Veteran economist John Robertson says Zimbabwe’s economic problems are as a result of the government’s failure to embrace free enterprise.
Robertson (JR) told Alpha Media Holdings chairman Trevor Ncube (TN) on the platform In Conversation with Trevor that the country’s economic problems are also exacerbated by lack of discipline in the banking sector and the Reserve Bank of Zimbabwe’s failure to play its proper role .
Below are excerpts from the interview.
TN: John MacDonald Robertson, welcome to In Conversation With Trevor.
JR: Thank you very much Trevor, I am very pleased to be here.
TN: John, you and I have known each other for over 35 years.
JR: At the least.
TN: You were from 1978 to 1984, the economist and then the chief economist for First Merchant Bank.
Since 1994 you have been semi-retired, and also from that time you have been managing director of Robertson Economic Consultants?
So John, you have been an economist for a long time, you have seen it all.
Tell me, the season that we are in right now, the economic environment that we are in right now, how does it compare to what you have experienced up to today?
JR: There’s a huge contrast between the past and the present.
Of course, this is not a very popular political subject, because people keep on claiming accusations being made when I make these comparisons.
I think the big difference is in the past the government was very much on the side of business.
I think the government of the more recent decades has been very much to exploit business.
It started in 1980 with the belief that the country could get enormous amounts of aid, and therefore did not need the income from business activities as much as the previous Rhodesian government had needed it.
The Rhodesian governments were very much supportive of everything that was creating wealth, and the new government after independence in Zimbabwe decided that the wealth would come in the form of aid, and they could push the business sector around.
The business sector would become the servant of the government.
I think that ever since we have done that, we have discouraged and demotivated so many of the business people who could have done so much more if they had been inspired by political policies that were supportive of them.
So that is the big difference I believe we have seen since independence.
TN: Do you think that comes from the ideological standpoint?
In 1980 there was the whole talk of socialism, I do not know whether that mindset has changed.
Do you think that is what is colouring the politicians and our political leaders’ view on the economy and the role of business?
JR: Well, it is the socialism feature. This is a belief in the redistribution of wealth. The previous people were in the business of the creation of wealth.
So when you talk about redistribution, it does not take that long before there is not that much left to redistribute.
Even the collapse of the Soviet Union was because of that.
The complete transformation of the nature of the economy in what was communist China, is also because of that.
They no longer refer to themselves as communist China, it is a very authoritarian state, but they are very much in support of ideas that promote innovation and creation of wealth by their own business people.
So there are many billionaires in China now because they are being promoted and looked after.
That is what is helping China to become rich.
It is what could have helped all of Africa to become rich, but there was a belief that we could redistribute wealth from where it is to where we want it.
The redistribution of wealth was always about when we have got it, you have less than what you had before and we have more than we had before.
This is a misinterpretation of the nature of wealth.
Wealth is not the money, wealth is the ability to make the money, and therefore wealth can be summarised as ability.
If you have the ability, you can make more.
So if you teach me how to do something, I have gained knowledge and maybe will be able to increase my own wealth afterwards.
However, you having shared your knowledge with me, you have not reduced your own wealth, you have still got it.
In fact, you might have acquired a new skill of teaching other people. So you have increased your wealth.
It is ability, and we are working towards that idea in most of Africa, I am afraid since independence here (in Zimbabwe), it has been sidelined.
You remember Robert Mugabe starting right at the beginning, “This is to be a Marxist/Leninist economy.”
So the redistribution of wealth was the main purpose of this, and they saw that as the function they had to serve and, therefore, now if you are in the right list of approved people you could get whatever you wanted and it was yours by entitlement because of the political philosophy that went with it.
TN: What is clear to me John, and what we saw happening last week, I will get to the details of that. There is no respect for private enterprise.
TN: The realisation that private enterprise, left alone and empowered can create wealth.
TN: You can then look at how you distribute it vis-a-viz taxes and that kind of stuff.
JR: That’s right.
TN: The priority ought to be to allow private enterprise, private initiative, creativity, innovation reside in the private sector. Not within the government, because the government’s role is supposed to be to create the enabling environment.
TN: We are not seeing that enabling environment.
TN: Is that the right way of looking at it?
JR: That is absolutely right there. The government should be facilitating what the business sector can do.
In this country we see the government wanting to take control. You can see it now in the mining sector, trying to start very big mining enterprises that will become government-owned.
The capital being subscribed to build this also comes from government.
Now if the government wants to be in control, and I am afraid governments all over the world, not just unique to this country, are not very good at doing this.
TN: They are terrible at running businesses.
JR: Well, there is the evidence that I would like to see, make decisions for the future. Let the business sector get on with it.
Let the people who can take initiative take those initiatives and get on with the job.
Governments, however, are simply saying everybody can do everything so whoever they give those jobs to they will be just as good as anybody else.
Well, there are massive difference between the exceptionally talented people and the rest of us, hahahahaha.
So find those talented people, get them to do the job.
Allow them the headroom they need to grow as big as they know how to grow.
We should not be putting limits on people.
This is one of the things they did in this country, when they said look at all these very successful farmers, we must limit them and from now on farms must be much smaller and they were not allowed to have more than one farm and all these constraints so that hundreds of thousands of people can all be farmers. Well, ever since we did that we have been importing food. This has been a very costly mistake which has not been fixed, we still have it.
TN: John last week we saw the arresting of business people. (Former Finance minister) Simba Makoni being one of them.
Bringing back the element of the state performing a command and control role within society, an anti-market stance which is open to arbitrage, abuse and corruption.
This reminds me of 10 years ago, we saw the same thing.
JR: We did.
TN: When we saw Makro being raided by people after the intervention of government.
Is it fair to say as we sit here with these measures, that there are going to be a lot of businessmen that are concerned by what is happening here?
So instead of businessmen, private enterprise, investing and creating wealth they are running around in concern.
One, the many statutory laws that are coming in place, and secondly, being arrested for simply doing what you are supposed to be doing. What is your sense of that?
JR: Well, this is a huge subject, but you are really looking at market forces being very powerful.
There is no government on earth that is more powerful than market forces.
So you can come up with legislation, but you are not going to displace the market forces that are driving the conduct and behaviour.
The market forces they have unleashed in this country are very destructive, but they come from a lack of discipline in the banking sector in particular, but in the central bank as the prime mover of the policies of banking.
The Reserve Bank is supposed to be the holder of the foreign reserves, that is why the name “reserve bank” is there.
The reserves that come into the country from our export earnings should go to the Reserve Bank.
The money that comes into the country from anywhere else, pensions or whatever payments, dividends, should also go the Reserve Bank.
The Reserve Bank should have a local currency that is so well respected that everybody is happy to accept it in exchange for the foreign currency.
However, the exchange for the foreign currency is at a rate, which is known, and when you want foreign currency you pay the same rate to buy it back from the Reserve Bank to pay for your imports.
Now this is what has broken down.
We used to have that.
Of course when you say something like we used to have that, you raise the heckles of the politicians, saying there is pointing out something of the Rhodesian days, or something that they cannot relate to.
The fact is, there is a right way of doing things and a wrong way of doing things, and we are doing it wrong now and we have caused the market forces now to generate conditions that are now the arbitrage you have mentioned, and the profits from arbitrage, when you can buy money at an official rate, and then you can sell that money at a higher rate, one is making far more money than you would ever make than if you were running a shoe factory or a furniture factory.
You are making that money instantly. In a factory if you are making 20%-30% in a year you are happy, and here you have made 90% in a day!
Of course people are going to take up the opportunity to make their money that way if they can.
TN: It is an easy way of making money, but it does not create wealth.
JR: It does not create any wealth at all. It is also tax free, because one is not going to admit to doing it as they might be arrested if they do.
- “In Conversation With Trevor” is a weekly show broadcast on YouTube.com//InConversationWithTrevor. Please get your free YouTube subscription to this channel. The conversations are sponsored by Nyaradzo Group.