President Mugabe
President Mugabe recently gave the State of the Nation Address (SONA) to which he laid the ten pointers namely:
Revitalising agricultural and the Agro-processing value chain;
Advancing beneficiation and/or value addition of agricultural and mineral resource endowment;
Supporting infrastructure development in key sectors like energy, water, transport and Information Communication Technologies (ICTs);
Unlocking potential of Small to Medium Enterprises (SMEs);
Encouraging private sector investment;
Restoration and building of confidence and stability in the financial services sector;
Promoting joint ventures and public private partnerships (PPPs) to boost the role and performance of state owned companies;
Modernising labour laws;
Pursuing an anti-corruption thrust; and
Implementation of special economic zones to provide impetus for foreign direct investment.
It is important to note that SONA came at an opportune time when the country is under threat from a number of constraints which inter-alia include lack of access to finance, policy uncertainty, poor infrastructure, inefficient bureaucracy, corruption and restrictive labour regulations.
The President spoke on the need to restore and build confidence and stability in the financial services sector as well as the need to encourage private sector investment. These two issues are positively correlated. To have these two targets achieved, the country requires policy consistency and stability.
Zimbabwe is poorly ranked in the overall infrastructure pillar by the World Economic Forum’s Global Competitiveness Report (GCR). In 2014-15 report, Zimbabwe was ranked 124 out of 144 countries. However, electricity supply, overall infrastructure quality and limited airline seats are perceived to be a problem in Zimbabwe. With respect to labour market rigidities, the President was spot on that we need to modernise the labour laws. Zimbabwe’s overall labour market efficiency ranking was at 137 out of 144 countries in the 2014-15 GCR. By the same token, Zimbabwe ranks in the bottom 3 in terms of hiring and firing practices, flexibility of wage determination and pay and productivity indicators.
Tied to this, is fact that Zimbabwe’s output per unit of labour is very low compared to its comparator countries, implying that the average productivity in the country is very low. To beef it up with facts, Zimbabwe’s productivity, that is output per unit averages around $2 000 in monetary terms while other countries like Zambia, South Africa, Botswana and Mauritius averages around $4 000, $11 000, $14 000 and $22 000, respectively.
Although the Labour Act has been signed into law, there are serious concerns from the business sector regarding the provision made in the new labour act. According to the World Bank, the notice period an employer must provide in Zimbabwe is equal to 13 weeks, which is roughly three times as lengthy as what is required in the neighbouring countries.
Likewise, the severance payment that Zimbabwean employers make on average equals 69,2 weeks of wages, which is also nearly three times as high as the neighbouring country average of 25,4 weeks. When added together, the total costs of retrenchment in Zimbabwe is 82,3 weeks of wages (a little over a year and a half), which is the highest in the region and nearly 9 times the 9,3 weeks of wages in South Africa. ]
What is important to note is that the country’s major source of employment is agriculture. It, however, has the lowest productivity due to climate change, limited resources and lack of business ethics by some of our resettled farmers.
What this means is that as we move in to amend the labour laws we must also take into account issues of productivity in the agricultural sector as enunciated in the SONA. In this regard, we need to take into account three factors.
First, investment into input support schemes for this 2015-2016 agricultural season. My humble submission is that in order to revamp agricultural output we must put resources to support agriculture now and also incentivise companies to engage in contract farming and other value chain support initiatives like business linkages.
Second, there is need to strengthen our institutions in the agricultural value chain. The current seeds services unit which is a unit in a division of a department in the Ministry of Agriculture was established around 1950 with capacity to service only five seed companies.
To date, we now have more than 45 seed companies, more than 2 000 seed dealers across the country, widening of seed grower base – new players introduced through the Land Reform Programme and ballooning number of varieties registered.
Recently, Agricultural Marketing Authority (AMA) boss Mr Basil Nyabadza bemoaned rampant acquisition of local seed companies which include Seed Co, Pioneer, Agric Seeds and Pannar.
This is of course good as we are looking for investments. However, this comes with side effects such as oligopolistic structure of the seed market which will result in exploitation of customers. More problems we are likely to face will include smart importation of the genetically modified organisms (GMOs).
In our case, we have observed a situation where the rat (the seed services) is monitoring elephants (Seed Co, Tobacco Research Board, Pannar, Agric Seeds). These elephants have both strong financial muscle and technological advancement which the rat doesn’t have!
Third, provision of markets – this has been like cancer in the bone marrow especially for the agricultural sector. For starters, it is open secret that farmers are still owed monies by the Grain Marketing Board (GMB) for the crop they delivered last year!
Technically, the farmers have lost the crop. As a result, the farmer cannot go back to farming. On this, it is my humble submission that the Ministry of Finance must do justice with our local farmers in the same way they do with farmers in Zambia, Malawi and South Africa – we heard that they are both well paid and timeously.
In the same vein, we must work on creating business linkages particularly in the agricultural value chain. Here we can take lessons from the work which is being done by the Ministry of Industry and Commerce together with the Ministry of Small and Medium Enterprises and Cooperative Development – the two ministries are created a platform SMEs to be given a platform to supply subcomponents for big enterprises.
A case in point is the Capri Private Limited which is getting components for its refrigerators from SMEs! This can be applied and expanded in agricultural sector although it is not well incentivised. We need to look at how we can incentivise companies to follow companies involved in out grower schemes like of Delta, Seed Co, Pannar, Pioner, Irvines, Nestle etc.