Pathway to Prosperity Zimbabwe Case Study Part II: Open Economies
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GLOBAL INDEX OF PROSPERITY INDEX ECONOMIC OPENNESS Pathway to Prosperity Zimbabwe Case Study Part II: Open Economies 2021 CREATING THE PATHWAYS FROM POVERTY TO PROSPERITY ABOUT THE LEGATUM INSTITUTE The Legatum Institute is a London-based think-tank with a bold vision to create a global movement of people committed to creating the pathways from poverty to prosperity and the transformation of society. We seek to do this by raising up leaders of character, restoring an ethical vitality to all sectors of society, and developing the practical solutions and data tools that will help build inclusive and peaceful societies with open economies and empowered people. • Our Centre for Metrics creates indexes and datasets to measure and explain how poverty and prosperity are changing. • Our Research Programmes analyse the many complex drivers of poverty and prosperity at the local, national and global level. • Our Practical Programmes identify the actions required to enable transformational change. ABOUT THE AUTHORS Dr. Stephen Brien is Director of Policy at the Legatum Institute. Preksha Dugar is a Research Analyst at the Legatum Institute. Daniel Herring is a Senior Analyst at the Legatum Institute. Ed King is a Research Analyst at the Legatum Institute. Carlos Montes is a Fellow at the Legatum Institute. Alistair Morrison is a Fellow at the Legatum Institute. The authors would also like to thank Ernest Moyo and Rebecca Mwabvu, both of the Higher Life Foundation, for their contribution to this work. The views expressed in this report are those of the Legatum Institute and do not necessarily reflect those of HLF. ACKNOWLEDGEMENTS A diverse range of experts were engaged in this work. This broad collaboration enabled a comprehensive range of views which the Legatum Institute captured and synthesised. The views expressed in this report, therefore, are those of the Legatum Institute and do not necessarily reflect the individual views of these advisors. The Legatum Institute would like to thank the following advisors who helped with the report: Victor Bhoroma (Economic analyst), Tafadzwa Chikumbu (Transparency International Zimbabwe), Admos Chimhowu (University of Manchester), Wellington Chimwaradze (Unilever), Innocent Chirisa (University of Zimbabwe), Ben Freeth (Mike Campbell Foundation), Evelyn Garwe (Zimbabwean Council of Higher Education), Keith Jefferis (International Growth Centre), Talent Jumo (Katswe Sistahood Foundation), Susan Kaksukunya (DHL Zimbabwe), Godfrey Kanyenze (Labour and Economic Development Research Institute), Gibbs Kanyongo (Duquesne University, Pittsburgh), R. Mukami Kariuki (Country Manager, The World Bank Group), Tendai Jeremiah Malunga (Bureau Veritas), Portia Manangazira (Ministry of Health and Social Care), Jeanette Manjengwa (University of Zimbabwe), Godfrey Maringira (University of Edinburgh), Abedinigo Marufu (Zimbabwe Forestry Commission), Abraham Matamanda (University of the Free State), Vakai Matutu (National Aids Council), Alexander Maune (UNISA), Evan Mawarire (ThisFlag Citizen’s Movement), Grasian Mkodzongi (University of Cape Town), Jeffrey Moyo (Thomson Reuters Foundation), Bhekinkosi Moyo (Wits University), Chipo Mubaya (Future Africa), Davison Muchadenyika (The World Bank Group), Deprose Muchena (Amnesty International), Rashweat Mukundu (Africa Adviser at International Media), Tichaona Mushayandebvu (UNIDO), Daniel Mususa (Biomedical Research and Training Institute), Patience Mutopo (Chinhoyi University of Technology), Mutanana Ngonidzashe (Zimbabwe Open University), Memory Nguwi (Industrial Psychology Consultants), Walter Odero (AfDB Country Economist), Robin Palmer (Mokoro), Brian Raftopoulos (Solidarity Peace Trust), Craig Richardson (Winston-Salem State University), Paidamoyo Saurombe (Zimbabwe Lawyers for Human Rights), Beatrice Schlee (Freiburg University), Ian Scoones (Institute of Development Studies), Edward Shizha (Wilfrid Laurier University), Sibangani Shumba (Save the Children), Mark Simpson (Institute of Commonwealth Studies, School of Advanced Study), Joram Tarusarira (University of Groningen), Jee-A van der Linde (NKC African Economics), Chikwature Whatmore (Mutare Polytechnic), Simon Wittich (World Vision), Janet Zhou (ZIMCODD) The Legatum Institute would particularly like to thank the team at the SIVIO Institute who provided invaluable support and advice throughout the research and drafting process. The Legatum Institute would like to thank the Legatum Foundation for their sponsorship. Learn more about the Legatum Foundation at www.lega- tum.org. ©2021 The Legatum Institute Foundation. All rights reserved. The word ‘Legatum’ and the Legatum charioteer logo are the subjects of trade mark registrations of Legatum Limited. Whilst every care has been taken in the preparation of this report, no responsibility can be taken for any error or omission contained herein. The Legatum Institute is the working name of the Legatum Institute Foundation, a registered charity (number 1140719), and a company limited by guarantee and incorporated in England and Wales (company number 7430903) Cover image: Shutterstock.comm CONTENTS Executive summary ................................................................................................................. 3 Introduction ............................................................................................................................33 Economic Quality .................................................................................................................. 41 Investment Environment .....................................................................................................65 Infrastructure and Market Access ......................................................................................89 Enterprise Conditions ..........................................................................................................115 Conclusion ............................................................................................................................135 Appendix ...............................................................................................................................138 | 1 2 | Credit (istockphoto.com) EXECUTIVE SUMMARY Zimbabwe has a history, natural resources, wealth, and the resourcefulness of its people that mean it is uniquely positioned to become one of the most prosperous countries in Africa. The key to doing so is to unlock the potential in the highly educated population and the rich resources of its lands in terms of the already demonstrated capacity for agriculture and mining. The nation’s prosperity can be driven by an open economy that harnesses ideas and talents to create sustainable pathways out of poverty. Specifically, this will involve a state that acts as an effective enabler of economic growth and ultimate guarantor of the rights of citizens and investors; a dynamic and investment-friendly country open for international business and trade. With a more open economy, sustained economic growth can over the coming decades take Zimbabwe on a path to a solid upper middle-income status, such as Peru today, or even Costa Rica or Malaysia. This report on Zimbabwe is part of a series of case studies examining the links between a nation’s economic openness and prosperity. Its goal is to provide a detailed assessment of economic structures and policies in Zimbabwe, following the structure of the Open Economies domain of the Legatum Prosperity IndexTM. The report also identifies the binding constraints to future economic development, as well as the type of actions needed to put Zimbabwe on the road to prosperity, with the ambition of achieving global-median prosperity by 2050 – while recognising that most of these individual improvements are possible only as part of a credible comprehensive reform programme. The Open Economies domain captures the extent to which an economy is open to competition, encourages innovation and investment, promotes business and trade, and facilitates inclusive growth. Prosperity is driven by an open economy that harnesses ideas and talent to create sustainable pathways out of poverty. In an open economy: • Property rights are protected, so investment can flow. • Business regulation enables entrepreneurship, competition, and innovation. • Open markets and high-quality infrastructure support trade and commerce. • Fiscal and monetary policy are used responsibly to foster employment, productivity, and sustained economic growth. Areas within this domain range from the strength of property rights and investor protections, the nature of business and labour regulations, the quality of the infrastructure that enables trade (communications, transport, and resources), and the inhibitors on the flow of goods and services between businesses. It also considers how sustainable the economic environment is and how well it is equipped to generate wealth and enhance productivity. | 3 ECONOMIC QUALITY (AFRICAN RANK 35TH) Zimbabwe currently ranks 35th for Economic Quality, having deteriorated significantly since the middle of the decade. On virtually any measure Zimbabwe’s economy ranks poorly relative to other African countries – 38th for fiscal sustainability, 53rd for macroeconomic stability, 40th for dynamism and 28th for productivity and competitiveness. The potential for a prosperous Zimbabwe is to have macroeconomic policy that delivers price stability, with easy access to foreign exchange. Fiscal deficits, monetary growth and interest rates would also be low, allowing