"Zimbabwe's current socio-economic state is anomalous; never before have I encountered a country that simultaneously tells, through its economic indicators, conflicting tales of shocking abject-poverty and exponential-wealth-creation. Indeed, Zimbabwe's current socio-economic state is like a bitter-sweet broth, which leaves one in a state of sensory bewilderment upon sampling it."
— My Abstract Description of Zimbabwe
The monumental 11th of February, 2009, swearing-in ceremony of Zimbabwean Prime Minister, Mr. Morgan R. Tsvangirayi, and Deputy Prime Ministers; Professor Arthur O.G. Mutambara and Ms. Thokozani Khupe, was the culmination of a protracted political settlement; which was fraught with mistrust, false-starts and endless bickering.
Now that the much-awaited all-inclusive government has been formed; and a government of national unity is presently at the helm of Zimbabwe, the conundrum sapping minds of Zimbabweans and members of the wider global community alike, is: 'Will this new political and administrative dispensation bring about Political Stability; Economic Growth; and, Social Progression in the Southern African Country?' In other words, 'Does the new administrative establishment have the mettle to tackle Zimbabwe's problems?'
Evidently, the answer to that question depends on a confluence of various unique forces; and, it is too difficult to forecast this 'confluence of various unique forces' accurately. Therefore, it would be too unwise to answer that question conclusively at this juncture, that is, before the new administrative establishment has fully settled. Thus, the most accurate thing I can say is that Zimbabwe's future is uncertain; aggrandizement and decay, have an equal probability of precipitating. Interestingly, this macro-economic sentiment is averred by the negligible level of activity on the Zimbabwean Stock Exchange since it re-opened less than a week ago; indicating the investment community is neither bullish nor bearish about the future of Zimbabwe, i.e., they are adopting a 'wait and see' stance, as they are of the opinion that anything can happen in Zimbabwe, at anytime.
Hence, when analyzing Zimbabwe from an investment perspective, it is important to de-emphasize the investment picture portrayed by traditional metrics like the inflation rate, the unemployment rate, and the savings-to-incomes ratio; because they usually fail to capture the true economic dynamics of Zimbabwe. For instance, whilst the C.P.I.-inflation rate of Zimbabwean dollar quoted prices is anything north of 400 million per cent per annum; people in Zimbabwe largely transact in the U.S. Dollar and the South African Rand, and Rand/U.S.- dollar prices of fast moving consumer goods, and the entire spectrum of services, are currently falling precipitously, e.g. 10 kgs of maize-meal (corn flour) was retailing at around USD8.00 in December, but now, it is retailing at USD5.00, which translates to a price change of -37.5% in less than a quarter: That is generally the trend being followed by prices of goods and services in Zimbabwe.
To avoid the pitfalls of using traditional metrics, I'll use a conceptual model developed by Mr. Michael Milken, to assess Zimbabwe's current Political, Economic, Technological and Social stamina; with the express aim of making policy recommendations that will help Zimbabwe to navigate out of the turbulent seas of underdevelopment (The recommendations will also help Zimbabwe to attract investors).
In his essay titled Creating Value, Michael Milken states that the level of prosperity in any society depends on the leveraging effect of financial technology on the sum of human capital, social capital and real assets.
Mathematically this can be expressed as:
Where:P stands for prosperity
Ft stands for financial technology
HC stands for human capital
SC stands for social capital
RA stands for real assets
I'll proceed by discussing just two of the critical components of Milken's Prosperity Formula within the context of 'Developing Zimbabwe':
1) Financial Technology: In the text titled Introduction to Financial Technology, by Roy Freedman, the description of 'Financial Technology' is as follows: Financial technology is concerned with building systems that model, value, and process financial products such as bonds, stocks, contracts, and money. One of the elements of Roy's description of 'Financial Technology' is bonds: Zimbabwe currently lacks a public bond market, and its public equity markets are poorly developed. It is widely understood that a viable and robust bond-market improves the efficacy of financial intermediation in an economy, and serves as a useful buffer to prevent, or minimize a future crisis. Hence, the absence of a public bond market in Zimbabwe, affects the efficiency with which financial resources are allocated throughout the Zimbabwean economy; making the economy less resilient in the wake of a cyclical downturn in the business cycle. Therefore, until, and unless Zimbabwe has a public bond market, it will never register a full recovery. Thus, it would be prudent for the Zimbabwean government to build a liquid, public bond market; with an acceptable level of liberalization, to signal its commitment to economic stability to the investment community. Furthermore, when investors are making capital allocation decisions, one of their primary concerns is liquidity; as liquidity generally has a positive correlation to operational flexibility. Zimbabwe's public equity markets currently offer investors negligible liquidity. Therefore, liquidity in the public equity markets of Zimbabwe has to be bolstered, to enable equity securities to trade close to their fundamental prices (removing pricing inefficiencies); and, this can be achieved by allowing, within reason, speculative transactions like; short-selling and regulated trades of share-options contracts (as they generally have liquidity-increasing effect in securities markets).
2) Human Capital: Is the largest, most-priced asset of any economy, and can simply be defined as 'The ability and productivity of people'. Zimbabwe has a population of approximately 12 to 15 million people. Currently, between 3 and 5 million (over 25% of the Zimbabwean population) of the youngest, healthiest and most skilled niche of Zimbabwe's population; resides in the diaspora. Thus, implying that the majority of Zimbabwe's human capital is currently in foreign lands; appreciating in value and accumulating knowledge and skills that have the potential of effecting a miraculous transformation in Zimbabwe. Evidently, it is critical for the new government to acknowledge that the Zimbabwean economy will never improve without regaining the skills it lost over the last 12 years. Therefore, it is of paramount importance for the Zimbabwean government to be proactive, by concocting a basket of incentives, e.g. tax holidays, hefty relocation grants and competitive wages; to woo back the lost skills, including entrepreneurs, specialist doctors, nurses, teachers and artisans that are scattered across the globe. The progression of the Zimbabwean economy would be exponential if the Zimbabwean government succeeds in repatriating those lost skills. Otherwise stated: Repatriation of lost skills is a precursor to exponential economic development. Therefore, I say to the Zimbabwean government: "Focus on wooing-back the skills you lost; find innovative ways of employing them; create an enabling environment for them, and Zimbabwe's problems will vanish immediately. Success is a function of people, not vice versa"
To conclude, it is my sincere hope that the new government of Zimbabwe heeds my advice; because the prosperity of Zimbabwe may be unlocked by doing so.
To conclude, it is my sincere hope that the new government of Zimbabwe heeds my advice; because the prosperity of Zimbabwe may be unlocked by doing so.
