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A developmental State defined – NewsDay

By Vince Musewe

Developmental State is a term coined by Chalmers Johnson that is used to describe States which follow a particular model of economic planning and management.

It was initially used to describe post-1945 Japan and its rapid modernisation and growth. A simple definition would be: “A developmental State is a State where the government is intimately involved in the macro and micro economic planning in order to grow the economy”, with the addition “while attempting to deploy its resources in developing better lives for the people”.

What are the characteristics of a developmental State?

The UN lists the characteristics of developmental States as the following:

  • A government with the political will and legitimate mandate to perform the required functions;
  • A competent and neutral bureaucracy that ensures implementation. This requires a strong education system and efficient set of public sector organisations with little corruption;
  • An institutionalised process where the bureaucrats and government engage with other stakeholders; and
  • An established development framework and a comprehensive governance system to ensure the programme is implemented for example, a central function responsible for overall co-ordination.

China, Singapore, India, Thailand, Taiwan, Vietnam, Malaysia, South Korea, Philippines, and Indonesia are all categorised as developmental States.

Accordingly, it is agreed that the developmental State not only refers to the collective economic and human development, but also describes the State’s essential role in harnessing national resources and directing incentives through a distinctive policymaking process. The State’s role is to partner the private sector in the national industrial transformation. The State is a catalytic agency and stakeholders respond to the incentives and disincentives the State establishes.

Clearly, this means that government must lead the developmental agenda creating institutions which effectively implement projects in an inclusive manner.

In my opinion, the NDS1 is an appropriate policy package for the emergence of a developmental State in Zimbabwe. The question which must be asked is: Do we have the appropriate institutional framework to create a developmental State?

In my view, the whole idea of State enterprises is for the State to play its meaningful role in the economy particularly on developmental issues.

Zimbabwe has 107 State-owned enterprises and parastatals (Seps) which contribute a mere 12% to GDP from a peak of 40% in the 1990s. Seps can be classified into strategic public enterprises, non-strategic viable or potentially viable commercial or industrial public enterprises, non-viable public enterprises with no strategic or social function and public enterprises with a social or developmental role.

The difference between a “parastatal” and a “State-owned enterprise” is that a parastatal is established by an Act of Parliament to carry out a socioeconomic mandate for the benefit of the public, while a State-owned enterprise is an entity in which the government has an equity stake and is registered in terms of Companies Act and should operate like a private company.

Unfortunately, poor management, weak corporate governance, corruption, patronage, cronyism, abuse of public resources, increasing losses which require continued Treasury support and unpaid tax liabilities, have been the common characteristics of Seps in Zimbabwe and this has resulted in their failure to deliver intended services, requiring them to be restructured or reformed.

Seps are a universal phenomenon, they are not unique to Zimbabwe. They are among some of the largest corporations in developed economies. Seps in developed economies emerged in the 1930s, especially after World War II. That was when governments felt the need to intervene in economies in order to facilitate economic development, create employment and address capital shortfalls where the private business sector was either unable or unwilling to participate. In some instances, and especially in developing countries, the motive of new post-colonial governments has been to consolidate and centralise political and/or economic power under the State by owning and controlling Seps in sectors considered strategic and key to economic control.

Seps are viewed as “essential tools of control, economic planning and development.” They are a means of industrial power and influence, economic self-reliance, implementation of policy, safeguarding public interests, maintenance and enhancement of national interest.

Unlocking the potential of Seps can, indeed, expedite the developmental agenda. However, reforming or restructuring Seps is critical so that they are fit for the purpose. The “privatisation” of Seps is another matter. Some feel that privatisation of Seps negates the role of a developmental State which should be at the centre of economic development.

There is no doubt that the State will always have an important role to ensure inclusive economic development which alleviates poverty, creates jobs, facilitates access to affordable basic needs for many, and remove barriers to economic well-being of citizens. Whether the privatisation of Seps can contribute to these goals is questionable given the experiences to date.

Those Seps with a developmental mandate certainly need to be strengthened to deliver. The debate is, therefore, not the “what” but the “how”. Developmental integrity must start with political leadership which can then build the necessary institutional architecture to deliver impactful and inclusive developmental policies.

The NDS1 is a good place to start as it is a comprehensive document of what needs to be done in each sector. The State’s role is clearly to lead and facilitate inclusive development. Monitoring and evaluation of progress will be a key determinant of final outcomes. I, therefore, posit that Zimbabwe will require fundamental and radical transformation where we rebuild new inclusive, effective and accountable institutions which are fit for purpose.

It is only then that we can create a new growth trajectory with the State playing a key role in a developmental State.

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economy

Zimbabwe may be close to adopting cryptocurrency – Micky News

Zimbabwe’s hardline attitude on cryptocurrency may be softening. Mthuli Ncube, the country’s increasingly crypto-friendly finance minister, recently stated it would be hard for the country to ignore cryptocurrencies at this time.

Ncube feels that cryptocurrency will be best suited as an investment class instrument rather than legal cash, according to a Herald report. This means that the Victoria Falls stock exchange platform may list cryptocurrency-based items in the not-too-distant future.

The Central Bank of Zimbabwe published a statement in 2017 outlining its position on cryptocurrency use in the country. It said that Bitcoin and other digital currencies were not legal currencies and should not be considered as such.

Virtual currencies not covered

Zimbabwe’s laws do not govern virtual currencies, according to the central bank. As a result, they risk being used as facilitators for money laundering, fraud, tax evasion, and even terror financing.

Following this, the central bank instructed all banks under its jurisdiction to halt all digital currency transactions. These activities include holding, trading, or transacting in these currencies, as well as providing services to businesses that do so.

Minister Ncube’s recent words may signal a shift in the Zimbabwean government’s attitude toward digital currencies. The minister appears to be lobbying for his administration and others to use blockchain technology to their advantage. That is, without relinquishing economic power.

Reducing costs and increasing remittance value

With commission fees for all remittances from Zimbabweans residing abroad as high as 20%, disruptive technology like blockchain could dramatically reduce these costs, increasing the value of remittances to the Zimbabwean economy from its present 7%.

According to the minister, the Zimbabwean government has started the process of regulating digital currencies. The government has already put in place a regulatory sandbox in which bitcoin use in the country can be evaluated in a controlled environment.

Image courtesy of Cointelegraph News/YouTube

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'Offshore centre plans on track' – NewsDay

BY MELODY CHIKONO

FINANCE minister Mthuli Ncube says Zimbabwe has made significant strides in its quest to set up an offshore financial services centre in Victoria Falls.

He said a planned commodities exchange would be a key component of the offshore financial services centre, which had been on the cards for some time.

The offshore financial services centre is expected to scale-up foreign direct investment inflows.

Speaking during a virtual workshop hosted by the Victoria Falls Stock Exchange (VFEX) in partnership with the Dubai Gold and Commodities Exchange (DGCX) yesterday, Ncube said the offshore financial services centre would help develop and deepen the financial services sector.

“We can all agree that investment is essential in driving economic growth and creating an attractive investment climate is one step towards achieving that,” said Ncube.

“An offshore financial services centre is in reality an attempt to create an investment environment in which international capital can flow freely,” he said.

He said the free flow of capital required supporting legislation.

Yesterday’s event came after a high-level ministerial delegation accompanied the VFEX to Dubai recently, where the VFEX and DGCX inked a memorandum of understanding.

As part of the agreement, DGCX undertook to extend technical support, knowledge and skills to VFEX.

The organisations are planning to establish an international commodities exchange in Zimbabwe.

“My ministry has supported the VFEX since it was mooted as an idea and we are encouraged to see that such a young exchange is quickly looking to broaden its products and services.

“DGCX is a leading derivatives exchange in the Middle East and has played a pioneering role in developing the regional market for derivatives trading, clearing and settlement. It is, therefore, prudent and opportune for VFEX to tap into their expertise in setting up a commodities exchange,” Ncube said.

He added that enhancing investment in the mining sector towards exploration, beneficiation and value addition of minerals including levelling the playing field to accommodate small-scale miners, would create more jobs and increase foreign currency earnings for the country.

The establishment of a local commodity exchange is one of the major steps towards achieving this goal, the minister said.

“If we are to make an impact in the global financial markets, we have to diversify from share trading into bonds and commodity trading.

“The growth in our financial markets will no doubt lead to creation of employment, increase export earnings in the formal channels and strengthen capital-raising opportunities for our extractive sectors.

“This will ultimately help in transforming our country to an upper middle-income economy in line with Vision 2030,” Ncube said.

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Poaching a threat to Africa's wildlife – NewsDay

BY OBERT SIAMILANDU

Poaching has been the greatest threat to wildlife and might cause its extinction in different African countries including Zimbabwe, a wildlife expert has said.

Safari Operators Association of Zimbabwe president Emmanuel Fundira yesterday said, while game meat production can contribute to economic growth in the country, there was need to curb poaching activities.

In a survey conducted in eastern Madagascar, it was revealed that 95% of those interviewed said they had eaten at least one protected species. But the majority showed a preference for meat from domestic animals, suggesting that game hunting could be greatly reduced if alternative sources of animal protein were affordable and available.

Studies have also shown that elsewhere on the continent, people still hunt wild animals to feed their families, while in other places hunting is done on a commercial basis.

The study said illegal game hunting was complex and was closely linked to various factors that differ from place to place.

However, wildlife experts said there was not much research done to look into illegal game hunting, while there is a lot of research on ivory and rhino horn poaching.

There is also poaching for elephant tusks, horns or other animal body parts, which experts say is a threat to African wildlife.

Fundira said conservationists needed to find ways to deal with illegal hunting activities.

“My view and experience is that game meat production is grossly underdeveloped. It is an area with great potential and can contribute significantly to economic growth, including nutritional aspects which are well-known.

“For example in South Africa, commercial game meat commands an annual value of R12 billion, with a significant proportion going towards exports,” Fundira said.

“It is for this reason that we should move away from poaching valuable assets and instead formalise game meat production for the benefit of the economy,” he said.

Fundira said in many African countries, there was little or no research into the illegal game meat trade due to the high cost of research which is often beyond the means of the already over-stretched wildlife authorities.

He said surveys on parks and wildlife sanctuaries had identified illegal hunting for game as the key threat to wildlife conservation in African countries.

“Surveys show that the most worrying indicator is that large-bodied mammals are now well below their expected numbers.”

In Zimbabwe, some of the endangered species facing extinction include the black rhinoceros and elephants that are hunted for their ivory and meat.

  • Follow Obert on Twitter @osiamilandu

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