Zim must build strong institutions.

Zim must build strong institutions.

Published in the Zimbabwe Independent Business Digest, New perspective column by the Zimbabwe Economics Society for October 12-18 2018.

Zimbabwe has implemented numerous economic blueprints post the 1990s which have yielded little results.

The same policies have been implemented in other African countries, yielding social and economic development. Zimbabwe has a history of good economic policies that suffer from an implementation syndrome.

Several post-independence policies such as the Economic Structural Adjustment Programme (ESAP) are still blamed for the litany of economic policy failings to date. This article provides a critical perspective on the major inherent problems behind Zimbabwe’s economic woes, with particular focus on weak institutions as a major problem dogging any economy blueprint implementation.

An endless List of economic blueprints have suffered a stillbirth during implementation because of weak institutions. Before the July 30 2018 election, I published an article, “Reform RBZ first”   , in this paper which appeared very prophetic. The article pointed out an example of the functional governmentality challenges of the Reserve bank of Zimbabwe (RBZ) in providing legitimate monetary policies that could address the confidence and trust void in the banking sector. Events of the past week proved my point following the RBZ governor’s panic monetary policy which sent the entire nation into a “flight of the elephants”.

While my article in July 2018 was meant to highlight institutional governmentality challenges in Zimbabwe This problem remains a major hurdle for sustainable economic recovery and development. If the government is to attract sustainable foreign direct investment (SFID), it will have to completely overhaul many of its economic and policy institutions.

A comparative functional analysis of the central banks in Zimbabwe and South Africa by a group of post graduate students at our main university showed that the current state of the Reserve Bank of Zimbabwe’s governmentality was not suitable for supporting economic development. Its functionality and mandate were weak in comparison to the Reserve Bank of South Africa, hence the RBZ requires priority reforms or a complete overhaul to ameliorate the effects of its toxic legacy and corporate fatigue. Corporate fatigue refers to a situation where an institution has a legacy of doing the wrong things all the time.

It was very unfortunate that while the new minister of Finance and Economic Development, Mthuli Ncube , did hit the ground running , he committed a big mistake by not carefully studying the institutions that were going to support his policies and reform agenda first. Theology literature advises that it is not good to pour new wine into old wineskins. The past week’s monetary policy announcement sent the entire nation into panic.

However, the same danger remains and may continue if the new government does prioritise reforming all economic and policy institutions including all those set by Act of Parliament . Further, government needs to stop relying too much on dodgy economists who have led Zimbabwe into national fatigue mode. National fatigue reforest where a government continues to accept advice from the same people who have led it into crises.

On the contrary, the UK government had to bring respected economist and former US Federal Reserve governor, Allan Greenspan, during a double deep recession to provide economic advice. I pray that Zimbabwe would consider the same for the Reserve Bank by considering the like of Tito Mboweni, who did remarkably well during his tenure at the helm of the Reserve Bank of South Africa.

The biggest challenge for Zimbabwe’s economic recovery will always remain the weak institutions.

Among these are regulatory bodies, implementing agents, and parastatals and state owned enterprises, business associations, professional bodies, economic and business chambers, and local authorities. Many of these institutions are mired in self-interest, poor leadership, bad corporate governance, conflicted leadership, corruption, technological lag and corporate fatigue.

The former US president during his visit to Ghana in 2009, famously said: “Africa does not need strongmen it needs strong institutions. “ Institutions in Zimbabwe need strong professional and ethical grounding. Some of the institutions are led by people who double up as politicians and business people despite theology advising that double minded persons are dangerous. They cannot achieve both but one. Strong economies in Africa have succeeded on the foundation of strong institutions that are trusted. Examples can be found in Rwanda, Mauritius, South Africa, Kenya, Egypt, Botswana and Morocco, to name a few countries.

On the contrary, countries that tend to be placed under staff monitoring by the International Monetary Fund (IMF) tend to be those associated with institutions that are too weak to effectively implement recommended economic policies.Numerous examples can be cited in Zimbabwe on how weak institutions have led to economic demise and may continue to do so in the current government or future ones.

For example, medieval diseases like cholera and typhoid in Harare. To be sure, health inspectors and engineers could have been more proactive in dealing with these epidemics, but local authorities are prioritising high salaries and luxury cars while infrastructure development and town planning are being neglected.
A synthesis of countless reports by the Auditor General’s Office shows that weak institutions are at the heart of Zimbabwe’s economic woes. The current health of public institutions in Zimbabwe can only support a limping, not competitive, economy unless there are strong measure to overhaul all institutions immediately.
The new government will need to urgently overhaul its policy institutions to ensure they are fit for purpose. Evidence has been seen in the Zimbabwe Anti-Corruption Commission (Zacc) which was set up with good intensions but remains functionally weak with no arresting powers. Owing to this weak position, President Emmerson Mnangagwa had to set up a parallel structure to do what Zacc was failing to do.

A number of economic regulatory bodies lack appropriate governmentality to support the government’s “Vision 2030”. The same applies to many business associations and chambers have remained weak in the quality of advice and thought leadership to government on economic policies which tend to be too academic and unsustainable. Many businesses under these chambers and associations continue to operate with outdated and uncompetitive business models and are never cited in global best practice. How can the country attract investment?

Countries with weak institutions tend to be characterised by high levels of corruption , speculative tendencies , absence ,or non-implementation of corporate governance codes , perennial economic paralysis , weak regulatory frameworks , high inflationary tendencies , policy mistrust , lack of public accountability , economic chaos , , inefficiencies , lack of pragmatism, too many laws that are never followed , injustices and inaccurate economic data.

The new government will have to urgently appoint independent teams of qualified experts to review all policy institutions, including those established through Acts of Parliament, on their governmentality and suitability.

to support Vision 2030, economic recovery and reconstruction strategies. Weak Institutions allow corruption and speculative tendencies to thrive by providing weak regulatory framework which cannot be adequately enforced.
Finally, strong emerging economies like China have achieved great success because of very strong institutions supporting their government’s economic development goals. It us very unfortunate that most African Governments engage a strong China supported by very strong research institutions and think tanks (both independent and governments supported) In conclusion , a legacy of weak institutions impairs our national integrity with grave implications for economic recovery and development. Sustainable investors prefer not to invest in countries with legacies of weak institutions.

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About the Author

Rodney Ndamba is an academic and founder of the Institute for Sustainability Africa (INSAF), an independent think tank and research institute.