Functional Institutions key in the recovery of Zimbabwe

Whatever the case, economists have predicted that the Zimbabwean economy is poised to change for the better especially in the coming year (2010), provided that the Government of National Unity (GNU) remains intact. An increase in agricultural production and a good harvest for the 2009/2010 season will boost the economy. It is a well known fact that Agriculture in Zimbabwe is the pillar/engine that drives the economy.

Furthermore, the agricultural sector is a multi-agent sector with a complex chain of inputs, intermediates, outputs and markets that are highly regulated. It is important, therefore, that we have working agricultural institutions in place to support agricultural production. The central issue of economic history and development is to account for the evolution of political and economic institutions which create an economic environment that induces increasing productivity.

Functional institutions

Institutions are defined as a set of constraints which govern the behavioural relations among individuals or groups. Formal organisations such as labour unions and employers organisations are institutions because they provide sets of rules governing relationships both among their members and between members and non members.

If the country does not have functional institutions which act as glue within the state, then even the formation of the government of national unity will not stabilize the economy, but instead create more complex problems. For instance, the issue of the Reserve bank of Zimbabwe dealing with the governor. What is more important is the strengthening of the institution.

It is critical to assess the quality of institutions within the agricultural sector; that is the relationship between farmers, input suppliers, creditors and the market, and other institutions be they legal, social or political, existing in Zimbabwe. Needless to say institutions play a vital role in agriculture economic development.

With the introduction of new players in the sugar cane industry, the newly resettled farmers have signed purchase and milling agreements with Hippo and Triangle. Through these agreements the farmers are supplied with inputs (fertilizers, seeds and chemicals), transportation of their produce to the millers who will deduct money for these services rendered from the total income earned from their produce.

Banks make life hard

Despite the clear rules set out perceptions of unfairness exist with regard to this exchange relationship between cane growers and millers. This kind of negative perception that exists between the newly resettled farmers and the millers may be a result of the political perceptions. Banks which are suppose to provide credit to the newly resettled farmers make life difficult for them as they do not poses the title deeds which are essential for collateral purposes. The issue of land invasions and displacements of commercial farmers coupled with lack of the judicial system to enforce property rights also show the importance of functional institutions.

The Zimbabwean agricultural sector in the past 10 years has been characterized by opportunistic buyers of produce. This has led to higher transaction costs and poor coordination, hence the justification of properly placed institution for agricultural economic development. As far as the importance and effect of institutions on Agriculture is concerned they are important for collecting, analyzing and disseminating information to small scale farmers which will enable farmers to make a difference regarding what to produce, when to harvest and where to sell their produce.

I would like to recommend that for institutions to work there is need to for developmental societies to promote research and development and the need to translate research into action. Lack of properly installed institutions has weakened the ability to provide clear and consistent policies also limiting the capacity to mobilize resources in pursuit of agriculture development.