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Digitalisation implications on macro-economic stability: Moving from cliché to government action- (2)

Continued from Part (1)

Turning to the meaning of macro-economic stability from the government priorities, this entails the stability of prices: A low inflation of under 10% per annum is considered as the benchmark.  Also, the exchange rate must be stable, characterized by parallel market premiums -the percentage difference between parallel and official exchange rates- not exceeding 25%.  As for the national output (GDP), the governments should target stable, inclusive, and sustainable GDP growth. This will be key in minimizing unemployment, stabilizing the balance of payments, equitable distribution of income, care for the environment, increasing productivity, and the realization of sound structure of public finances.

Digitalisation could enable the government to meet its economic ambitions as set out in the National Development Strategy (NDS1) (2021-2025) and help in the realization of Vision 2030. Below is a list of examples of some key areas where positive implications could be immediately felt and cascade to societal levels.

  1. Modernization of Agriculture and Agro-Industries

According to the Food and Agriculture Organization (FAO), the agricultural sector is a vital sector of the Zimbabwean economy. Currently, it is providing employment and income for 60-70% of the population, supplying 60% of the raw materials required by the industrial sector, contributing about 30% to export earnings and approximately 20% to GDP. In entire Sub-Saharan Africa (SSA), the food system is projected to add more jobs than the rest of the economy between 2010 and 2025.

Farm labour and income is important especially in Zimbabwe where on-farm activities represent almost 70% of all rural income. Hence, harnessing new farming technologies will transform this sector for the good of the economy. For instance, there are now mobile and web technologies for agriculture where farmers can get advice, weather information, and financial tips at a click of a button. Technology is used in soil data analysis to help farmers in applying an optimum amount of fertilizer or irrigation water. Further, information on competitive pricing, monitored crop information, disease prevention tips and disaster mitigation support can transform Agric to improve incomes, production, and demand.

In the new world of changing climatic conditions, farmers can utilize data-driven precision farming technologies for productivity optimization and waste reduction. Zimbabwe is struggling with frequent El-Nino-induced droughts which are affecting crop yield leading to food insecurity. For instance, in 2019 and 2020, the country harvested less than half of its annual maize staple requirement of 2million tonnes. The country’s agriculture is heavily dependent on rains as it has only 10% of irrigable land. It is high time now for the country, through the fiscal budgets, to embrace Digital Revolution such as cloud seeding and hydroponics.  While the Agric sector has been receiving one of the highest budget votes over the years, little has been spent in revitalizing Agric technologies. As such, the persistent food insecurity piles pressure on the fiscus as the country will be forced to borrow to import food and this has destabilizing effects on the economy.

  1. Employment, Skills & Production

According to the International Labour Organization (ILO), about 60% of youth in Sub-Saharan Africa are unemployed. Statistics also show that the youth have the highest unemployment rate among the age groups in the labour force in Zimbabwe notwithstanding that the youth constitutes about 67% of the total population. The youths are considered as one of the most critical resources a country can have to elevate its socio-economic development. However, due to high unemployment, the youth are now indulging in regressive activities like substance abuse, early marriages, and participation in political violence.

To harness the potential of the youth, there is a need for government to facilitate technology penetration and use since the youths are generally considered as the most technology fascinated group. Investing in critical digital infrastructure and skills for innovation and technology use will become a catalyst for employment creation and an engine for economic growth. For instance, Digital Revolution is creating new roles like search engine optimization managers. It is also resulting in the creation of new types of organizations like cloud computing providers as well as new sectors of the economy like digital security and data science.

All these results in new cost-effective ways of production that will transform the Zimbabwe industry which still relies on old technologies. This is causing the industrial production costs to be too high thereby rendering domestic firms uncompetitive regionally. Also, citizens are being affected by the high prices of goods and services. However, at an average of 0.2% of total 2022 budget, government spending on the youth remains too low. The rising inflation is making technology expensive for the unemployed youths.

  1. Financial Services and Investment

Increased financial services from the Digital Revolution impact economic growth through inclusive financing for women, youth, rural, urban populations, and other vulnerable groups no matter where they are located. This is enabling the unbanked populations to enter formality through retail electronic payment platforms. Elsewhere the digital revolution is enabling entrepreneurs and businesses to rethink business models that are more impactful, sustainable, and connected to the other sectors of the economy. This transforms product designs and business models including the Government migrating to online platforms to efficiently and effectively provide direly needed public services to all corners of the country as it eliminates the barriers being caused by physical distance.

  1. Fighting Inequality

Spreading access to technology can empower the poor with access to information, job opportunities, and services that improve their living standards. Digitalisation can enhance Economic justice- Artificial Intelligence, blockchain technologies, and the Internet of Things can enhance opportunities for data gathering and analysis for more targeted and effective poverty reduction strategies. Already we are seeing the transformational power of formal financial services through mobile phones. Mobile money wallets like Econet’s Ecocash and Net One’s One Money reach underserved communities including women. These financial services allow citizens to save in secure instruments to enlarge their asset base. This is critical in the fight against rising poverty and inequalities especially between the rural dwellers and their urban counterparts. For this reason, we are calling for the abolishment of regressive taxes like the proposed US$50 cellular tax being proposed in the 2022 national budget as it will decimate the gains the country has made to date.

  1. Improve Health Care

Zimbabwe faces severe health challenges worsened by the pandemic, limited physical infrastructure, and a lack of qualified and motivated professionals. However, some of these challenges may be easily resolved through increased digitalization as it can improve medical data & service delivery. For example, using technology to report medicine stocks, tracking & monitoring stocks can reduce leakages and provide services efficiently. Rwanda has become the first country on the continent to use drones in the healthcare sector to deliver blood transfusions to remote areas. Digitalization also improves disaster response as it facilitates quick sharing of information, checking of symptoms, and communicating under quarantine conditions. Nevertheless, the slow adoption of technology in health care in Zimbabwe is a cause for concern. The health budget of 14.9% of total 2022 national budget is largely consumed by recurrent expenditures such as wages and salaries. Most public hospitals are facing acute shortages of medical equipment to treat chronic illnesses like cancer while manual systems are still in place in the distribution of medical drugs. This was evidenced by the 2019 OAG  report that failure of officials to dispose expired drugs.

  1. 6. Improved Public Finance Management

Digitalization presents opportunities for improving public finance management. As the government depends on taxes for revenue, the adoption of digitalization can, by improving reporting of transactions and collection of taxes, increase the revenue base.  This will also bring efficiency in public spending through targeted social assistance which reduces inclusion and exclusion errors. The use of digital technologies can improve public debt management as the government will be able to track the performance as well as the maturity of all borrowed funds. Consequently, this will avert scenarios where debt becomes high unsustainable as is the case for Zimbabwe. The latest statistics show total public debt at US$13.7 billion (over 90% of GDP) with external arrears taking the larger share of US$13.2 billion.

The same digital technologies can be used to curb the huge Illicit Financial Flows particularly in the extractive sector which is estimated at over US$1.5billion per annum. It is commendable that the 2022 budget set aside ZW$146 million to operationalize cadastre system as this will reduce conflicts which are emanating from the double allocation of mining claims and will allow the government to effectively implement its Use-it or Lose-it policy.

  1. E-commerce

E-commerce is beneficial for both consumers and companies. As for consumers, it results in improved access to a variety of products and services being charged at lower prices. This ultimately boosts consumer spending in particular and aggregate demand (GDP) in general. For companies, e-commerce provides business opportunities as well as access to new markets -domestic and external. Empirical evidence indicates that those companies that engage in e-commerce export 50% more than those that do not, relying on their skilled labor and capacity to innovate. This translates to more exports, more forex to support struggling local currency & improve service delivery hence benefiting the majority of citizens.

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