How probable is Biti’s $100bn economy for Zim in a decade?
Mr. Tendai Biti has made several remarks on creating a $100 bn economy for Zimbabwe in a short space of time if the political party he represents gets into office. How probable is this goal? Is this just another lofty goal? Is it the usual delusional talk from politicians or is it a credible plan for the economy? Let’s look at it.
Zim’s GDP was $16.77 billion as of 2020
We can ignore the 2021 GDP figure for now. I believe it to be somewhere between 11 and 16 billion but it is a very contentious figure.
Mr. Biti made several claims around the 100 bn economy. Biti’s claims have been for different time horizons, sometimes it’s 8 years, then revised to 10 years, and at times it’s been 15 years. Under each claim, the target would be to grow GDP from roughly $17 billion to $100 billion in those time spans. The question that beckons is this: what is the growth rate that will take our economy from where it is now to the target?
Before we look at the growth rate required, let’s look at how much time it will take to move from $17 bn to $100 bn at different growth rates. A simple “goal-seek” in excel can do the trick.
The information above says, if the economy is growing at 1% per annum, it takes the country 179 years to move GDP from $17 billion to $100 billion.
If the economy is growing at 5% per annum, it takes the country 37 years to get to a $100bn GDP.
If the economy is growing at 10% per annum, it takes the country 19 years to get to the desired $100bn GDP.
If the economy is growing at 15% per annum, it takes the country 13 good years to get to a $100bn GDP.
If the economy is growing at 20% per annum, it takes the country a decade to get to a $100 bn GDP. So, there it is, we need to grow at 20% per annum to fulfill Mr. Biti’s claims/plans.
The question now is this: can we get an average growth rate of 20% sustained over a decade? Which growth rate is highly-likely? But before we answer that, let’s first look at what a $100 bn economy means in comparative terms.
What does a $100 billion economy mean?
Zimbabwe has a population of 15 million people. A $100 bn economy means GDP per capita would be $6,667. This is roughly six times more than where it is right now. So, it basically means an improvement of lives, a better economy, and a generally better life for most.
What exactly does this absolute figure mean in terms of the “better” standard of living? This means the people of Zimbabwe would have roughly the same standard of living as those in South Africa right now. GDP per capita in SA was USD5,090 as of 2020.
Moving Zim’s GDP per capita to USD6,600 doesn’t mean Zimbabwe will catch up with South Africa because South Africa will also be growing at the same time, it only means lives in Zimbabwe will have improved to the level that is prevailing in South Africa right now.
South Africa makes a better example because it is closer to home, people can relate and in terms of data, the data is not heavily distorted by the dominance of one attribute. For example, the islands of Seychelles and Mauritius have data that is heavily skewed because of financial flows that go into those countries for tax haven purposes. Data for Gabon and Equatorial Guinea are also fundamentally flawed by oil funds for a tiny population that doesn’t really translate to a better life for all. The same can be said about Botswana and its diamonds. That makes South Africa a better comparison of a broader economy with significant trickle-down effects over a much bigger population.
Thus the wish for Zim is to be like SA when it grows up (in GDP terms). That’s the desire.
Which Growth Rate is highly-likely?
Let’s say we emulate the Tiger economies of Asia or China. How fast did China grow in the last three decades? It grew very fast. Growth averaged 9.19% from 1989 to 2021.
China’s highest growth rate in the past three decades has been 14.3%. They have been doing a lot of work. For Zimbabwe to attain these growth rates, a lot of work has to be done. Even so, 20% seems to be a very lofty target.
No country has ever been able to hit the 20% growth rate mark. Asking to hit that mark and sustain it for over a decade is asking for too much. However, the fact that something has never been done does not mean it cannot be done, so we cannot totally rubbish Biti’s claim using the fact that it hasn’t been done before.
Which growth rate is highly likely? It depends on how far behind the economy is. If the economy is way way behind, then the catch-up effect will imply we can grow at very high growth rates, far above the World GDP growth rate.
If Mr. Biti and his party take over, they can reasonably grow the economy at rates that are significantly above the current growth rates. Thus, if the current growth rate is 5%, it would be reasonable to assume that more liberal policies and more growth-focused policies could result in growth rates that are 4 to 6% higher than the current path, thus 9 to 11% thereabout.
The growth-rate question is two-pronged; there is a question of hitting high growth rates, and a question of sustaining those rates for a decent period of time (ten years at least).
Before we answer the question of which growth rate is highly likely, we could check out the growth rates currently expected.
Current Growth Rates, the Hopelessness and SA Migration Situation
Zimbabwe has a medium to long-term forecast growth rate that “averages-out” to 3%.
What does this 3% mean? This means that it will take the country 60 years to grow its GDP from $17 billion to $100 billion.
Sixty (60) years is a lifetime, for a country with a life expectancy of 61 years.
You can now understand and explain why people decide to move to South Africa and never return to Zimbabwe. They are economic refugees. Zimbabwe’s GDP per capita might never catch up with South Africa’s during their lifetimes. That is the hopelessness embedded in the GDP Growth rate of 3%. The average person doesn’t know this hopelessness using fancy numbers and economic terms, but they nonetheless know it. The average person cannot express these concepts using the 10 years, 15 years, etc but they just know that it will take a lot of time to catch up, and for trickle-down effects to flow through the economy and improve the lives of almost everybody.
It is important to always try and deduce what these numbers mean to people. Economists and statisticians usually throw these numbers around as data points without explaining what they mean in relation to the life of the average person.
The hopelessness encoded in the expected growth rate informs the migration to South Africa situation. As long as there are wide disparities between GDP per capita (a 6X gap), migration down south is always going to be an issue regardless of how things play out on non-economic fronts (regional politics, SA party politics, xenophobia, border control). The fundamental difference is economic, and the problems will persist until the gap is closed down a little bit.
How long does it take to Double our Living Standards?
Besides playing catchup to South Africa, we could also look into the 3% with a view to how long it will take to double Zimbabwe’s GDP. Framing things this way reveals how important it is to grow the economy. A 2% difference in growth matters a lot when that growth rate is compounding over time.
The key question is; how long will it take for us to double our living standards (to increase them by 100%). The pic below shows exactly how long it takes, at different growth rates.
If the economy is growing at an average rate of 1% per annum, it takes 70 years to move GDP from 1000 to 2000(i.e double it).
However, if the economy is growing at an average rate of 2% per annum, it takes only 35 years to double GDP per capita, assuming population growth is constant (silly assumption yes I know but great for simplifying things).
Notice the difference between 1% and 2% is only 1%, but the difference between the years is 35 years.
If the economy is growing at 3%, it takes 23 years to double the living standard. Twenty-three (23) years is a long time. For this reason, the growth rate of 3% for Zimbabwe is unacceptable.
Notice that if the economy grows at 7% per annum, it takes a decade to double the living standard. This is why 7% is deemed to be a magical number. It’s a growth rate that enables a country to catch up. If Zimbabwe had achieved this average between 2012 and 2022, living standards would have been twice better off now than they were in 2012. This is why growth matters. This is why it is very important to grow the economy.
Notice that if you have 5 good years of growing the economy at 14%, you can double the standard of living for the country’s 15 million people. Kindly note that 5 years is one term in office for Mr. Biti’s party.
Low base and Low Hanging Fruits
Rates northwards of 7% but below 10% can be achieved and sustained for close to a decade because the economy is coming off a low base and there are so many low-hanging fruits to harvest. Just fixing the monetary mess would probably allow the economy to grow at a natural rate of 5% (just a couple of percentage points above the World GDP growth rate)
5% is attainable without doing anything else extraordinary. Liberalizing the economy, creating free markets, attracting investments in mining, agriculture, boosting tourism, etc could allow for growth rates of 7%.
Beyond that, hard work needs to be done to earn the rates above the magical number. The hard work includes restructuring the economy, upskilling the labor force, re-educating the country, digitizing government services, creating competitive advantages in certain industries, localizing value chains, and building industries from scratch that manufacture goods for the region. All of these can get Zim’s GDP growth rate to levels just above 10%.
What hasn’t been done elsewhere before can be done!
Growth rates of 14% and sometimes 20% need a lot of work. We have witnessed growth rates above 20% in certain industries and certain companies. It’s bliztscaling. The same strategies can be done at a country level, at a macro level. Blitscaling growth can be done for an entire nation.
What needs to be done is not easily understood by most businessmen so it is somewhat folly to think that politicians would understand it.
What is it that needs to be done to get growth above 20% and sustain for a decade?
This is where my ICT Policy, plans, DecaTechs, and the Industrial Policy come in. These are big ideas. Revolutionary ideas in terms of looking at economic growth. If these are implemented with military precision, Zimbabwe can get to a $100 billion dollar economy in a decade.
Links for my policies and plans are below:
- The ICT Policy that You Deserve
- The ICT Policy you Deserve = Great Grand GDP Growth Hack
- The Industrial Policy that you Deserve
Back to the primary question: Is Biti’s $100 billion dollar economy in a decade probable? The answer is no, it’s not probable using his lens of viewing things. And the answer is yes, it’s a possibility using my lens of viewing growth and what needs to be done.
Without new out-of-the-box thinking, it is not possible to achieve the lofty target. He is just talking for the sake of talking, just talking nje, mere talk. It is not possible to attain the required rates from resource extraction, construction, and manufacturing.
Only a rapid transition to a tech-based economy at the center of the Fourth Industrial Revolution has chances of hitting the growth mark and sustaining it for a decade, and tapering-off thereafter since there are inherent limits to growth in everything.