Opinion by John Robertson, Zimbabwe

 

16 June 2016

 

Economic outlook mid 2016 - extract

 

Economic crunch and solutions / Property Rights

 

.... The country’s whole population now needs to become much more critically aware of the needed process of change. Very big problems need very big policy changes, and so far, we have had only very small attempts that are dealing only with the symptoms. If we all recognise that we need to be stimulating changes that will lead to the creation of hundreds of thousands of jobs, and if we keep reminding ourselves that each job costs thousands of dollars to create, we will readily accept the fact that many hundreds of millions of dollars-worth of new investment has to be attracted into the country. Only by rebuilding productive capacity can we hope to restore our international credibility, employ our people and generate foreign reserves.

 

To attract investment, investor confidence has to be rebuilt so well that the investors, who could choose from 200 other countries, become eager to choose Zimbabwe. Very big policy changes are needed if we are to make ourselves that attractive. Confidence will be rebuilt when we show complete respect for civil rights, judicial rights and property rights, and when we entrench that deep respect in very clear Constitutional guarantees.

 

Fixed property, particularly land, is by far the best form of collateral that can be offered to banks as security for loans, so it is essential that all the land that was declared to be the property of the State should be placed back onto the market to allow it to becomes the financial foundation upon which the whole economy can be rebuilt. With their rights respected and access to local working capital, local investors who are empowered by secure property rights will regain the faith and courage needed to start the reconstruction process. Without doubt, many foreign investors will arrive too, with millions of dollars to take up the many other opportunities that so clearly exist.

 

The current official mindset claims that being allowed to invest in Zimbabwe is an enormous privilege, so investors should pay dearly for that privilege. This is particularly so for the mining sector, for which the minerals under the ground are said to have such immense value that half of every mine has to be given to government free of charge.

 

But the cold, hard fact is that the minerals under the ground have no value whatever while they are still under the ground. The business of mining is locating them, reaching them, extracting them and putting them through expensive processing to turn them into something of value. That long process carries with it huge costs and enormous risks, only one of which is that the world price of the mineral might fall and make all those cost impossible to recover.

 

Government’s current demands on mining companies are preventing any prospect of new mining investment inflows. For that reason, they are preventing the creation of tens of thousands of jobs and the generation of billions of dollars-worth of export revenues.

 

Common sense demands that the policies must be changed. When they are, Zimbabwe’s recovery will start. And when Zimbabwe does turn that corner, the restored property rights will provide farmers with the collateral they need to borrow the working capital and regain the confidence to make the very considerable efforts that will be needed to rebuild Zimbabwe’s agricultural sector.

 

For property owners in the residential, commercial and industrial areas, one of the first signs of economic recovery will be an improvement in property prices. As the adoption of the needed policies will greatly improve economic prospects, and as Zimbabwe, even now, offers a better investment platform than can be found in most other African countries, the country will regain the recognition that it is the best placed in the entire region to become the transport and communications hub, the prime financial services centre and the major supplier of agricultural inputs for the full range of agricultural processing companies.

 

All the evidence suggests that the conditions now in place are too damaging and totally inappropriate to our needs, so they cannot be left in place for much longer. Therefore, change must be on the way. We have to remain hopeful that it takes place soon and that the changes will be in the right direction....

 

For further information:

 

John Robertson

Robertson Economic Information Services

Tel:  +263 4 740 205

Cell: +263 772 224 755

E-mail:  jmrobertson@umaxlife.co.zw

Website:  www.robertsoneconomics.com

 

If you would like to read John Robertson’s full article, click on the RESOURCES/ECONOMY tab and find it under 16 June 2016