Is land-based economy Zimbabwe’s best model?

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By Gilbert Muponda

MANY commentators and observers have linked Zimbabwe’s current economic decline to the land reform, and in particular the way it was put on the fast track mode.

Land reform is an often-controversial alteration in the societal arrangements whereby government administers possession and use of land. Economies tend to follow a developmental progression that takes them from a heavy reliance on (Land) agriculture and mining, toward the development of industry (e.g. technology, textiles, shipbuilding, steel) and finally toward a more service-based structure.

The first economy to follow this path in the modern world was the United Kingdom. However, the speed with which other economies have later made the transition to service-based economies, sometimes called post-industrial, has accelerated over time.

Given this background, it may be time for Zimbabwe to pursue a policy that takes into account how other economies are making the transition into a service-driven economy. It is undeniable that land reform was necessary. And all main stakeholders seem to agree on that. But beyond that, the New Zimbabwe needs a modern, well thought-out policy to rapidly develop the nation, taking advantage of its various forms of capital of which land is just one of them.

Whilst land is a critical resource, it cannot be a substitute to other forms of capital that are required to generate wealth and uplift the standards of living. Most of these other forms of capital are equally vital if the land is to be fully exploited to fully benefit all the citizens. The much hoped-for New Zimbabwe needs to generate and mobilise other forms of capital and develop a balanced modern economic model which can compete on a global stage.

It should be noted that there are various nations that do not have much in terms of arable land for agricultural purposes, but this hasn’t stopped these nations from building solid economies. Some have discovered mineral wealth, others turn to textiles, fisheries and yet others do trade. Developing key competences, they have built clear-cut advantages to become trade centres, service centres or specialised in the manufacture of high value goods for exports.

A nation that seeks to become the global leader in a particular industry must attract many of the most qualified talents in that field, to apply and to improve their own particular individual capital to that problem in that country. The underlying assumption is the country has to be attractive to live in and be able to offer a stable and fairly predictable future. This will draw capital into the country. As noted above, land is just one and on its own will not deliver a better standard of living.

There are general five broadly accepted forms of capital. The other sub-divisions fall into these five main categories of capital. The Five Capitals Model of sustainable development were developed by the organisation Forum for the Future. The model groups together: Natural capital, Social capital, Human capital, Manufactured capital and Financial capital.

The model is used to show stocks and flows of resources as they relate to a sustainable society and economy. For a fully functioning economy, all the five forms of capital are required and are also accessible. The presence of one or some of the capital is normally enough to attract the other lacking capital. However, an isolated economy may not be able to attract most of these forms of capital and may not be able to borrow either to make up for any shortfalls.

This is where investor confidence and good governance come in. The lack of this will result in capital flight in terms of financial and human capital (brain drain). This can have a devastating impact on production. Normally, production plummets due to lack of investment and rapid loss of skilled personnel to handle the challenges that immediately follow after financial capital flight.

Economic industrial development is generally widely accepted to fall into three categories. The lower levels indicate lower value addition and more reliance on natural capital. There are four basic sectors which economies tend to follow, namely Primary sector of industry, Secondary sector of industry, Tertiary sector of industry and Quaternary sector of industry.

The quaternary sector of industry is an extension of the Three-sector hypothesis of industrial evolution. It principally concerns the intellectual services: information generation, information sharing, consultation, education and research and development. It is sometimes incorporated into the tertiary sector but many argue that intellectual services are significant enough to warrant a separate sector.

This sector evolves in relatively well developed countries and requires a highly educated workforce. Given Zimbabwe’s relatively strongly educated workforce and well developed education sector, this is an area Zimbabwe could focus on as an anchor for its development plan. Considering Zimbabwe’s non-resident population, many of whom have gained exposure and skills in advanced markets, this presents a New Zimbabwe with critical human capital.

The quaternary sector can be seen as the sector in which companies invest in order to ensure further expansion. Research will be directed into cutting costs, tapping into markets, producing innovative ideas, new production methods and methods of manufacture, amongst others. To many industries, such as the pharmaceutical industry, the sector is the most valuable because it creates future branded products which the company will profit from.

The quinary sector of industry is the sector of industry suggested by some economists as comprising health, education, culture, research, police, fire service, and other government industries not intended to make a profit. These industries are more often included in the tertiary or quaternary sectors. These are areas Zimbabwe has made progress on even though in recent years some of the gains have been reversed. Despite the recent reversal, the infrastructure still remains to allow a New Zimbabwe to be built on the previous gains.

The quinary sector also includes domestic activities such as those performed by stay-at-home parents or homemakers. These activities are not measured by monetary amounts but make a considerable contribution to the economy.

The tertiary sector of industry (also known as the service sector or the service industry) is one of the four main industrial categories of a developed economy, the others being the secondary industry (manufacturing), primary industry (extraction such as mining, agriculture and fishing), and (quaternary) the sharing of information. Services are defined in conventional economic literature as "intangible goods".

Considering how these sectors can drive an economy, it may be time for a New Zimbabwe that focuses on all its capital not on just one form of capital. The pursuit of one form of capital at the expense of anything else usually leads to severe imbalances which can disrupt production cycles, leading to shortages, black markets and inflation.

Gilbert Muponda is a Zimbabwe-born entrepreneur, exiled in Canada. He can be contacted at gilbert@gilbertmuponda.com. See his website: www.gilbertmuponda.com

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