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How to rebuild a collapsed economy and become competitive again
Greg Mills, Business Report
April 24, 2009

http://www.busrep.co.za/index.php?fArticleId=4949537&fSectionId=2880&fSetId=662

What might a road map to a more competitive Zimbabwe look like? There is little use focusing on those reforms that are easy, since they will likely deliver less. A successful Zimbabwe competitiveness recipe would need to prioritize action on six key tenets:

Tax reform

The challenges of widening Zimbabwe's tax base and income, increasing formal employment and attracting investors all have one common solution - tax reform. That basically requires a simplified tax administration, fewer tax categories and low, flat tax rates. Eliminating taxes on savings, capital gains, and dividend and interest income would encourage liquidity and investment.

Trade and tourism access

Zimbabwe is not able to compete by using its human capital advantage without opening up access - to both trade and people. The costs of trade are not just about tariffs, but also the costs of delays of goods at the border and the paperwork involved.

An ambitious, forward-looking agenda would quickly remove all import and export quotas and tariffs. (After all, what remaining industry is Zimbabwe seeking to protect?)

It would also dramatically simplify import and export procedures, so that it would never take longer than 10 days to import or export an item.

Worthwhile tourism should similarly be boosted by scrapping visas for all countries with a per capita annual income of more than US$10 000 (R89 750).

Food security and diversity

Current schemes focus largely on short-term donor financing of inputs, notably seed and fertiliser. This is both economically and socially costly, not least because it removes personal incentives and competes with private business. The government should back private sector-led extension services: first in communal land and later on so-called "purchase" (smallholding) land. This would enable Zimbabwe to quickly achieve food self-sufficiency and security and reduce reliance on donors.

Such private sector-led schemes have been successful elsewhere in southern Africa , notably Mozambique.

Public service reform and deregulation

The objectives of a reform package should be to streamline and enhance the quality of public services, thereby reducing the burden on the already weak government (and overburdened people) by reducing regulations, licences and permits.

This would also decrease the opportunities for corruption. A new licensing law should cut back drastically on bureaucratic procedures, creating a "single window" for applications; and accelerate processing by adopting the "silence is consent" principle - meaning that if officials do not respond to an application within a specified period, that will be taken as approval for the application.

Empowering labour

The aim of legislation should be to encourage new entrants into the formal labour market. This has all sorts of advantages, political and economic, from increasing the size of the decimated middle class to boosting bankability. Since wages and formal employment levels have declined so markedly, there should be no minimum wage, a la Singapore and Georgia. This would also offer a competitive advantage in attracting investment into labour intensive industries relative to neighbouring countries, notably South Africa.

Monetary policy and sound banking

Currency value is one way to ensure greater competitiveness. Dollarisation has brought an end to hyperinflation but has led to a crisis of liquidity. So credit lines must somehow be opened up immediately. Then the government must try to switch from dollarisation to "randisation" of the economy, because of the greater availability of rands.

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