A country with no plan, pt. 3

Wed, Apr 30th 2014, 10:40 AM

I cannot, with any degree of honesty, call myself a supporter of Robert Mugabe, but there is one quote attributed to him from a recent interview with BBC World News which resonates within me. And though I find his style of leadership questionable, I cannot deny that I am in full agreement with his thinking when he declared to his people that "...never, never again shall we make the mistake of allowing our resources - natural resources - to be owned by foreigners. Never."
I am of the opinion that foreign direct investment (FDI) should never include the giveaway or sale of natural resources, be it acres of land or miles of beaches and waterfront. A sovereign country should always be able to negotiate terms of investment from a position of strength, upholding its sovereignty, such that the very land it is presiding over remains in the ownership of the citizens, guarded on their behalf by their government.
The injection of capital in the form of FDI, in the way we have welcomed it, may serve well as a last resort to boost economic activity, but as a long-term growth model it is worrisome. We have come to think of FDI as the great deliverer, but this neglects to consider the necessity of direct domestic investment and moves the prospect of property ownership further beyond the reach of the common man. A modified approach to FDI where domestic investment is the lead part of FDI should be the norm, particularly in a small country.
This norm and modified approach to FDI should also limit the percentage of ownership of foreign investors in domestic investment partnerships to a capped amount of 49 percent with the remaining 51 percent held by the citizens of the host country as private shareholders, and not held in trust with a government where it does nothing to create new wealth and continuing prosperity for the people.
As is the case at present, a government could choose to have as much FDI as it likes with many capital injections and it will give the perception that the economy is robust, but the real story lies in the domestic sector and with domestic investment. If you want to know how well the economy is doing, ask first how large the domestic investment sector is.
How vibrant is it? How much is it growing? What is it comprised of? What percentage of small businesses in the domestic sector account for overall economic activity? What is the ratio of domestic investment opportunities to FDI opportunities? What percentage of the labor force is employed in the small business/domestic sector as opposed to being laborers in a byproduct of FDI?
And, finally, to get a better idea of long term growth potential, you should also ask how many businesses in the domestic sector really do innovate and are not merely international franchises, resellers or reproducers. You should then seek to bring partners who facilitate the development needs of the domestic sector, not the other way around.
Small business and real growth
The reason small business is the 'lifeblood of the economy' is because it relies on innovation, but a search through the local yellow pages and the news dailies is disheartening in this regard. A primarily copycat economy exists in our nation when there is great potential for invention. With the existing imitator blueprint, sustainable growth will be hard to come by. There cannot be sustainable growth until the people prepare themselves to have ownership of original ideas, instead of just employment in duplicates, and until they are creating and innovating as opposed to replicating.
Our country's net exports in services yield a surplus. Our net exports in goods yield a deficit. We have more services than products to offer the world. Certainly services are an important part of an economy. But what about the other part?
We go to work every day, but what are we producing? A tourist has a great vacation. An offshore investor makes more money. But in this environment how does our daily labor make our lives better? Really, how productive are we in these industries? And how do we quench our thirst for expensive imports when we do little to innovate?
At the end of the day, we still lack infrastructure; we have very little along the lines of finished manufacturing and agriculture, and FDIs leave the same way they came. If these business ventures were more than FDIs, if they were joint ventures with all the consumers in the national economy, we might have more to show for them.
Some argue that we can't be a producing economy in the traditional sense, that our services will always be greater than our goods, but we have many natural resources and we have them in abundance. If our people were trained throughout life to be innovative and not reliant we could have a stronger and burgeoning domestic business sector and a more resilient economy with more to trade than just 'heads in beds' and stock portfolios which consist of assets we can't even purchase.
As it stands, we are too heavily reliant on people wanting to visit us and on them spending more money here, constantly trying to find ways for them to empty their pockets when our productivity could be speaking for itself in a number of other ways.
There are very many local businesses that provide necessary products and services. Of course we will always need groceries and healthcare and other such necessities, but we have to think beyond the necessary. How do we make the necessary better, more effective and more efficient? That is innovation.
If you sell something already, perhaps you can learn how to make your own version of it or make it better. Keep your business idea as simple as possible and in this manner make it more achievable. Let it grow organically and tend carefully to it as it grows; don't sit and wait for handouts from visitors. Initiate. Innovate.
A laissez-faire society hinders progress
Inviting tourists to the country and then hoping they will buy something expensive or a lot of something not too expensive is like drawing straws for a prize. It sounds great in theory - a relatively easy win. But what happens when we all get bored with that game? What is our backup when tourists and investors don't come our way any longer, or when they don't spend any more, or when our people no longer want to be only servants in any industry?
We are a people who hasten to fall back on "God will provide". Perhaps for us the spirit of innovation is not instinctive, and maybe that's why we go nowhere faster. Our motivation to assert ourselves and produce great things like we've never done before is pre-disabled.
It's all well and good to dress up every day and prance around preaching prosperity to others, saying a higher power will provide, but what are we doing to help that power along?
If you were the highest level executive, would you provide to a well-dressed, able-bodied beggar who plainly does not help himself? Probably not, because that would be productive for neither one of you.
Gross Domestic Product (GDP) is a measure of what we produce, how industrious we are, but the deceitful thing about GDP is that it includes output by foreign firms who repatriate their earnings to their own or other countries. So, when we calculate GDP per capita, what are we truly measuring?
Because of foreign investment and foreign banking, we've had the highest GDP per capita in the region for decades and, because of tourism, we've had adequate foreign currency reserves to support our fixed dollar value, yet our people are still poor. That GDP per capita and those foreign currency reserves suggest that we are either over-producing, which is clear we are not, or that this kind of great wealth is spread amongst everyone, which is clear it is not, or that it is held by a small few, which is most likely. And the few holding this wealth will use it to modernize their lifestyles and possessions, because who knows when they'll get to hold it again. Consequently, is economic growth through foreign direct investment, foreign banking and tourism really just an illusion in an otherwise non-producing society?
o Nicole Burrows is an academically trained economist and a self-trained writer. She writes primarily on the economy and society, and her interests include economic growth and development and contemporary women's issues: nicole.burrows@outlook.com.

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