The Sunday News
Thuso Maphala Economic Focus
URBAN local government entities in Zimbabwe are mandated to search for and woo investments into their areas by provisions in the Urban Councils Act but failure to do so is not an offence. Each urban council must therefore necessarily have its own economic development strategy or blueprint.
By economic development strategy, I mean “a general outlook on the nature of economic growth and the proper role of the local governmental entity in encouraging growth”. The assumption is that while urban management has an inherent regulatory function, more emphasis should be that of a developmental role under the ever imminent threat of globalisation.
This discussion proposes three tested investment attraction strategies which may be chosen individually or in various combinations by any urban local authority in search of local economic growth. The role of the state/local authority is also highlighted vis-a-vis the strategy adopted.
Local economic growth enhances employment creation, boosts council revenue inflows and promotes funding of service delivery.
A common strategy in Zimbabwe has always been informed by lowering production factor inputs to lure potential investors such as incentivising provision of land through reducing prices or deferred payment, free water for so many months and discounted taxes on acquisition of commercial/industrial land to be developed. This is a “supply-side” culture that encourages relocation and expansion of existing industries.
An evaluation would prove that this tactic has not been very effective in luring much needed investment to our towns and cities.
Elsewhere in the developed world, three strategies that have emerged to become popular because of their effectiveness are: entrepreneurial, industrial recruitment and deregulation strategies. The entrepreneurial approach also called “market shaping”, “high tech” or simply “activist” is designed around a “demand side model” that emphasises the creation of new enterprises, technology and markets.
This strategy seeks to achieve qualitative growth through the promotion of high-value added production. The role of state/local government in this approach is to adopt entrepreneurial functions by facilitating the launch of new enterprises, creating new technology and products and developing new markets for these products. This is a “demand side or export approach” where the state/local government takes external demand as an exogenous factor and focuses on spurring new enterprises and production to meet that demand. It may also seek to earn foreign currency to enhance local finances.
The industrial recruitment strategy promotes locational incentives of existing industries by lowering production factor costs. The approach assumes that local economic growth is a “supply-side” process which necessarily responds to changes in input factor costs whose aim is quantitative growth resulting in creation of new jobs through favourable business climates.
Policy tactics applied here are non-discretionary tax and financial incentives to bolster private investment on the assumption that public subsidies on capital and operating costs of private industry will generate sufficient growth to offset these expenditures.
The deregulation strategy takes a more relaxed interface with the state assuming that the best economic development technique is to minimise governmental involvement (regulation).
The role of the state is limited to providing the legal framework and a social environment for private economic activity. Local government is therefore expected to adopt a visible and coherent strategy through a tendency towards a set of common policy tools and targets. Multiple strategies sharing common assumptions about the nature of local economic growth and a clear role of local government may be combined to optimise policy effectiveness.
What then informs the choice of any strategy at the local level? Firstly, the national macro-economic policy must provide for the adoption of creative local level economic policy choices by supporting local government economic growth initiatives and where possible, galvanising innovative attempts towards fundamental changes at the local level. It should promote local economic growth through fiscal decentralisation (special purpose development grants, low interest rate loans and revenue sharing) and equalisation where growth has been depressed over the years.
The second factor is taking cognisance of regional disparities in natural resource endowments so as to focus on boosting the comparative advantage that each urban centre enjoys.
For example, local economic policy tools for urban centres like Mutare may hinge on enhancing their natural touristic endowments such as (the priceless scenic environment, abundant human capital, a culture of hospitality and attractive weather all year round); locational advantage as a border town (hotels, banking, food and transport service sectors, warehousing and logistical support to the export sector) and the plentiful but non-renewable varieties of valuable and harvestable rare forests and wildlife resources.
The third factor is the economic history of each urban centre. Each urban centre has experienced some form of economic development over time since the colonial and post-independence era. The gradual demise of the economic sector in our urban centres has been influenced by many forces; including economic sanctions, under capitalisation, dwindling markets, competition from other countries with lower input factor costs and technological obsolescence. Innovative local economic development polices may seek to resolve these shortcomings through a regime of policy combinations such as mixing elements of the entrepreneurial, industrial recruitment and deregulation policy tools to address current economic performance gaps towards an achievable future vision state.
Most urban centres have their own natural resource endowments upon which innovative combinations of the entrepreneurial, industrial recruitment and deregulation strategies may be crafted and effectively employed as local economic development tools. An urban centre does not need to solely rely on any individual approach but may experiment with small policy doses of each approach in line with the macro-economic policy, its natural endowments, industrial and commercial background and the comparative advantage it singularly enjoys, giving it comparative advantage over others.
The Author
Thuso Maphala is a Zimbabwean with a Master of Management degree in Public and Development Management from the University of the Witwatersrand, a post-graduate Diploma in Urban Development and Project Planning from the University of Erasmus (IHS) in the Netherlands. He is a Unisa PhD candidate in Public Administration and is currently employed as a management development consultant at the Zimbabwe Institute of Public Administration and Management. He has substantial urban management and training experience gained locally and abroad. He is a former director of Housing and Community Services at the Municipality of Gwanda and is a former freedom fighter who retired from the Zimbabwe National Army as a Captain in 1992. ([email protected])
