FACULTY OF SOCIAL SCIENCES
DEPARTMENT OF LOCAL GOVERNANCE STUDIES
NAME: AMANDA CHAKARA
REG NO: R147059X
DISSERTATION TITLE: THE EASE OF DOING BUSINESS POLICY AND ITS IMPACT ON LOCAL ECONOMIC DEVELOPMENT: CASE OF VUNGU RURAL DISTRICT COUNCIL.
DISSERTATION: FIRST DRAFT
Due to the economic sanctions imposed by the Europeans, Zimbabwe has been hard hit by lack of foreign direct investment. This has also led to the failure by the Central Government of Zimbabwe to support the local authorities both urban and rural in partaking Local Economic Development (LED) in their own areas. To outsmart this scenario, Zimbabwe among other developing countries in Africa introduced the Ease of Doing Business Policy (E.O.D.B.P) in 2015 with the main goal of improving the business environment for the local actors and attracting sustainable and mutual beneficial foreign direct investments. It is the purpose of this research to analyse the Ease of Doing Business Policy (E.O.D.B.P) and its impact on Local Economic Development (LED) with the case of Vungu Rural District Council. The purpose of this chapter is to highlight the background of the study, problem statement, research objectives, and research questions, significance of the study, limitations and delimitations as well as definition of terms.
Background of the study
The Zimbabwean economy has been stable during the colonial regime until 1990 after independence. The economy in Zimbabwe deteriorated due to poor monetary policies and the failure of the fiscal policies to control the budget deficit. In addition, the Zimbabwean economy further worsened in 2002 due to massive droughts together with the fast track land reform programme. This has later contributed to high inflation rates, imposed sanctions as well as lack of foreign and direct investors in Zimbabwe. The Central Government of Zimbabwe with the main aim of stimulating local economic development has introduced many policies since independence in the 1980s. The policies that were implemented include the Economic Structural Adjustment Program (ESAP) of 1996, Zimbabwe Program for Economic and Social Transformation (ZIMPREST) of 1998-2000, Vision 20/20 of 2009, Short Term Economic Recovery Program (STERP) of 2009-2013 and the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET).
The key components of LED involve the use of sustainable local resources, poverty eradication as well as participation by both local and foreign stakeholders for the development of a local area. Zimbabwe has been rated poorly in the Ease of Doing Business Indicators according to the World Bank Reports of 2016.To ensure that the business environment is conducive and that growth is nurtured by the Central government, Zimbabwe among other developing countries adopted the Ease of Doing Business Policy (E.O.D.B. P) in 2015.The key highlights of the Ease of Doing Business Policy are labour market regulation, enforcing contracts ,registering property ,protecting minority investors among other as according to the World Bank report of (2004).
The research is a case study based with Vungu Rural District Council being used. A brief background of Vungu Rural District Council according to the Vungu RDC Website (2017) shows that it was established in terms of subsection (1) of Section 8 of the Rural District Councils Act Chapter 29:13, 1996 through the Presidential Proclamation 15 of 1993 published as Statutory Instrument 99 of 1993 as amended by Proclamation 26 of 1993 published as Statutory Instrument 195 of 1993. The Presidential Proclamation also abolished the Manyame Local Government District Council; the Vungu and Upper Ngezi Rural Council area and the Gweru-Shurugwi Rural Council area. The council area covers Chiwundura Communal lands, Lower Gweru Communal Lands and the large-scale commercial farming and A2 and A1 farming areas around Gweru town. The area covers two House of Assembly constituencies, namely, Vungu Constituency (Wards 1, 2, 3,4,5,6,7,8,15,17 and 19) and most of Chiwundura Constituency (Wards 9,10,11,12,13,14,16 and 18).
The area under study suffers from reduced service delivery especially when it comes to infrastructure development and meeting the demands and needs of the clients. Furthermore, it has been discovered that many local people both the business and residents are not benefitting in investing and developing their local areas due to old procedures that were introduced by the council. Hence, it is therefore the purpose of this study to analyses the Ease of Doing Business Policy introduced by the Central Government and its impact on Local Economic Development with the case study of Vungu Rural District Council.
Statement of the problem
Improving service delivery and client’s satisfaction has become the key element of concern of Local Authorities in Zimbabwe and Vungu R.D.C is no exception. Vungu R.D.C has faced many challenges in attracting local investors as well as improving client’s satisfaction pertaining to the issues of development in Vungu District. It is the main goal of the Ease of Doing Business to certify that such challenges are dealt with. The research seeks to scrutinize the impact of the Ease of Doing Business Policy on Local Economic Development in Vungu District.
Key Research Questions
What aspects of the Ease of Doing Business Policy (E.O.D.B.P) that are currently being implemented by Vungu Rural District Council?
What are the Local Economic Development Projects that are currently being undertaken by Vungu Rural District Council since adopting the Ease of Doing Business Policy (E.O.D.B.P)?
What are the major challenges being faced by Vungu Rural District Council in implementing the Ease of Doing Business Policy on Local Economic Development Projects?
To what extent has the Ease of Doing Business Policy promote Local Economic Development in Vungu Rural District Council?
To identify aspects of the Ease of Doing Business Policy implemented in Vungu Rural District Council.
To examine the impact of the Ease of Doing Business Policy in terms of Local Economic Development in Vungu Rural District.
To establish factors that contribute to the success and failures of the Ease of Doing Business Policy on Local Economic Development in Vungu Rural District.
Justification of the study
The Ease of Doing Business Policy (E.O.D.B.P) is a strategy that was implemented with the main aim of creating an environment that is conducive for the operation of a business. The objective of this research is therefore to scrutinize the Ease of Doing Business Policy (E.O.D.B.P) in detail and its impact on Local Economic Development. It is also the purpose of this study to analyze if the policy of Ease of Doing Business is being fully implemented in Local Authorities of Zimbabwe. This research will also determine the relationship between the Ease of Doing Business Policy and Local Economic Development analyzing on the negative and positive impacts of the policy. In addition, this study will also help Local Authorities in bringing out opportunities they may have overlooked in their strategic plans as well as the strategies that can be employed in trying to foster development in their own areas.
Significance of the study
The study determines the relationship between the Ease of Doing Business reforms and Local Economic Development analyzing on the successes as well as failures of the projects. There much literature available on local economic development in the country and it was the researcher’s wish to communicate on what is happening in other countries that have adopted an almost similar approach to development through the Ease of Doing Business Policy (E.O.D.B.P) analyzing critical success factors and failures. Thus, it means developing countries alike can adopt a similar approach to development.
Delimitations of the study
Vungu Rural District Council is one of the local authorities in the Midlands Province. The council has seven (7) departments, which are the Human Resources, and Administration, Environment, Finance, Social Services, Finance, Roads, Works and Planning department and the Audit department and the study shall focus on all departments, as they are interrelated. The research shall only be focus on Vungu Rural District Council at administration and the local stakeholders operating in Vungu district. The research targeted business people, Council employees and management. The objective of including these groups was to confirm that the study brings to light the impacts of the Ease of Doing Business Policy (E.O.D.B.P) on local economic development projects since its initiation.
Limitations of the study
Turabian (2013) points out limitations are physical and conceptual boundaries of the study. This research covers one local authority in Zimbabwe that is Vungu Rural District Council. The study is focused on the Policy of the Ease of Doing Business and its impact on Local Economic Development.
The researcher faced the problem of limitation of time, as she has to balance between research and attending lectures.
Solution: – To respond this the researcher made use of the weekends and semester break to ensure that she gets the job done
Management may choose to suppress information citing various reasons like confidentiality amongst other things. To deflect this, the researcher persuaded the management that the research is exclusively for academic purposes and would not be published until there was approval from the organization and the institution.
Definition of terms
Blakely (1994) postulated that LED is a process which brings local governments and other key stakeholders to work together in their localities to stimulate and maintain business activity to stimulate local employment.
The World Bank defined LED as a process by which the public sector, business and non-governmental sectors partner and work collectively to create better conditions for economic growth and employment generation to ultimately improve the quality of life of the citizens.
The Ease of Doing Business
A reform set that is meant to improve the performance of the public sector and service delivery to the citizens and investors.
The chapter sought to highlight some key fundamentals of the study bringing out a brief history of the concept of the Ease of Doing Business as well as Local Economic Development. The background of the study ensured that it laid the foundation of the study by postulating the objectives of the study as well as research questions. The chapter also sought to highlight the significance of the study to Vungu Rural District Council as well as in contributing to the knowledge gap that currently exists in local economic development in Zimbabwe. The next chapter shall disclose the literature written on the Ease of Doing Business and Local Economic Development by many researchers as well as the legal framework.
To understand the Ease of Doing Business Policy and Local Economic Development in detail, this chapter provides an assessment of the related literature. The chapter unfolds with the definitions of terms, and provides a historical background on the Ease of Doing Business and Local Economic development, theoretical foundations of Local Economic Development. It shall also highlight the aspects of the Ease of Doing Business Policy. In addition, it shall also highlight the actors involved in Local Economic Development. This chapter shall also seek to find out the relationship between the Ease of Doing Business Policy and Local Economic Development with relevance to two case studies that is Zambia and Egypt.
2.1 CONCEPTUAL AND THEORETICAL FRAMEWORKS FOR LOCAL ECONOMIC DEVELOPMENT AND THE EASE OF DOING BUSINESS
2.1.1 Definition of LED
Rodriguez-Pose (2008:23) described LED as an “integrated approach in development rather than a ‘one size fits all solution’ with its core purpose being to ‘mobilize the local economic potential by bringing innovation to all its growth dimensions which range from infrastructure to local small and medium enterprise and their skills ,to attracting foreign direct investment ,fostering territorial competitiveness strengthening local institutions ,better management of the development process and internalizing local resources”.
According to Mufamadi (2000:1), LED is an outcome based local initiate, which is driven by local stakeholders. It involves identifying and using primary level resources, ideas and skills to stimulate economic growth and development. The aim of LED is to create employment opportunities for local residents, alleviate poverty and redistribute resources and opportunities to the benefits of all residents.
Basing on the above definitions by different scholars, LED is more focused on different actors or stakeholders who participate to improve the livelihoods of the people within the community as well as promoting the economic growth of the country using the locally available resources within an area.
2.1.2The Ease of Doing Business Policy (E.O.D.B.P)
According to the World Bank (2012:12-30) the ease of doing business is an index created by Simeon Djankov at the World Bank Group.
The Ease of Doing Business Policy is a policy that is used by many developing countries to improve the business-operating environment as well as attracting sustainable and mutual beneficial foreign direct investments.
2.2 HISTORICAL CONTEXT OF LOCAL ECONOMIC DEVELOPMENT AND THE EASE OF DOING BUSINESS
Local Economic Development
World Bank (2003) the concept of LED arose in the context of Globalization. The World Bank further summarizes the post 1960 understanding of LED through three waves of development.
According to the World Bank (2001) the first wave was from the 1960s to the early 1980s.During this period, the LED focus was on attraction of manufacturing investments, hard infrastructure investment and attracting outside investors. The second wave was focused on retaining and growing of existing local business. The emphasis was still on inward investment attraction. The late 1990s and onwards can be classified as the third wave. During this wave of LED, greater focus was placed on soft infrastructure investments, public-private partnerships, networking and making the entire business environment more conducive to business.
2.2.1The Ease of Doing Business
As stated by Djankov (2012) the Doing Business report has its origins in a paper first published in the Quarterly Journal of Economics by Simeon Djankov, Rafael La Porta, Florencio Lopez-de-Silanes and Andrei Shleifer called “The Regulation of Entry in 2002. The paper presented data on the regulation of entry of start-up firms in 85 countries covering the number of procedures, official time and official cost that a start-up must bear before it could operate legally. The main findings of the paper were that: “Countries with heavier regulation of entry have higher corruption and larger unofficial economies, but no better quality of public or private goods. Countries with more democratic and limited governments have lighter regulation of entry. The paper became widely known because it provided quantitative evidence that entry regulation benefits politicians and bureaucrats without adding value to the private sector, or granting any additional protection
According to the Economist (2014), “several countries have launched reforms to improve their rankings. These efforts are motivated to a great scope by the fact that the World Bank Group publishes the data, and hence coverage by the media and the private sector every year. In addition, Doing Business highlights every year the successful reforms carried out by each country. Since The Regulation of Entry was published, Simeon Djankov and Andrei Shleifer have published eight other academic studies, one for each set of indicators covered by the report.
As stated by the World Bank (2015) in 2013, Doing Business covered regulations measured from June 2011 through May 2012. Over the previous decade, the reports recorded nearly 2,000 regulatory reforms implemented by 180 economies.
According to the World Bank (2015) in 2014, Doing Business covered regulations measured from June 2012 through May 2013 in 189 economies. In 2015, Doing Business covered regulations measured from June 2013 through June 2014 in 189 economies. For the first time this year, Doing Business collected data for two cities in 11 economies with more than 100 million inhabitants. These economies include Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation, and the United States. The added city enables a sub-national comparison and benchmarking against other large cities.
Fig 1: The Ease of Doing Business Index Map
Source: Charts Bin Website
2.3 Actors of Local Economic Development
Local Economic Development is a change that places emphasis on local area and is spear headed by the local people in partnership with the other actors that include the local authorities, national government, the private sector and the Non-governmental organizations. It is a foundation on which local economies are inspired to enhance competitiveness, increase sustainable growth and to eradicate poverty. In addition, Local Economic Development is a multi-actor as it is not only initiated at local level but it is also based on decentralization with the involvement of regional and national level for coordination, promotion and support.
According to Wekwete (2009), LED is therefore a multi-actor in terms of implementation and all key actors become part of continuous learning and lesson sharing. In addition, Wekwete (2009) hearsays that LED as a policy and process brings together key local, national and international partners together to invest and stimulate local economies for growth and poverty reduction. It is fashioned as a bottom up process emanating from localities advocating for and attracting external investments, retention and expansion of local enterprises connecting global values chains and mobilizing the private sector.
Basing on the views of Local Economic Development by Wekwete it can be concluded that it is a bottom approach that originates from the local level with the involvement of the community by promoting the use of local resources and the participation of all local stakeholders for economic growth by attracting foreign direct investors.
2.3.1 Local Level
According to many scholars through the Multi-actor model for Local Economic Development, the local level is the pillar on which development lays. As stated by Canzaneli (2001) economic development at the local level is in which local stakeholders work cohesively. Such a process will stimulate and facilitate partnership between local stakeholders enabling the joint-design and implementation of strategies. It can be concluded from the above views that at the local level that is where local development begins as local stakeholders work together in order to make local economic development strategies within an area.
2.3.2 Regional Level
The regional level also plays a pivotal role in promoting local economic development. Basing on the Multi-Actor Model for Local Economic Development by Pennink (2012) in fig 1, Stimson et al (2009) postulates that the first variable demonstrates the resources endowments and market conditions that a region currently possesses. Sufficient resources are necessary for a region to efficiently grow and perform. The second and third variable, leadership and entrepreneurship are closely related but not synonymous. Effective leadership encompasses entrepreneurship. Leadership can be performed by an individual but in the case of regional economic development is more likely to be the expression of the collective action of a society or a group of people.
2.3.3 National level
Pennink (2012) postulated that economic development is suggested to be stimulated by co-operation between government, business and industry. For the government, it is not just the notion agencies but also provincial and municipal heads that are actors that can (and should) contribute to interplay of the three actors. In this interplay, the willingness to share knowledge is significant and at the local level, there is need for knowledge.
Figure 2: Multi-level, Multi-actor Model for Local Economic Development
Source: Pennink, B. 2014. Dimensions of Local Economic Development: Towards a Multi-Level, Multi Actor Model
2.4 THEORIES OF LOCAL ECONOMIC DEVELOPMENT
Economic Base Theory
Dinc (2002) argues that an ideal local economy can be divided into two sectors that is the basic and non-basic sector. The theory emphasizes that, to strengthen and grow the economy, it is essential to ensure that the basic sector is developed and enhanced as it is the engine of an economy or in more technical terms provides the economic base. According to Das and Leatherman (2013), an economy is supposed to have a stronger basic economy than the non-basic one, which puts it in a better position if the national economy fails. Das and Leatherman (2013) postulated that the basic industry is that type of economy, which does not necessarily rely on the local market but rather focuses on the international markets. Examples of such include mining, agriculture and tourism, the latter having prices which are largely determined on the global scale. The non- basic industry is that which relies on local markets for example convenient stores, butcheries among others.
The research will determine the aspects of the Ease of Doing Business Policy that are being implemented by Vungu Rural District Council analyzing the overall contribution of the policy to local economic development.
2.4.1 Place Marketing Theory
Metaxas (2012), is of the view that place marketing is instrumental to local economic development as it is not only limited to the satisfaction of the enterprise and residents from purchase of goods and services that are provided by the place but to also satisfying the expectations of the potential investor.
Cheshire (1999) cited in Hague et al (2011) defined place competitiveness as “a process by which groups acting on a behalf of a regional or sub-regional economy seek to promote it as a location for economic activity either implicitly or explicitly in competition with other areas. In other words, the creation of investor friendly policies attracts instead of pushing away potential investors.
According to Storper (1997), a local authority should be able to have conditions that attract firms as well as maintain the ones with a rising market share in an activity while maintaining or increasing standards of living for those who participate in it.
The Cardiff Consensus of 2011 brings out the four key actions or conditions that enable local governments to play their full roles. These actions according to the Cardiff Consensus (2011) are –
Providing a clear national framework for local economic development through effective fiscal, political and legal decentralization including appropriate constitutional and legal recognition and access to an equitable share of national resources;
Creating an enabling environment for LED which enable business to flourish by promoting direct investments, providing core services, convening the private sector and reducing red tape;
Developing local strategies to promote LED, which involves local government working with other partners to understand the local economies and promoting integrated development planning and community consultation.
Developing the capacity of local governments to access existing funding sources or to use innovative financing models to support LED through public private partnerships, special purpose vehicles, joint ventures, municipal bonds, and borrowing on the market where appropriate and accessing credit; and developing partnerships with the private sector and other partners to ensure effective promotion and coordination of LED.
From the above view, place marketing is influential in empowering local economic development as it encourages development within an area leading to more employment opportunities, participation of local stakeholders thereby eradicating issues of poverty as well as promoting issues of development within an area.
2.5 LOCAL ECONOMIC DEVELOPMENT STRATEGIES
To ensure that there is meaningful development, there are innumerable strategies of Local Economic Development that have been implemented. According to the Wisconsin Economic Development Institute (2003) there are five (5) main strategies that can be used by local authorities in LED and these are enterprise and business development, regional collaboration, community cash flow development, infrastructural development and workforce development.
2.5.1 Enterprise and business development
There are provisions that are set aside to ensure that there are businesses that can provide the necessary capital investment for any meaningful development to take place. Ndabeni (2014) is of the view that economic failure leading to closure of industries has contributed to the significant growth of the informal sector, which is instrumental in reducing poverty and unemployment. Wisconsin Economic Development Institute (2003) argues that enterprise and business development entails retention of current players, attraction of new players and lastly creation of new businesses complimenting the existing ones. Kuratko and Lafollette (1987) postulated that local authorities could partake in business and enterprise development through the creation of small business incubators. It is unquestionable that most small and medium enterprises have unsuccessful from the start, a factor accredited by lack of financial and business skills. The small business incubator amenities necessitate the use of leases on terms that are flexible as well as reduced rentals with the resultant support facilities of financial management as well as technical and administrative support.
2.5.2 Regional Collaboration
Wisconsin Economic Development Institute (2003) defines collaboration as a high degree of commitment to working with others. Regional collaboration normally involves a scenario whereby there is teamwork for mutual gain between local governments or with the other stakeholders. Local authorities strengthen the performance of the economy both in the short and long period through the application of a co-operative approach. Hague et al (2011), is of the view that regional collaboration may also lead to the expansion of markets especially for primary producers. It can be argued however that regional collaboration is not only centered on geographical boundaries only but across national frontiers. Self- Pierson (2012) postulates that local authorities can exploit the avenue of city twinning which ensures that there is an exchange of manpower and technical expertise between various local authorities. For example, the Harare City Council collaborated with the German city of Munich. Dhedheya (2013) hearsays that Harare has benefitted from medical supplies as well as exchange of information on town planning, urban governance and municipal improvements among others. In this regard, regional collaboration is often a policy that involves all stakeholders be it ratepayers, business people or the respective local governments. Participation or engagement of stakeholders is one of the pillars of Local Economic Development.
2.5.3 Community cash flow development
Pulver, (1986) argues that community cash flow development can be aided by encouraging local citizens to buy local brands for example purchasing groceries from local stores rather than buying from other territories. As cash flow development involves the movement of money in and out of a territory, there is also a need to stimulate investment and this perhaps explains the use of growth points as a development tool. Gordon (2006) is of the view that in order to promote community cash flow development, there are four main components that should be looked at which are creation of local safety nets, housing improvements and settlement upgrading, basic service delivery and stimulating local economy. Wekwete, (1988) postulates that” growth points are used to stimulate growth by virtue of the use of concessionary rates and subsidies, which attracts investors. Furthermore, through market research, a local authority can be able to know goods and services required within their area of domain and work accordingly to acquire them. According to Helmsing (2010), a community should partake in income generating projects as well as have provisions for a community fund where those who are disadvantaged can borrow money. This will ensure that even if the national economy fails, communities are better positioned to fend for themselves.
2.5.4 Workforce development
Armstrong (2006) points out that in order to have a competitive advantage and have a highly skilled and capable labour force, there is a need to ensure that there is training and development of employees. Haralson (2010) argues that workforce development is essential in community development and describes a wide range of the term has come to describe a relatively wide range of undertakings as well as programs partook by territories to formulate, endure and preserve a competent workforce capable of supporting present and future business as well as industry. According to Agia, et al. (2007) workforce development directly translates to improved service delivery. This is mainly because an experienced and capable workforce is better positioned to be innovative and creative considering any changes on the global scale be it poor economy or other anomalies. The Wisconsin Economic Development Institute (2003) supports that the absence of highly skilled labour supply may significantly reduce the chances of attracting investment. This is mainly since people want to invest in a local authority that is managed by an efficient workforce. A good workforce development may also mean that there will not be poor service delivery, which in turn may mean that there will be low levels of outward migration. Low levels of outward migration mean that the community may be well equipped to partake in local economic development, as the people at the forefront will be having the community’s interests at heart. Furthermore, as local economic development focuses on job creation, poverty alleviation, it often means that the higher the level of inward investment promoted by the presence of a capable workforce, the higher the chances of people getting employment and poverty being eradicated. The presence of an educated and trained workforce may also mean the sustainability of current and future businesses.
2.5.6 Infrastructural Development
Smith & Da Lomba (2008) define infrastructure as the structural elements of an economy, which allows the production of goods and services without being part of the production process per se. It comprises of the hard element that is road and rail networks, airports, water supply, educational facilities, solid waste treatment and disposal, electricity power generation to mention but a few. It also concerns the soft element of good management and development policies as well as use of operating procedures, all in a bid to ensure that they are responsive to societal demand. Infrastructure plays an important role in the social and economic development of communities. Smith and Da Lomba (2008) also go on to highlight that areas devoid of such have high levels of people wallowing in poverty with local authorities seen to be focusing more provision of basic municipal services like water and sanitation. Blair (1996) points out that for LED to be successful, there is a need to maintain existing infrastructure as well as come up with new modernized infrastructure.
As reported by Helmsing (2010) locality development is about planning and realization of infrastructure and of relevant economic and social overhead capital in the locality. Locality development is not restricted to the export base of an area. It also has to address the orderly development of the non-basic sector of the local economy. Locality development corresponds to the management of the entire local territory. Localities that succeed in better management of their territories contribute to enhance the competitiveness of their economic activities. It may also improve the local quality life. Together these may take the locality more attractive to external investment, firms and people. Helmsing (2010) further goes on to highlight that the management of the territory would involve several components. Participatory Local Economic Development Planning: LED is a multi-actor affair. There important investment complementarities within the private and community sectors and between the public and private agents which when properly managed can result in important economic gains and external benefits. Local government can make an important contribution by properly coordinating its own Public Sector Investment Program with needs and investment priorities of communities and the private and through its physical planning.
2.6 THE EASE OF DOING BUSINESS POLICY (E.O.D.B.P) IN ZIMBABWE
The Ease of Doing Business deals with the aspects of regulations affecting the key areas to do with the business that include: -starting a business, dealing with construction permits, getting electricity, getting credit, registering property, protecting minority investors, trading across borders, enforcing contracts, resolving insolvency and paying taxes. The concept of the Ease of Doing Business Policy started in Zimbabwe in September 2015 with the Office of the President and Cabinet introducing the first 100(hundred) Day Rapid Results Initiative on the Ease of Doing Business. According to the Progress Report on the Ease of Doing Business Reforms (2017) the Office of the President and Cabinet are spearheading the reforms of the Ease of Doing Business.
It is also according to the report that Zimbabwe has focused on the key areas concepts expect on getting electricity. After its execution, in Zimbabwe many milestones have been achieved in areas such as registering property, starting a business and getting credit. The achievement of the results has been enabled and sustained through the adoption of the Rapid Results Approach whose thrust is achievement of results in a business usual manner.
2.6.1 THE RATIONALE BEHIND THE EASE OF DOING BUSINESS IN ZIMBABWE
The Ease of Doing Business Policy is there to transform the investment climate in the country and can lead to significant changes in the Company Act. It is also aimed at improving the business-operating environment in Zimbabwe to boost local and foreign investment. According to the Progress Report on the Ease of Doing Business Reform (2017), the reforms of the Ease of Doing Business are aimed to –
Improve the business-operating environment in Zimbabwe in order to boost local and foreign investment.
Improve performance of the public-sector institutions in delivering quality services to the people.
Reduce the cost and ease of doing business.
Creation of value for money.
2.7 LEGAL FRAMEWORKS FOR THE EASE OF DOING BUSINESS AND LOCAL ECONOMIC DEVELOPMENT
For any policy to be successfully applied there is a need to ensure that it is structured by legislation to confirm that it is explicit and not exposed to abuse by the implementers. The section below will highlight legal frameworks that guide local economic development in Zimbabwe. In addition, the section will bring out legal provisions that share a link with the Ease of Doing Business in Zimbabwe and other countries that include Egypt and Zambia.
2.7.1 For Local Economic Development (L.E.D)
LED in Zimbabwe originates its legality from the supreme law of the land that is the Constitution Amendment No 20 of 2013 on Section 14. Local authorities are also mandated to partake in local economic development through the Rural District Council Act chapter 29.13 on section 60. Other acts that also guide local authorities on local economic development are the Regional and Town Planning Act Chapter 29.16, Special Economic Zones Act Chapter 14.34, Urban Council Act Chapter 29.15, the ZIMASSET as well as the Sustainable Development Goals (SDGs).
126.96.36.199 As stated by the Constitution of Zimbabwe on Chapter 14 Section 264: –
(1) Whenever appropriate, governmental powers and responsibilities must be devolved to provincial and metropolitan councils and local authorities, which are competent to carry out those responsibilities efficiently and effectively.
(2) The objectives of the devolution of governmental powers and responsibilities to provincial and metropolitan councils and local authorities are-
(a) To give powers of local governance to the people and enhance their participation in the exercise of the powers of the State and in making decisions affecting them;
(b) To promote democratic, effective, transparent, accountable and coherent government in Zimbabwe as a whole;
(c) To preserve and foster the peace, national unity and indivisibility of Zimbabwe;
(d)To recognize the right of communities to manage their own affairs and to further their development;
(e) To ensure the equitable sharing of local and national resources; and
(f) To transfer responsibilities and resources from the national government in order to establish a sound financial base for each provincial and metropolitan council and local authority.
188.8.131.52 According to the RDCA Chapter 29.13 on Section 60: –
(5) The functions of a rural district development committee shall be—
(a) To consider ward development plans submitted to it in terms of section fifty-nine;
(b) To make recommendations to the council as to matters to be included in the annual development and other long-term plans for the district within which the council area is situated;
(c)To prepare the annual district development plan for approval by the council and assist in the preparation of other long-term plans for the council area;
(d) When instructed to do so by the council, to investigate the implementation of the annual development and other long-term plans for the council area;
(e) To exercise such other functions in relation to the annual development and other long-term plans for the district as may be assigned to it from time to time by the council.
Basing on the legal frameworks of Zimbabwe Local Economic Development is all about transferring powers and responsibilities by the Central government to the local authorities in order to manage their own affairs at local people. Furthermore, the local people or community for the purpose of development within their own areas bases Local Economic development according to the legal frameworks of Zimbabwe upon the effective and efficient use of local resources.
2.7.2 For the Ease of Doing Business Policy
The Ease of Doing Business Policy was put forward to transform the investment climate in Zimbabwe as well as creating significant changes in the Company’s Act.
Case of Zimbabwe
The Ease of Doing Business Policy shares a link with various pieces of legislation that is the Special Economic Zones Act, the Deeds Registry Act, Judicial Laws Ease of Setting Commercial Dispute Bill, Shop licensing Act, Insolvency Act, the Movable Property Security Interest Bill, Estate Administrators and Insolvency Practitioners Act, Public Procurement Act as well as subsidiary legislation in the form of Statutory Instruments (S.I).
184.108.40.206 One Stop Shop Investment
To promote and facilitate both foreign direct investment and local investment, the government launched the Zimbabwe Investment Authority (ZIA).It is an institution born out of the union of the Export Processing Zones Authority(EPZA) and the Zimbabwe Investment Centre(ZIC).This was done to create the One Stop Shop Investment Centre(OSSIC).The One Stop Shop(OSS) was set up in 2010.Its main aim is to bring under one roof a number of key institutions that includes the Deeds Offices, the Reserve Bank of Zimbabwe(RBZ), the Ministry of Mines, power utility ZESA, Environment Management Authority, Local government and the immigration department to accelerate the process required for an investor to set up shop in Zimbabwe.
Fig 3: The Zimbabwe Investment Authority in Harare
Source: ZIA website
220.127.116.11 Case of Egypt
In Egypt, the Global Authority for Investment (GAFI) eases the way of global investors looking to harness opportunities present by Egypt’s fast growing domestic economy and nation’s robust competitive advantage as an export hub for European, Arab world and Africa. The main purposes of the GAFI are to-
Facilitate the procurement of business licenses.
Offer tech advice and information to clients planning.
Introduce a transparent and reasonable fee structure.
Improve the quality and timeliness of government related processes.
18.104.22.168 The Investment Service Centre of Egypt
The Investment Service Centre guides the Ease of Doing Business in Egypt through the Incentive Law No 8 of 1997, Company Law No 159 of 1981 together with the Law No 72 of 2017.
2.7.2. 4 According to the Investment Law No 72 of 2017 Chapter 2 on Article 2
Investment in the Arab Republic of Egypt aims at improving the national economic growth rates and the domestic production rates, as well as provision of employment opportunities, promotion of exports, and boosting of competitiveness, which contribute to achieving the comprehensive and sustainable development.
All the Competent Authorities in the State seek attracting and promoting of the local and foreign investments.
Investment is governed by the following principles:
Equality of the investment opportunities and equal opportunities regardless of the size and location of the Project and without discrimination based on gender.
The State supports the emerging companies, entrepreneurship, and micro, small, and medium enterprises to empower the youth and small investors.
Consideration of all aspects with social dimension, protection of the environment and the public health.
Freedom of competition, prevention of monopolization practices, and protection of the consumers.
Compliance with the principles of governance, transparency, prudent management, and absence of conflict of interests.
Seeking to stabilize and fix the investment policies.
Prompt completion of investors’ transactions and providing them with facilities in a manner to attain their lawful interests.
22.214.171.124 Case of Zambia
There are legal frameworks of doing business that are mandatory to the national government and the local authorities of Zambia. These legal frameworks include the Zambian Development Act, Multi-lateral Investment Guarantee Agency (MISA), Company’s Act Cap 388 of Zambia and the Zambia Development Agency (ZDA) Act.
Building on the legislations discussed in this section, it can be seen that policies are created and some amended to ensure that there are implemented. In addition, this section has also highlighted the policies that are used by other countries and how they successful the Ease of Doing Business policy thereby promoting Local Economic Development in their countries. In addition, this section has also shade light on the ideas of other countries on the Ease of Doing Business and it further calls for a critical analysis on how Zimbabwe can improve in the Ease of Doing Business policy as well as fostering for Local Economic Development.
2.8 The Negative and Positive Impacts of the Ease of Doing Business Policy (E.O.D.B.P) on Local Economic Development (LED)
Central and Local Government Coordination
The relationship between the central government and the local authorities bears an impact on local economic development. A cordial relationship between the central and local government drives away investors and there is no development while on the other hand when the central government and the local authorities’ coordinates, development is promoted thereby by attracting both local and foreign direct investors. The failure by the Central Government to decentralize some of its responsibilities and powers to the local authorities promotes poor service delivery and less development within the country. At times, the central government can create an environment that is not conducive enough for development to take place. Madzivanyika (2011:33) alleges that efficient and effective provision of service is undermined by a high level of central interference in the decisions of municipalities. According to the Urban Councils Act of Zimbabwe (UCA) Chapter 29.15 on Section 91 the Minister to have unrestricted access to all council records, minutes and nay document in the possession of any council which is relevant to the council’s meeting, resolutions and affairs. Muchadenyika (2014) also argues that soiled Central local relations have led to local authorities lacking autonomy, which directly translate to appalling service delivery. With the regards to the above views one can also conclude that lack of coordination between the Central government and the local authorities is also another key element that has contributed to the failure of Local Economic Development (LED) projects and the attraction foreign investors.
According to Kunaka (2002), corruption often leads to low levels of infrastructure development as money earmarked for development purpose can often be diverted towards other things that do not benefit the community. In line with Mundenga (2015), corruption sidetracks resources that are needed to improve the lives of citizens in order to enrich a few at great cost to many. It inhibits the state from achieving its statutory obligations, corrodes the legitimacy of a democratic government and undermines the rule of law thereby devilling the moral fabric of the society and chocking economic growth .It has powerful deteriorating effect on Foreign Direct Investment (FDI) by destroying the investor optimism and confidence .Mills (2012) also agrees that corruption can destroy local economic development as it impairs trade, scares away inward investment as well as diverting spending by government on public goods such as education and health which in turn may lead to the exacerbation of poverty.
126.96.36.199 Economic Performance
One of the chief components that influence local economic development at any place is the economic structure. A country with a good economic performance promotes development whilst a country with an unstable economy drives away development. The frequent adjustments of policies within a country affect issues to do with local economic development as well as the performance of the economy in a negative way. These frequent changes in government policies can create uncertainty for local business as well as the investors. As reported by the Zim Stats (2015) Due to the fact we are importing quite a large number of goods from other countries instead of locally creating our own and exporting them, we are not promoting local growth in our country. According to Chakaipa (2010) poor economic performance of a nation and high levels of unemployment lead to brain drain whereby qualified and skilled labour force flock out of the country to other countries in search of greener pastures.
From the above views by different scholars, it can be concluded that the economic performance of a country has an impact on local economic development. Without unskilled personnel within a country, there is no capacity to develop a local area especially on infrastructure thus leading to a less conducive business environment for attracting investors.
According to Buckett (2015), investors are more inclined to invest in a country where their investments are profitable and protected against any changes in the political landscape. Griffith and Wall (1995:322) observes that an uncertain political environment can hinder efforts made to attract investment. In the case of Zimbabwe, ZANU PF and MDC officials in both urban and rural local authorities are often in favour of their own political parties instead of promoting local economic development in their own areas. For instance, some councilors from the MDC party in Vungu Rural District Council allocated stands without the knowledge of the council not for development but only to further their own political interests. The scenario is also like the some of the local authorities both in urban and rural areas were councilors’ advocate for development for their political parties. In most scenarios, especially in rural areas, the Ward Development Committees (WARDCOs) that are meant for developmental purposes are no longer serving their purposes as most of the councilors are developing their own wards for political interests. Muchadenyika (2010) observed that the rise and ascendancy of MDC in Urban local governments resulted in serious confrontations between state and local level further supports this pointed. ZANU PF had lost the control of most local authorities in elections and tried to regain lost urban governance institutions. The fight to control urban areas has sustained at the expense of service delivery. With the events of political instability between different political parties, Zimbabwe it has often been difficult for the country to be a safe country for doing business and attracting foreign direct investors. Basing on the above, one can conclude that politics is also one of the factors that contribute to the failure of local economic development and the attraction of local as well as foreign investors within the country.
188.8.131.52 Impediments to foreign investment
For Local Economic Development to be successful within a country there is the need to ensure that investors are fully protected by the laws so that they can operate in a conducive business environment. According to Theron (2010) although Zimbabwe law guarantees the right to private ownership, this right is increasingly not respected in practice. The Central government of Zimbabwe that seized private farms and businesses of the foreign investors without compensation or legal process evidence the above view. The Land Reform Program is an example of such programs that seized the private properties of the foreign investors.
Unlike in Egypt, where investors operate in a conducive business environment as according to the Investment Law No72 Chapter 2 Article 2 of 2017 of Egypt. The act provides for equality and equal opportunities for the investors support from the government and freedom of competition among other rights. It is through these policies, that Egypt is ranked better in the Ease of Doing Business index according to the World Bank reports. With the regards to the above, one can clarify that friendly policies attracts foreign investors to operate in a conducive environment while strict laws drive away investors.
Technology is yet another key component that plays a pivotal role in Local Economic Development.Kundishora (2012) points out that ICTs can help in garnering work opportunities for people. Melkott further agrees upon this point and Steeves (2001) cited in Kehbuma (2005) development can only take place in a country if people are liberated and this can only take place through access to information which is necessitated by ICT infrastructure. Technology therefore plays a pivotal role in promoting a fruitful local Economic Development. Effective ICT policies attract investor’s thereby promoting development in both urban and rural areas.
Basing on the views of many scholars, Local Economic Development revolves around the engagement of both local and foreign direct investment with local resources for the benefit of the local people. The chapter sought to highlight the theories and strategies of local economic development and their relationship with the Ease of Doing Business Policy. This chapter also highlighted the legal frameworks that are inter-related with the Ease of Doing Business in other countries. The next chapter shall examine the research methodology.
The following chapter will highlight the research design, target population, sample frame as well as the instruments. The chapter will also seek to make initial investigations into research areas that are unknown as well as seeking for new information into phenomena and in the settings of this study, seek for the examination of the Ease of Doing Business Policy and its impact on Local Economic Development.
A research is a systematic core analysis and interpretation of data to answer a certain question which one have in mind or to solve a problem. According to Rajasekar (2013) Research is a logical and systematic search for new and useful information on a topic. Concerning the above views, a research is therefore a systematic process of collecting, examining and interpreting data.
3.1.2 Research Methodology
Polit and Hungler (2004:233) define methodology as ways of obtaining, organizing and analyzing data. Methodology decisions depend on the nature of the research question. Henning (2004:36) also defined methodology as coherent group of methods that complement one another and that have the ability to fit to deliver data and findings that will reflect the research question and suit the researcher purpose. The methodology here captures characteristics such as the study design and research instruments as well as discussing data analyzing tools.
3.1.3 Research Design
According to Parahoo (1997:142) a research design is’ a plan that describes how, when and where data are to be collected’. Mc Millian and Schumacher (2001:166) further defines a research design is a plan for selecting subjects, research sites and data collection procedures to answer the research questions. They further indicate that the goal of a sound research design is to provide results that have judged to be credible. The research design aims to make sure that data collected addresses research the intended research objectives. The research design is appropriate as it intends to conduct an in-depth analysis on the Ease of Doing Business Policy and its linkage with Local Economic Development.
3.1.4 Quantitative Research Design
According to Leedy (1993) Qualitative research methods deals with numbers and anything that is measurable in a systematic way of investigation of phenomena and their relationship. It is used to answer questions on relationships with measurable variable with the intention to explain, predict and control a phenomenon. In other words, quantitative research design creates meanings through objectivity uncovered through data collection.
3.1.5 Quantitative Research Design
Hiatt (1986) points out that qualitative research methods focus on discovering and understanding the experiences, perspectives and thoughts of the participant that is qualitative research explores meaning purpose or reality. According to Lincolin and Guba (1985) qualitative research is usually described as allowing a detailed exploration of a topic of interest in which information is collected by a researcher through case studies, interviews and so.
A population is a collection in which the researcher would obtain results from. It is embraced with individuals or organizations with specific characteristics. Chimedza et al (2006) is of the view that a population is a total set of objects in a statistical survey or study. The population includes all elements that meet certain criteria for inclusion in a study (Burns & Grove 2003:43).
Brown and Dowling (1998), argues that sampling is the selection of some elements to present the entire populace from which the elements are chosen or selected. It should be noted that the vital concept in sampling is representativeness.
3.3.1 SAMPLING TECHNIQUES
Sampling can be defined as a process of selecting units that include people, organisation from a population of interest so that by categorizing the sample a researcher may fairly generalize the results back to the population from which they were chosen. The research will apply both random and non-random sampling techniques, which are the stratified sampling, convenience sampling, purposive sampling and observation. Probability sampling will be used to achieve representativeness. Random sampling techniques will be applied to quantitative methods whereas non-random techniques will be applicable to the qualitative methods.
According to Walliman (2014), stratified sampling is used when cases in population fall into distinctively different categories strata?. An equally randomised sample will be obtained from each stratum separately to ensure that each is equally represented. These samples will then be combined to form the complete sample from the whole population. For the purposes of this research, the sampling units will be divided into strata that are the business people, council officials, elected officials and the D.A.s office. This would ensure that the sample would be divided into manageable sub units based on information to be gathered. Furthermore, the separation of the sampling units makes it easier to analyse the data.
3.3.3 Convenience Sampling
It involves using what is immediately available (Walliman 2014:154). This involved the haphazard selection of cases because they were easily available to obtain. This sampling technique will be mainly used to conduct interviews with the council officials as well as business people.
3.3.4 Systematic /Interval Sampling
Systematic or technical sampling is a technique based on selection of elements at interval starting with a randomly selected element on the population lists. The researcher will also make use of systematic sampling, which would ensure that everyone had an equal chance of being selected. Haralambos and Holborn (2004) points out that a systematic sampling entails the picking up of a respondent after every interval.
3.3.5 Purposive Sampling
Purposive Sampling is a technique that is based on the researcher’s judgement to fulfil those who will participate in the research process. Black (2010) defines purposive sampling as a non-probability sampling method and it occurs when elements selected for the sample are chosen by the judgement of the researcher. The purposive sampling will be used when gathering data from the local officials, and from the offices of the District Administrator
3.4 DATA COLLECTING INSTRUMENTS
According to Burns & Grove (2003:373), data gathering is the precise, systematic gathering of information relevant to the research sub-problems, using methods such as interviews, participant observation, focus group discussion, narratives and case histories .The data accumulated for this research will derive from both primary and secondary sources of data. Primary data will mainly originate from questionnaires as well as interviews.
Fig 4: Types of Data Collection in Research Methodology
Source: Wikipedia website
3.4.1 Primary Data
It will be collected by the researcher in the field in the form of observations, questionnaires and interviews directed to respondents. The major advantage of primary data as a form of gathering information is that it may not be subjected to exaggeration, a norm quite synonymous with secondary data. Furthermore, it ensures that facts gathered will be recent and up to date.
184.108.40.206 Primary Data Collecting Instruments
The tools to be used by the researcher for the purposes of this study are the questionnaires as well as interviews. Data will be collected from a sample of the business community, residents, council officials, district administrator office and councillors.
Tshuma and Mafa (2013) defined a questionnaire as a document containing questions designed to obtain information from the sampled respondents and is used as a great deal in survey research. Basing on the above view, a questionnaire can be seen as a data collection instrument that comprises of open-ended questions or closed questions or both. The questionnaires shall combine elements of open ended and close ended. The open-ended questions are flexible and it gives room for a respondent to elaborate. Questionnaires are a form of quantitative data collection mechanism. The close ended questions are restrictive and do not give room for clarification and they may be limited to such answers as ‘yes, no’, ‘agree, disagree’ to mention but a few. Haralambos and Holborn (2004) cite the following as the major advantages and disadvantages of using questionnaires as a research instrument.
i. Data resulting from questionnaires is easily measurable especially data originating from close ended questionnaires
ii. Permits the researcher to cover a large geographical area especially if postal questionnaires are used. Furthermore, it means distant areas may be reached.
iii. Respondents are given sufficient time to give trustworthy information as the researcher simply leaves the questionnaire and will take it at any given date.
iv. Respondents are not indebted under any circumstances to say their name thereby protecting their identity. Thus, it often means that the research will be done within the confines of research ethics. Furthermore, respondents give answers without fear of persecution or reprisal.
v. As questionnaires have the same questions and distributed to various groups of people, it often means that responses given are varied thus giving a researcher rich, diverse and crucial information over a very short space of time.
i. Questionnaires can be subject to misinterpretation especially if there are self-administered by the respondents. As a result, it often means that people may interpret the question differently hence giving responses that are biased
ii. Low response rate is also another disadvantage of questionnaires. It has often been seen that many of the questionnaires send out to respondents are not returned which often greatly reduces the chances of having a valid research.
iii. Unless drastic measures like taking a lie detector test are taken, there is no way a researcher can be sure that the information being given by a respondent is truthful. It has often been observed that questionnaires are subjected to exaggeration and misrepresentation of information
An interview involves a one on one direct conversation with another person and it is done to find out new information basing on a specific research topic. According to Cohen (2006) an interview is a two-way conversation or oral questionnaire initiated by an interviewer for the specific purpose of obtaining research related information and to learn about the ideas, beliefs, views and opinions of interviewees. Flick (1998:76) points out that there are different types of namely semi-structured, structured and unstructured interviews. According to Gabrium (2002) an unstructured interview is an open situation through which great flexibility and freedom is offered to both sides that is the interviewer and the interviewee in terms of planning, implementing and organising the interview content and question. Haralambos and Holborn (2004) state that structured interviews are a list of predetermined questions in which the researcher is not allowed to deviate from. On the other hand, semi-structured interviews allow the researcher to let the respondent talk about other things during the course of the interview before redirecting them to the topic discussion.
More information in greater depth can be obtained.
There is room for flexibility as questions can be restricted.
There is room for probing in case of verification.
Personnel information can be easily obtained.
Supplementary information can be obtained.
Language can be adjusted to suit the respondent.
Interviews are costlier to conduct in comparison with questionnaires
Interviews may lead to subjective information as the interviewee may exaggerate some information so as to please the researcher
Interviews lack anonymity that is provided by questionnaires and as such respondents may withhold some vital information or avoid answering questions deemed as sensitive iv) Interviews may be influenced by respondents’ personal attributes and may suffer from interviewer dominance.
Interviews are time consuming.
220.127.116.11 Observations/Non Participant
An observation can be viewed as the recording of events as observed by an outsider for example observing the traffic and record the number of cars or the social behaviour of people interacting in a bus.
An observation allows a deeper insight into the researcher’s problems.
It compliments other research methods.
Interviews introduce biases on their own
Observing people may change their behaviour.
Observations are time-consuming and expenses.
18.104.22.168 Ethical Considerations
According to Gray (2004p235) In conducting interviews, ethical issues are one of the main concerns. Confidentiality must be given. Respondents should not be harmed or damaged in any way by the research. Putton (2000 p404-5) and Gray (2004p235) also state that there are some ethical issues that need to be considered during the research methods which are: –
Explaining the purpose of inquiry to the respondent.
Promises and reciprocity-state what respondents will gain.
Risk assessment-considering in what ways might the interview put the respondent at risk in terms of stress, legal liabilities or political repercussion.
Confidentiality-reflect on the extent to which promises of confidentiality can be met.
Inform consent-what kind of consent is necessary if any.
3.5 Secondary data
Haralambos and Holborn (2004) define secondary sources as data that have already been produced. In other words, they are sources that already in existence. Information will originate from the internet especially relating to projects amongst others.
Obtained at a lower cost as one simply has go into a library or search on the internet for relevant information. Information on the Ease of Doing Business and local economic development is readily available on the internet as well as library.
ii) Time saving as one does not have to go into the field
iii) Enables comparativeness as the researcher can compare findings to those that are in already existing literature.
i) An in-depth case study may not be available which forces the researcher to go into the field
ii) There may not be information that will be relevant to the researcher’s studies for instance the researcher found it very difficult to find literature linking the Ease of Doing Business with local economic development.
The main aim of this chapter was to explain in detail the research methodology that can be used by the research when scrutinising the findings from the field, which are the primary and the secondary data together with the sampling techniques. The next chapter will present the data and analyse the findings from the field’s work.