UNTIL the last cent is gone in 2015!
This may seem a strange way to start a column but I believe our government has a belief that there will be funding until the last cent is gone and until the last person who has any ability to create value is taxed at a 100% rate, all from present national financial/strategic model revenue. Against all factual data, the latest meme from our strategic direction is that “we aren’t broke!” But the truth is we are broke and we require a new strategic trajectory specifically in creating a new economy.
The promotion and mainstreaming of the idea that the government is a magical piggy bank and all we have to do is put on our ruby slippers, click our heels three times and all of our wishes will come true – we will be showered in OPM (Other People’s Money). It promotes the idea that the sweet, sweet government money originates from a faceless entity called “big government”, not from the sweat, labour and innovation of productive individuals in this country who need enabling government support (not freebies); I find it distasteful.
It all seems the government believes that it doesn’t need to invest in a new economy and that the old economy that has failed over the years to deliver socially sustainable economic outcomes should remain the government’s focus. Maybe, the government is waiting for the economy to collapse for it to start thinking in a radical new fashion. I actually hear the echoes of the loud voice of lobbyists in agriculture, mining and manufacturing on the outcome of the recent past fiscal policy statement. In the end the national budget became a loud sounding nothing, clueless, uninspiring, unimaginative, and retrogressive piece of shoddy job basically crafted by lobbyist from the old economy.
With a GDP which for example is less the size of English Premier League revenue and an economy less than the size of a single company like the Tata group, we surely need new critical new thinking and a new economy to deliver socio-economic justice to the Zimbabwean people. In as much as we can export metal, in a new economy we can actually also export just ideas or just a service.
Zimbabwe is plagued by multiple challenges including alarming levels of deindustrialisation, massive retrenchments, humongous unemployment, the influx of foreign goods, low investment and almost a pariah status in international finance. With these challenges a national strategic plan premised on existing incremental budgetary model with emphasis on agriculture, manufacturing and mining is a wrong path to take.Advertisement
These are not the only industries, because if it were so, how come we are resource-rich but significantly poor three decades after independence. The emphasis on these industries shows lack of competence in imagination. Whilst in 1980 the world made money from breaking backs in agriculture, mining and manufacturing, the same way of the 1980s to make a successful economy may not ring true in 2015.
There are more tools that the country, companies and individuals can use to achieve success than at any time in history and, as an example, the Indian call centre industry has in excess of 400,000 employees, Mauritius is a financial services hegemony and South Korea is leading in the technology industry almost without natural resources. Ideas often outpace resources and this lesson must be learnt by those who craft our national fiscal direction.
It is a folly to believe the lobbyists that drove our recent past national budget outcomes that this country’s competitiveness in agriculture and manufacturing will be restored by protectionist policies; it’s simply not true. The truth is that during the recent past Zimbabwe-dollar casino economic insanity the world moved on to new state of the art cost-effective manufacturing methods, invested in research & development, globalized markets & costs and trained & developed their human capital base much to the detriment of our competitiveness.
The new strategic trajectory requires that the government no longer view itself as this Leviathan that exists to tax existing industries and few employees to the last cent, fix market failures, provide public goods, fund infrastructure and correct industry externalities but instead drive the next big revolution in innovation and germination of new enterprises. The state should expend its energy in enabling and supporting the germination of new generation enterprises and entrepreneurs.
Government should move from the notion that it is only an innovation policy-maker and be a funder of open, collaborative and inclusive innovation. Zimbabwe urgently needs a government funded Innovation Hub to ideate, discover, share knowledge, funnel innovation and commercialize ideas. Conservative financial institutions facing dwindling real cash flows, bad loan books and transitory deposits have no appetite for new ideas to commercialize innovations.
I have doubts if any bank has funded any Greenfield in the past decade. This innovation funding proposal has massive implications beyond innovation. I suggest funding should be sourced from cutting back on public spending through privatisation & outsourcing public services and reduction public service costs. The other implication will be to drive financial policy towards funding of greenfields instead of brownfields.
Most of the existing industries no longer have any value to offer because they have simply reached their strategic ceiling due to lack of new competencies, usage of archaic business models, failure to adapt to social and systemic changes, the tendency to stick to the status quo and rules and a siege mentality. Government cannot be promoting these industries to their level of incompetence. The old industries are the major lobbyists of our recent past budgets, resulting in the regurgitation of the same interventions that have failed in the past and will continue to fail. Protectionist policies are not the only way to revive an ailing economy.
Innovative companies like Apple, Google and Facebook all come from a particular country – the United States of America .This is because the United States (just like India, Mauritius, Seychelles amongst other countries) believe in the constant renewal and development of a new economy. They also believe universities are not centres to memorize old theories but centres to invent and research. Mariana Mazzauto has this to say about Innovation and the United States government:
“If there is a reason not to believe, so just think of some of the smartest revolutionary things that you have in your pocket …, your iPhone. Ask who actually funded the really cool, revolutionary thinking-out-of-the-box things in the iPhone. What actually makes your phone a smartphone, basically, instead of a stupid phone? So the Internet, where you can surf the web anywhere you are in the world; GPS, where you can actually know where you are anywhere in the world; the touchscreen display, which makes it also a really easy-to-use phone for anybody. These are the very smart, revolutionary bits about the iPhone, and they’re all government-funded. And the point is that the Internet was funded by DARPA, U.S. Department of Defense. GPS was funded by the military’s Navistar program. Even Siri was actually funded by DARPA.The touchscreen display was funded by two public grants by the CIA and the NSF to two public university researchers at the University of Delaware.”
Zimbabwe has its unique challenges and competencies to that of the USA therefore its government must create a unique innovation funnel. The government must move beyond regulation, fixing and shaping markets into creation of market processes, products and solutions. Innovation is often expensive, revolutionary, radical and risky and most financial institutions will not dare that devil.
But it’s time the government looks beyond agricultural and infrastructure banks and seed into Innovation, Investment and SME banks that are supportive of new iniatives.In addition the government should consider propagating state owned venture capital firms as well as providing funds to design and implement private equity, angel investors and crowd funding platform for Zimbabwe. The failure to have a structured way to develop the new economy has partly been the cause of stunted economic growth and disabled private-public partnerships.
By investing in innovation hubs and other channels the government will reap rewards through tax on new enterprises and the new jobs will create growth, growth that further widen the base to further tax in a snowballing effect. Countries like Finland, China and Brazil are actually retaining equity in the new ventures propagated by state venture capital funds. Some countries like Rwanda retain equity and dispose the same at a profit. In the end an innovation fund and hub is not social service but a calculated investment proposal that makes a huge impact on the economic health of the country. The benefits to the country are both direct and indirect. It doesn’t mean innovations will not fail; they will and it’s risky but it’s a risk worth taking by none other than the government.
To nip the current uninspiring and retrogressive financial planning model the government must consider progressive planning that ushers in a new economy. Budgets must be lobbyist-free, must balance recurrent with incremental and incremental with radical. This will require adaptation to the new world order, development of new competencies, new strategic innovation models and development of a tradition of entrepreneurship.
Brian Sedze is an author on Innovation, President of Free Enterprise Initiative and Chairman of Africa Innovation Hub. He can be contacted on email@example.com