Dr Gift Mugano
There are about 40 national competitiveness councils or commissions worldwide including those in the United States, Egypt, Croatia, Saudi Arabia, Ireland, United Arab Emirates, Brazil and South Korea.
Some are led by the private sector (US, Egypt and Croatia) while some by the Government (Ireland, United Arab Emirates, Saudi Arabia and Vietnam).
Regardless of who leads, successful councils usually involve stakeholders from government, the private sector, academia and in many cases trade unions. In these countries, national competitiveness commissions played critical role in fostering exports and attracting foreign direct investments.
The Government of Zimbabwe is currently going through a legislative process for the establishment of a National Competitiveness Commission (NCC). Based on information in the public domain, the functions of the NCC will be to:
develop, coordinate and ensure implementation of key policy improvement processes, strategies, and initiatives that will enhance Zimbabwe’s global competitiveness.
monitor evolving sector specific subjects and strategies for enhancing Zimbabwe’s global competitiveness
review all existing and new business regulations to ascertain their impact on the cost of doing business and recommend amendments or repeals where appropriate to enhance competitiveness;
continuously monitor the cost drivers in the business and economic environment, and advise on measures to be taken to enhance productivity and address current and emerging costs challenges;
identify sectors of the Zimbabwean economy that have potential for global competitiveness, whilst also paying due attention to issues of structure and size of industry, technology gaps, skills, infrastructure and modernization needs;
review all price changes by public bodies ranging from central Government, parastatals to local authorities that charge or levy user fees, rates from the public and/or clients;
undertake research and maintain a comprehensive nationwide statistical database to be used in the analysis of competitiveness across all sectors of the economy and developing periodic competitiveness frameworks and strategies;
provide a platform for dialogue between the public, private sector, labour, academia and non-state actors on the subject of competitiveness, to build an awareness and an advocacy media on matters related to competitiveness.
produce an annual benchmarking report on the national competitiveness such as the National Competitiveness Report;
This is a welcome development considering the fact that Zimbabwe’s number one energy after ravaging inflation is now uncompetitiveness.
Already, the Office of the President and Cabinet (OPC), since September 2015 to date, has led in the process of doing business reform agenda under the Rapid Results Initiative (RRI). The OPC’s work is actually addressing the second objective of the NCC which focuses on reviewing of all existing and new business regulations to ascertain their impact on the cost of doing business and recommend amendments or repeals where appropriate to enhance competitiveness. What it means is that the work of the NCC partially began in September 2015.
Working groups which are participating in the under the OPC RRI agrees with me that the level of effort and resources required are insurmountable! It therefore means that in order to achieve the nine functions stipulated in the proposed NCC Bill a fully fledged organisation is needed. This is not a big ask since the process of establishing the NCC underway. The question this article seeks to address is how the NCC will contribute towards the country’s export drive?
For starters, Zimbabwe’s competitiveness advantage has never been empirically revealed. In last week’s issue titled “Zimbabwe Economic Paradoxes”, I indicated that the services sector has not been given sufficient attention given to other sectors such as agriculture and mining notwithstanding the fact that the very same sector contributes 60 percent of the national output.
This fundamental void can be addressed by the NCC thereby helping the country to diversify its exports.
Beyond coming up with a matrix of services sector for export, out of the 15 categories of services, the NCC can help in the country in developing products mix which Zimbabwe can favourable compete with the rest of the world regardless of the sector. From a trade perspective, competitiveness advantage evolves over time. Zimbabwe, in the mid-1990s had a well-diversified export basket with over 30 products significantly contributing to the country’s foreign exchange earnings.
Today, our exports have been reduced to three product categories, that is, minerals, tobacco and cotton, constituting about 85 percent of total exports. The possible explanation for this new order is two-pronged:
First, this economy has gone through serious structural changes which have seen some key sectors especially the manufacturing sector failing to cope. This has resulted in reduced capacity utilisation and in some areas demise of the industries thereby constraining the country’s capacity to export. In some areas, especially in the agricultural sector, in livestock, in particular, because of long gestations involved, the real challenge there relates to low productivity.
Second, as I said before, a country’s competitive advantage evolves over time regardless of the country’s productivity. One such area where comparative advantages have significantly changed to our disadvantage is the mining sector, specifically in minerals like iron ore.
It is now public knowledge that China has changed its growth strategy from one powered by exports and foreign direct investment to a services driven economy. As we all know the moment a country makes that structural change, there will be less demand for inputs required to power exports of goods. In this particular case, China lost its “appetite” for base metals like iron ore. This resulted in plummeting of mineral prices in recent years since China is the biggest consumer of base metals.
The tragedy of this is that all this is happening under our nose without a think tank which can help us build these new developments into policy making.
Now coming back to the issues regarding the shrinking exports base, from where we stand as a country, without concrete evidence, we cannot tell the real reason why our export base has gone down to three products.
Even if we hypothetically agree that both factors, that is, change of comparative advantage and reduced capacity have contributed, again we cannot tell with certainty the weight of their contribution. In the same vein, we cannot eloquently explain new lines which are coming through in as far as the country’s competitiveness is concerned, for example, services. In as long as we are in the imaginary world, it is very difficult if not impossible to come up with the right policy mix for the country.
Another area of focus of the NCC, based on its proposed functions, relate to the review of all existing and new business regulations to ascertain their impact on the cost of doing business and recommend amendments or repeals where appropriate to enhance competitiveness. This is ongoing work as I indicated before.
From an export perspective, before the OPC RRI, an exporter was required to complete 10 documents. One of the documents was supposed to be picked up from Mazoe station. Now imagine a company based in Bulawayo will have to send an official from Bulawayo who will have to bear the menace of toll gates all the way from Bulawayo to Mazoe and back plus his travel subsistence and allowance.
All these costs will build on the cost of doing export business. At the end of the day, before we bring in the challenges of the strengthening of the United States dollar we would have started on a wrong base.
From this perspective, the NCC will be quite key in addressing this problem. Definitely, we would want to see streamlining of procedures and decentralisation of certain unavoidable procedures.
In the same vein, the NCC’s thrust to review all price changes by public bodies ranging from central Government, parastatals to local authorities that charge or levy user fees, rates from the public and/or clients and continuously monitor the cost drivers in the business and economic environment, and advise on measures to be taken to enhance productivity and address current and emerging costs challenges is key in dealing with microeconomics of competitiveness which affect exporters.
We all agree that rates, water bills, electricity tariffs, fuel and some cost of utilities like information and communication technologies are unfavourably high. Whatever argument provided by the service providers, the reality of the matter is that these costs are pricing our local companies out of business. Is there a good business case why say price of water in Zimbabwe has to earn high fixed charges yet there is no fixed charge in South Africa? Is there a good case why fuel per litre on average is around $0,70 in neighbouring countries like Botswana, South Africa, Mozambique (Chimoyo) and Zambia whilst in Zimbabwe is $1,36?
These cost drivers have to be periodically reviewed and corrective measures has to be implemented.
I can go on and on. The message here is that the NCC carries important functions which can help this country to streamline processes, lead the reform agenda by providing concrete evidence and help this country to not only identify its competitiveness but also help the country to build consensus through dialogue.
Zimbabwe’s answer to its economic challenges lies in driving exports. Since dollarisation, exports has contributed a flat share of 60 percent of the country’s liquidity. It is therefore apparent that this is an easier catch for us. Hence, in addition to existing export growth strategies, the establishment of the NCC need to be done expeditiously.
Together we make Zimbabwe great.
Dr Mugano is an Economic Advisor, Author and Expert in Trade and Competitiveness and Research Associate at Nelson Mandela Metropolitan University (SA) and Senior Lecturer in the Faculty of Commerce at Zimbabwe Ezekiel Guti University. Feedback: email: email@example.com, Cell: +263 772 541 209.