By Prof Mthuli Ncube
We published the following article 3 days ago on the 4th of September. Today Prof Mthuli Ncube has been announced as the new Minister of Finance and Economic Development for Zimbabwe and thus we think it is important to republish this article.
This is how the man tasked with the very difficult job of turning around Zimbabwe’ economy thinks. We like the emphasis on entrepreneurship and unlocking investment for startups. Good Luck Honourable Minister…
Zimbabwe is on the brink of a new era of innovation and economic activity. Our government’s greatest task will be to promote small and medium-sized enterprises and to unlock the creativity and productivity of the population. This will require specific policy decisions supportive of entrepreneurship and business development.
In a credit constrained environment such as Zimbabwe, it is not easy for businesses to secure “patient capital” such as equity finance. On the contrary, banks are only able to supply debt capital in the form of short-term overdraft facilities, which require collateral. Collateral may not be easy to present. One can not successfully re-equip businesses and start new business ventures in Zimbabwe on the back of short-term overdraft facilities. Even worse, enterprising youth with brilliant ideas do not have easy access to such bank finance as they lack the necessary collateral and a credit record.
We need to develop sources of equity funding, real “patient capital”. This could be done by creating a National Venture Capital Fund. The Fund could be set up with equity contributions from domestic banks, insurance and pension funds, and international development institutions such as FMO(Dutch), KfW (Germany), among others. The Zimbabwe Government will be an orchestrator and retain a minor equity position so as to contribute to investment policy and remove bottlenecks. In essence, the Fund would be a form of public-private-partnership (PPP).
A National Venture Capital Fund could be designed so that it could take equity in businesses and support them in their business development, such as helping the industry to acquire new equipment. For example, for those businesses that are exporting, the Fund could partner with trade finance institutions such as Trade and Development Bank (former PTA bank), Afreximbank and African Development Bank. These institutions offer trade finance facilities and would be excellent equity partners. Jobs creation can then begin to happen again in the industry sector, as companies seek to expand and export.
In its asset allocation, the Fund could also target the Youth. In fact, 30% of the portfolio of the Fund, as an example, could target businesses being driven by the Youth, in order obviate the need for collateral for access to finance. As part of the Youth entrepreneurship support objective, the Fund could also spearhead the creation of a “Entrepreneurship Ecosystem”. When I was Dean of Wits Business School, Wits University, I created a Centre of Entrepreneurship for training youth on entrepreneurships skills, for providing a mentorship program from experienced and retired entrepreneurs, access to an angel-investor network, and access to incubation services. Basically, a young entrepreneur would receive training up to the point of completing a business plan, then they would be sent to an incubator where they have access to capital from the Fund and banks, and access to angel investors, and mentorship. In South Africa, I also partnered with municipalities, who then gave the young entrepreneurs business procurement opportunities in order to help kick-start these businesses. One of the universities such as University of Zimbabwe or NUST could set up a Centre of Entrepreneurship, which will also deepen capacity within the academic institution, which will then offer the necessary training certificate for the Youth. Incubation services and mentorship programs would be created for “entrepreneurship ecosystem”.
There are many policies that Government can pursue to support the development of small and medium-sized businesses in Zimbabwe, which in turn support the creativity of the Youth and the population at large through job creation and entrepreneurship.
Professor Mthuli Ncube is a financial, economics, investment, and public policy expert. He has vast experience and worked in the private sector, public sector, academia, and international financial institutions. He is the Former Vice President and Chief Economist, African Development Bank Prof Ncube is a Board Member of the Official Monetary and Financial Institutions Forum (OMFIF) based in London, and with offices in US and Asia. OMFIF provides support and advisory services to Central Banks around the world and pension funds and other investors on monetary policy, macro-policy, investments and financial markets. He is a citizen of Zimbabwe.
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7 comments
I agree with Prof Mthuli Ncube on his proposal here. We need his contribution to the economy. I would join him in creating this environment.
Yah if only we Zimbabweans acknowledge the entrepreneurship ecosystem being mentioned there, then businesses and jobs could sprout. Our problem as Zimbabwean is that, from top to bottom class citizens we have become more corrupt and selfish. We believe in benefiting at every opportunity that presents itself.
kikiki He is Zimbabwean sounds like He is so good he can’t be Zimbabwean. Its a good article, however ,I think much of what he writes we already have or had in the country well probably not in the exact manner, but in bits and pieces, for instant the Old Mutual Youth fund that just went nowhere, then the numerous agricultural funds from Gono’s era ;Baccosi to ED with the Command xxx and the tobbacco contract farming companies more or less prodive collateral free loans. Business mentoring is a cultural norm you cannot just work up and institute it, starts from the family and a willing heart look at the Indians, the white community etc, most accounting firms have mentorship programmes , I have at least 4 CA friends who have left the country. Why? point is Zimbabweans have been culturally and nationally conditioned to search for jobs , mentoring is fantastic but it has to start with the government pushing its institutions to set up businesses. I don’t mean to waterdown the Prof’s article I like the fact that for the first time we have a young minister of finance one who can relate with the majority of Zimbabweans ,there is a reason he was in South Africa implementing those ideas. The fact is in Zimbabwe we need a change of approach by our Leaders understanding that the country is sick we cannot be buying Prados or Benz if an ex jap that costs $5000 why not use that penalise those who what a $200K vehicle in a struggling economy, relooking the points on which our Zimbabwean money money is going out and never coming back ( Why is it our ministers kids learn in the UK and the USA @ $60000 tuition fee per annum) when we have NUST & MSU @$2000) more like agreeing on being professionals, if you are a CEO be there for (4-5 years stay if your own the company one that you created from start not one you bought) , not using political association to get favours and to undermine authority, ZESA employees to pay for electricity, to understand that what benefits the least privileged ultimately benefits the nation as a whole. The Minister must work on like really really work on removing red tape or bureaucracy that are alone might grease the wheels of economic progress.
Same old talk but no action… Corruption corruption corruption… Party impunity… First thing he did was pay the chiefs with cars… Was that budgeted… There’s no flour but hey at least done one got a new car
The fact is in Zimbabwe we need a change of approach by our Leaders understanding that the country is sick we cannot be buying Prados or Benz if an ex jap that costs $5000 why not use that penalise those who what a $200K vehicle in a struggling economy.
The policy thrust should be on corrective measures to address market imperfections. The ZW economy is beset by serious imperfections that have made the informal sector more attractive and rewarding. Since the decline of the industry, more and more ZW have found livelihood through engaging in unregulated business activities such as vending, gold panning, etc. As a result, most university graduates who have shunned the informal sector find themselves unemployed for many years and remain dependent on parents. Notably, the system has killed the motivation to learn among the majority of youth. Current efforts by the local authorities to rid the streets of vendors is a welcome development that will help restore sanity. Let us all join hands in eradicating corruption and the black market, in particular forex dealers. This will undoubtedly usher a conducive environment for business.
Zimbawa is a poor country and zimbawa people wants change and want to strong their economical postion and this is the great effort from the government of zimbawa. they create oppertunity for small enterprenure. this happy new year 2019 will bring lots of oppertunity for zimbawa people and their economy.