objective was to boost domestic production by protecting local industries from unfair competition from foreign firms.
The Confederation of Zimbabwe Industries (CZI) and other industrial bodies cannot continue to rely on regulatory protection as a strategy to sustain their business performance.
For instance, CZI annual manufacturing studies have shown that most local entities are using old technologies and hence continue to lose competitiveness and market share.
Resultantly, production has continued to shrink with most companies shifting more to distribution rather than production. In the absence of increased domestic production, the demand for forex will continue to rise in line with increase in imported goods and services.
It is, therefore, important for the local producers to sharpen their competitive edge through progressive adoption of new technologies or upgrading of plant and machinery. This is a function of the ability to develop, import and adapt new technologies and is largely a management issue as these decide on the allocation of resources.
Poor private sector leadership and management result in the misuse of resources with adverse impact on productivity. The long-term competitiveness of the local manufacturing firms should, therefore, largely depend on production efficiency.
It is, however, paradoxical that even those companies relying on the Economic Structural Adjustment Programme (ESAP) period or even pre-independence technologies are surprisingly up-to-date when it comes to acquiring the latest vehicles and other luxuries for their executives.
In addition, the same companies prefer to derive what they call efficiency from paying slave wages to their employees.
The sum and short of it is that while the Government is sorting out the macro environment, the private sector cannot continue to sit on its laurels in the false comfort that the authorities are responsible for all their fortunes or misfortunes.
Even in the advanced economies that most of local industrialists emulate, some companies are thriving while others are going under because of variations in firm level strategies and business acumen.
It is therefore critical that Zimbabwe’s private sector also stands up and be counted in order to support ongoing monetary and fiscal policy measures through efficient production, export growth and import substitution.
The modicum of transparency, exchange rate stability and information symmetry ushered-in by the foreign exchange auction, as well as monetary and fiscal restraint, should not be taken for granted.
It is a very positive and important pre-condition for all the good things economic such as foreign direct investment, domestic savings growth and general business confidence. These promising but vulnerable offshoots of confidence and stability are, however, neither permanent nor stable.
They desperately need to be nurtured by productivity and patriotic discipline across all the sectors of the economy, especially the private sector, government ministries, parastatals and local authorities.
Andrew Lampard is a retired banker who worked in Zimbabwe and South Africa.–herald.c.zw