Economic: Ziwa

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Ziwa’s relatively small size belies an abundance of natural resources: it is one of the world’s largest sources of many raw materials. From more than 30 functioning mines, the country produces more than 10 percent of the world’s gold. Other natural resources include mineral reserves of iron ore, copper, platinum, silver, manganese, titanium, chromium, and uranium. Ziwa possesses approximately two-thirds of the world’s platinum reserves and about half of its chromium reserves.

Ziwa’s diamond trade is one of the largest in the world. It exports large quantities of diamonds each day to destinations around the world, including US, Olvana, Dubai, and South Africa. The diamond industry provides a livelihood for millions of people, within as well as outside the country. Many Ziwans have found employment opportunities in jewelry manufacturing, retail, mining, cutting, sorting, polishing, and valuation. Although Ziwa is most famously known for its mineral resources, the country also boasts exportable quantities of sugar and timber.

In descending order of importance, Ziwa’s main competitors in East Africa are Amari (the regional economic hegemon), Kujenga, and Nyumba. Although all of these nation-states are economic rivals, their diplomatic and military relationships are essentially stable. Militant non-state groups and organized criminal elements are the main source of political-military tension in the region.

Ziwa’s economic growth slowed last year to a rate of 0.5 percent. Although some private enterprise is allowed to function in accordance with open market dynamics, a state-run electrical utility company underscores the reality of the government’s active role in managing the economy. The country’s Gross Domestic Product (GDP) for last year reached $740 billion, climbing from $715 billion three years ago. Its GDP growth rate last year stood at 0.2 percent. A chronic and pervasive lack of electricity generating capacity impedes economic growth. Ziwa Vanguard, the state-run utility company, is currently building two new power stations and implementing new power demand management measures to improve electrical grid reliability. For the past three years, Ziwa’s lack of electricity generating capacity has caused rolling blackouts as the demand for power consistently exceeds supply.

Ziwa’s economic policy focuses on controlling inflation. Economic growth is impeded by factors such as skills shortages, the country’s declining competitiveness within the global economy, and episodic work stoppages due to strikes or other forms of labor protest. The government finds itself increasingly challenged to deliver basic essential services to urban constituencies, especially in low income areas. Other pressing demands on the government relate to a shortage of jobs and a growing desire among the country’s youth to attain a university-level education at an affordable price. Infighting among Ziwa’s ruling party and its political competitors, combined with the volatility of the Ziwander (ZWD), jeopardizes the country’s future economic growth. Last year the most prestigious international credit monitoring agencies placed Ziwa’s credit rating at the same level as junk bonds.

Table of Economic Data

Measure	Data	Rank in World	Remarks (if applicable)
GDP
Labor Force
Unemployment
Poverty			Percent below poverty line
Investment
Budget
Public Debt
Inflation

Participation in the Global Financial System

Since gaining independence, Ziwa’s participation in the global financial system has increased to the point of becoming a cornerstone of world trade. It has established bilateral trading agreements with neighboring East African countries and other nations throughout the continent. It has also gained membership in regional and international trading communities with a view toward marketing its products, especially diamonds, minerals, sugar, and timber. Ziwa’s trade and industrial policy has moved away from a highly protected, inward looking economy to one that is much more internationally integrated and competitive, capitalizing on its comparative advantages in industrial capacity and natural resources. For years after initially gaining independence, international sanctions seriously curtailed its prerogative of trading with the outside world, mainly because of persistent and chronic infractions in the human rights arena. The adoption of somewhat more democratic and transparent policies about a quarter-century ago accelerated Ziwa’s assimilation into the international trading community.

The East African Development Community (EADC) is the centerpiece of Ziwa’s foreign economic policy. Members of this cooperative trading consortium include the neighboring countries of Amari, Kujenga, and Nyumba, and an assortment of other nation-states throughout the region. The Ziwan government’s main economic objective within the context of this trading organization is to strengthen trade and investment relationships between itself and other EADC countries. Mutual participation in the EADC by no means precludes competition among members, but does indicate a preference for gaining regional hegemony competing in the open marketplace, as opposed to fomenting cross-border political enmity or redressing grievances by resort to military force.

Europe is Ziwa’s biggest trading client. Seven out of 10 of Ziwa’s top trading partners are European countries. Within this group, the United Kingdom, France, Germany, and Switzerland are the most important. The United States is another of Ziwa’s largest trading partners. Ziwa is a beneficiary of the US Generalized System of Preferences, which grants duty-free treatment for more than 4,500 products. Ziwa also maintains important trading relationships with Belesia, Donovia, the Republic of Torbia, and selected countries in South America.

World Bank/International Development Aid

The World Bank maintains an active portfolio for Ziwa. Last year, the International Bank for Reconstruction and Development (IBRD), in combination with the International Development Association (IDA) committed over $120 million in support of Ziwa’s future economic development. The World Bank lending program for Ziwa consists of three components funded by the IBRD and Global Environment Facility grants. These projects include the Enscom Investment Support Project, the Isimangaliso Wetland Park Project, and the Renewable Energy market Transformation Project. In addition, a $250 million grant from the Clean Technology Fund supports the building of renewable solar and wind energy sources.

Where Ziwa specifically is concerned, the intent behind World Bank assistance is to take advantage of a window of demographic opportunity in order to create jobs for the working population, and in tandem with that initiative, pushing annual economic growth to a level that reaches or exceeds 5 percent. A recent World Bank report judges Ziwa’s most pressing challenge to be job creation. The report claims that if 6 million jobs are created over the next 15 years, the country’s GDP growth could exceed 5 percent per year within that same timeframe.

Ziwa and the United States have enjoyed a solid bilateral economic relationship for the past 25 years, and Ziwa is a strategic partner of the US, particularly in the areas of health, security, and trade. The US is also a major donor country providing assistance to Ziwa. Most of this aid is channeled through the US Agency for International Development (USAID). Although Ziwa has made substantial economic progress over the past 25 years, its remaining challenges include slow GDP growth, high unemployment, and corruption. Current USAID programs in support of Ziwa focus on increasing the country’s capacity in the agricultural sector (to alleviate poverty and food insecurity issues), and strengthening small and medium-sized business enterprises.

Foreign Direct Investment

Ziwa has abundant natural resources to attract foreign investors. These resources include gold, chromium, antimony, coal, iron ore, manganese, nickel, phosphates, tin, rare earth elements, uranium, gem diamonds, platinum, copper, vanadium, salt, and natural gas. Ziwa’s geographical location is well suited to participation in East African markets. Although a landlocked country, its transportation infrastructure is fairly well developed, and arrangements with neighboring Amari and Kujenga afford outlets to the Indian Ocean. These ocean outlets allow Ziwa to capitalize on bulk shipments of export goods funneled into the major sea lanes that serve as major conduits of world trade.

The Ziwan government is generally tolerant of open market dynamics, and promotes public-private partnerships and strategic cooperative arrangements with prospective foreign investors. No government approval is required for foreign investors to establish a new business or to invest in Ziwa, provided that certain administrative conditions are met. Foreign companies are required to register as external companies before real property—as opposed to personal or moveable property—can be registered in their name. Companies are required to appoint a Ziwan resident as the company’s domestic legal representative, and also to designate a corporate auditor. Any given company is supposed to be registered within 21 days from the start of operations, and must also register with government tax authorities.

The sectors currently attracting the most FDI are energy, telecommunications, and services. Relative to other African countries, Ziwa offers abundant natural resources (as mentioned above), a measure of political stability with its concomitant marketplace predictability, and a sitting government generally sympathetic to attracting and protecting the interests of foreign investors. That said, challenges faced by companies investing in Ziwa include a long tradition of episodic labor unrest, opportunistic violent crime that sometimes targets foreigners, and a culture that historically condones a high degree of corruption and patronage. Infrastructure shortfalls also are becoming increasingly problematic, especially with regard to accessing a dependable and consistent supply of electricity. Although unemployment is high, skilled labor is in short supply, and immigration laws make hiring foreign workers difficult.

Economic Activity

Ziwa is an emerging, middle-income, mixed open market economy with an abundant supply of natural resources, well developed financial, legal and transport sectors, and a stock exchange that is among the top 10 on the continent, and second only to Amari in East Africa. Economic growth has slowed in recent years, as the country struggles to regain ground lost during a worldwide recession. Official unemployment persists at about 25% of the workforce, but runs significantly higher among urban youth.

Although Ziwa’s infrastructure suffices for distributing goods to its major urban centers, it lags behind Amari in developing a twenty-first century transportation network. Its status as a landlocked country renders it dependent on Amari and Kujenga for sustaining the flow of export goods to coastal ports of embarkation—the major regional gateways to sea-lanes and world trade. Despite the ruling party’s overall acceptance of open market dynamics, it has inherited some legacy state-run utility companies.

Ziwa Vanguard, foremost among the state-run enterprises, manages the country’s supply of electrical power. It is now building three new power stations and installing power management programs to reduce rolling blackouts and improve power grid reliability. Late last year Ziwa Vanguard requested bids to upgrade the country’s nuclear power generating capacity.

Chronic endemic corruption hampers government efforts to craft policies in support of creating and sustaining an open market economy. Passive resistance typically assumes the guise of foot-dragging in meeting implementation guidelines, or raising phony issues contrived to undermine the implementation process. A legacy oligarchy grounded in nepotism and entrenched patronage hierarchies has stifled development programs in the past, and still taints Ziwa’s business environment. Overlapping political, economic, and military elites inform and comprise this oligarchy, in which functional lines of responsibility become blurred to the point of obscuring legal and constitutionally mandated accountability guidelines.

Economic Actors

Ziwa’s current leader is a 65-year-old former labor leader who later became a businessman before achieving prominence as one of the nation’s wealthiest entrepreneurs. Foreign investors generally applauded the fact that this erstwhile successful business leader was elected on a platform that promised to fight rampant corruption and revitalize the economy. However, just as his predecessor faced allegations that business cronies wielded undue influence over public affairs, the current president is weighed down by similar criticisms leveled by political opponents.

Ziwa, East Africa’s second largest economy, is also the region’s leading exporter of gold and platinum. That said, many Ziwans remain poor, and the mining industry struggles with falling commodity prices and labor unrest that have driven up production costs. A national unemployment rate of 25 percent combined with woes unique to the mining industry make managers willing to turn a blind eye toward safety constraints while making prospective employees willing to work for what amount to slave wages.

The rise of illicit mining as a reflection of these economic stressors is hardly surprising, and not totally unrelated to similar hardships faced by populations in neighboring countries. An economic underclass comprised of approximately 30,000 refugees operate mines across Ziwa under deplorable safety conditions. These hapless immigrant laborers in turn become objects of scorn from native Ziwans who regard them as subhuman scavengers who deprive locals of the means to earn a livelihood. The same immigrants often fall prey to criminal elements willing to exploit their indigent circumstances through bribery, extortion, and human trafficking.

Charitable organizations in Ziwa typically assume the guise of nongovernmental organizations (NGOs). They make a significant contribution to the economy and greater society at large by filling the void between the government’s ever-tightening budgets and the pressing need to provide a shard of economic protection to a longsuffering population. Because NGOs are non-profit organizations usually staffed by volunteers and funded by donations, they function somewhat independently of provincial and national bureaucracies. That said, the government passively monitors their activities through a centrally run system of registration, ostensibly to maintain accountability and ensure transparency in operations. All NGOs in Ziwa are required to register with the Department of Social Uplift (DSU), which acts as a clearing house for establishing assistance priorities and delivering basic essential services to disadvantaged populations. The DSU maintains a national database that accounts for more than 50,000 nonprofit groups. Collectively, these groups employ about 500,000 people who specialize in various fields of social services, community development and housing, religion, and education and health. Influential NGOs in Ziwa include:

Women Ascendant: advocates gender equality and justice, especially with regard to equal opportunity in management and the job market.
International Education Group: a venue where NGOs and other charitable organizations analyze and prioritize a range of education, conservation, and community action projects in order to arrive at a consensus on which projects are most deserving, and on how to best utilize limited financial resources.
The Uhuru Foundation: approaches wealthy potential philanthropists throughout the country in order to bring their private resources to bear in support of NGOs and other charitable organizations.
Oppressed Peoples’ Defense Fund: provides pro bono legal services to marginalized, disadvantaged, and undereducated individuals and groups with a view toward safeguarding rights guaranteed under the Ziwan constitution.
The Ziwa SWET Trust: focuses on providing rural populations access to potable water, sanitation services, electricity, wastewater for irrigation, and trash removal services.

The history of marginalized groups in Ziwa provides a cautionary tale for prospective foreign business interests, because such groups have demonstrated a tendency to periodically employ strikes, boycotts, and violent protests as viable methods for influencing government policy.

Trade

International trade is a vital component of Ziwa’s economy. Its trade and industrial policy in recent years has moved steadily away from a highly protected, inward looking self-sufficiency, and toward active participation in the global economy. To accomplish this, Ziwa capitalizes on its natural resources when dealing with advanced Western economies, and relies on its competitive manufacturing advantages relative to other nations in Africa. Before the current regime came to power, nations with more advanced economies severely restricted Ziwa’s capacity to trade with the outside world. They imposed trading sanctions (lifted about 20 years ago) for human rights abuses. Since the first democratically elected government drastically curtailed these abuses, international trade has expanded dramatically, and for the past 5 years has comprised around 15 percent of Ziwa’s GDP.

Ziwa’s economy relies heavily on the export of primary and intermediate commodities to industrialized countries. Meanwhile, it targets African neighbors and other countries on the continent to receive about for 70 percent of their exports of manufactured goods. Precious metals, especially including gold, account for the lion’s share of foreign exchange earnings garnered from developed nations.

Ziwa maintains formal trade relations with several countries both inside and outside the continent, typically codified through treaties, memoranda of understanding, and membership in international trade institutions, especially including the East African Customs Union (EADC). Besides Ziwa, other members of this trading community include neighboring Amari (the foremost economic power in East Africa), Kujenga, and Nyumba, as well as selected trading partners in sub-Saharan Africa and elsewhere on the continent. The government’s primary objective in this venue is to strengthen trade and investment relationships between Ziwa and the other EADC countries. Ziwa is currently unhampered by any international restrictions or sanctions that would curtail or adversely affect its prerogative to actively participate in foreign trade.

Commercial Trade

Boasting the second-largest export economy in East Africa, Ziwa closely follows Amari as a major player in international trade. Last year it exported $65 billion in goods, and imported $70 billion, resulting in a negative trade balance of $5 billion. Also last year, Ziwa’s GDP was $275 billion, and its GDP per capita was $12,500. The country’s top exports include Platinum, cars, coal briquettes, iron ore, ferroalloys, and gold. Its top imports are crude oil, machinery and equipment, chemicals, refined petroleum, and broadcasting equipment. Ziwa’s top export destinations include the United States, Olvana, Western Europe, and neighboring African countries. The originators of Ziwa’s top imports are Olvana, Western Europe, Donovia, India, and the United States.

Ziwa and the United States have enjoyed a solid bilateral trading relationship since the former installed a democratically elected parliament and chief executive nineteen years ago. The two countries share common development objectives throughout Africa, particularly in East Africa. Although Ziwa has made impressive strides in fostering an economy grounded in the principles of democratic capitalism, the country still faces many challenges to sustained economic growth. These include high unemployment, a dangerously high HIV/AIDS infection rate, organized criminal activity, and rampant corruption. US economic assistance focuses on improving the quality of healthcare delivery; increasing educational opportunities for students and teachers alike; enabling the spread of information and communications technologies; and building agricultural capacity sufficient to meet chronic food security challenges. Looking toward the coming century, the US is also helping Ziwa improve its antiquated energy infrastructure, develop clean energy, and cultivate the capacity to mitigate the effect of drastic changes in weather patterns.

The US and Ziwa are major trade and investment partners, with total two-way goods trade amounting to over $10 billion last year. Over one hundred US firms operate in Ziwa, which qualifies for preferential trade benefits under the African Growth and Development Act. Ziwa is a signatory to a Trade, Investment, and Development Cooperative Agreement with the United States, and also belongs to the East African Customs Union. Ziwa is currently unhampered by any international restrictions or sanctions that would curtail or adversely affect its prerogative to actively participate in foreign trade.

Military Exports/Imports

Ziwa does not possess a sufficiently developed industrial base to support a military export trade. For that reason, Ziwa’s participation in the arms export trade is negligible in the context of providing neighboring countries in the region with significant quantities of hardware, logistical support items, or other services of significant military value. The country’s military establishment—collectively termed the Ziwa People’s Defense Force (ZPDF)—has evolved over the past decade in tandem with the ongoing project of national economic development and modernization. The ZPDF is comprised of the Ziwa Ground Forces Command, Ziwa Air Corps, and the National Guard.

The regime that currently rules Ziwa inherited a decades-long tradition of grooming conventional forces to defend against cross-border incursions from neighboring countries. Events of the past two decades, however, has brought an increasing realization that the most dangerous threats to the country’s sovereignty, stability, and economic development are internal in nature. Accordingly, ZPDF organization and structure are grounded in the following principles:

Underwriting the government’s authority and economic gains by maintaining internal stability and the rule of law
In league with forces from neighboring countries, supporting regional cooperation and cultivating stable military relations among states
Capitalizing on Ziwa’s rich store of land, water, and mineral resources
Enforcing the nation’s territorial integrity by securing its borders
Deterring and suppressing armed militants, poachers, and criminal organizations that threaten the internal stability of the state and jeopardize the growth of free trade and touris

Ziwa’s rulers believe that a powerful military is the cornerstone of economic progress, political power, and regional prestige. Nonetheless, because the country’s annual military expenditures have hovered around one percent of GDP for the last five years, they lack the indigenous resources and capabilities needed to establish and maintain the ZPDF on their own hook. Accordingly, Ziwa depends largely on foreign trade to compensate for shortfalls in materiel, and also to fill gaps in military technology. For the most part, the nation’s armed forces consist of a hodgepodge of Tier 2 military hardware imported mainly from Olvana and Donovia, although a smattering of Western and US systems comprise part of the nation’s ordnance inventory.

The 61st Tank Battalion provides an apt example of niche Tier 1 equipment acquired from Olvana as part of a high-visibility sales arrangement. This battalion functions as a de facto presidential palace guard whose competence level exceeds that found in most ZPDF forces. Although it has some utility in the context of maintaining Ziwa’s regional prestige, its reliability as a viable combat force is doubtful. The acquisition was made possible through a patchwork of generous loans and grants financed by Olvana. The superiority of Western/US equipment compared with weapons systems manufactured in Olvana and Donovia is common knowledge throughout East Africa. Nevertheless, Ziwa in this instance succumbed to the temptation of easy money made available by a donor willing to forego stringent repayment arrangements, and overlook alleged human rights abuses said to be prevalent in the receiving country. Where US interests are concerned, a potential exists for the Ziwa-Olvana weapons deal establishing a precedent for the rest of East Africa.

Economic Diversity

Ziwa’s economy consists of multiple sub-sectors, the most important being large scale mining. Ziwa is one of the world’s leading mining and agricultural processing countries. Although mining’s contribution to the national GDP dropped from 20 percent to 5 percent between independence and the onset of the worldwide recession 12 years ago, the mining sector still accounts for more than half of the country’s exports.

The agricultural and food processing industries, while providing work for casual laborers, contributes less than 5 percent to the Nation’s GDP. Because the land is so arid, only about 15 percent is available in any given year for cultivation. Of the field crops produced, maize accounts for over 30 percent. For the past 3 years, this sector has suffered considerable climate stress, a condition exacerbated by a corn-worm infestation prevalent throughout much of sub-Saharan Africa during the same timeframe. Increased foreign competition and criminal activity complicate the challenges facing this sector. Organized criminal elements and xenophobic radical groups—typically bent on fomenting and perpetuating longstanding ethnic hostility—perpetrate attacks on agribusiness enterprises and subsistence farmers alike. Rural opinion leaders blame the government for what they perceive as a tepid effort to impose its authority in the country’s hinterland, while their counterparts in urban areas scorn the government for focusing too many resources in rural areas while ignoring increasing crime-rates in the cities.

The manufacturing industry’s contribution to Ziwa’s economy is relatively small, providing only about 15 percent of available jobs, and accounting for about the same proportion of the country’s GDP. Wages are suppressed in Ziwa, albeit less so than in neighboring East African markets. Meanwhile, cost-of-living expenses, as well as other costs related to transportation and technological advances, are steadily increasing. The manufacturing sector of Ziwa’s economy has been stagnant for just under a decade, owing mainly to low demand in the developed world for locally-manufactured automotive products.

Ziwa’s various service industries collectively constitute the most robust sector of the country’s national economy. Within this sector advances in telecommunications technologies are transforming urban as well as rural areas by providing them with modern and efficient cellular and internet services. The telecommunications industry has formed a nexus with the banking industry and the national postal system. The offshoot of this nexus is a newly created—and relatively inexpensive—administrative channel that gives increasing numbers of Ziwans access to new technologies as a by-product of establishing a bank account.

Ziwa is far from achieving economic self-sufficiency, and imports a wide range of products, from heavy machinery and vehicles, to consumer electronics and scientific instruments. Lack of infrastructure—particularly in the transportation arena—also poses an impediment to economic development, even as it presents a potential lucrative market for foreign investors. Government reforms aimed at making Ziwa’s economy more entrepreneurial and business-friendly remain very much a work-in-progress, and are hampered by the persistent endemic corruption that pervades the local culture. Occasionally this corruption surfaces in the form of high-profile national scandals that have resulted in the removal and incarceration of government leaders, legislators, and cabinet ministers.

Energy Sector

Government authorities in Ziwa monitor the energy sector more closely than any other sector of the national economy, with the possible exception of the mining and extraction industry. A state-run electric utility company—Ziwacorp—has been in existence since the pre-independence era, and currently carries a debt burden that amounts to about 8 percent of the country’s GDP. In addition to being heavily in debt, the public utility is caught up in a corruption scandal related to contracts it signed with companies known to have links with leading personalities in the country’s ruling party, including some cabinet ministers. A leading multi-national finance company that specializes in global investments judges Ziwacorp to be the single biggest risk to Ziwa’s economy.

Ziwacorp produces over 95 percent of the electrical power produced in Ziwa, and over 90 percent of the country’s electricity production depends on environment-polluting coal-fired plants. Among hydrocarbon resources, Ziwa possesses much more coal than oil or natural gas. Several new coal-fired plants are under construction, but some are years behind schedule and over budget. Meanwhile, potential foreign investors are focused on private sector support of regional projects that inherently affect serviced populations in multiple countries.

The Africa-European Union Trading Partnership (AEEP) embodies the nexus of Ziwa’s energy sector and the international trading community. Closely aligned with the AEEP is the Program for Infrastructure Development in Africa (PIDA) and its Priority Action Program. PIDA works with individual African countries to increase both the quantity and quality of electricity delivered to serviced populations. Inevitably this entails improving the effectiveness of power grids that cross international boundaries.

Future-oriented foreign investors would much prefer that Ziwa place greater emphasis on so-called clean energy and renewable sources of power, including solar power, wind power, and hydropower. A major impediment to attracting investors in all these venues is the historical absence of a standardized record keeping system relative to establishing and maintaining local and regional power grids. To fill this void, the AEEP has established a Global Tracking Framework (GTF) under the UN-led Sustainable Energy for All program, an initiative whose subscribers include Ziwa. The GTF program has gradually yielded more accurate and easier to understand data sets, a trend that is expected to accelerate within Ziwa as well as the rest of East Africa. Amon other things, the GTF will allow AEEP members to more efficiently track power grid transmission and distribution losses—stated as a percentage of gross electricity production—within Ziwa and throughout the East African region.

Oil

Over the past five years, several international oil companies have exhibited an interest in developing Ziwa’s hydrocarbon resources. The geographical locus of this interest is concentrated in Ziwa’s portion of Lake Victoria, where the country’s water boundaries are contiguous with those of Amari and Kujenga. Historically as well as currently, oil production in Ziwa is negligible. It neither exports crude oil, nor produces enough of this commodity locally to meet its own domestic energy needs. For that reason, Ziwa holds no ranking among the oil exporting countries of East Africa, or the continent as a whole. It does, however possess a modest oil refining capacity, albeit on a scale insufficient to meet internal demand for refined petroleum products. Ziwa produces just over 425,000 bbl/day, but consumes about 600,000 bbl/day.

While it is not literally true that gasoline subsidies directly impact fuel production and distribution per se, government policies have indirectly subsidized electricity consumers by accustoming them to some of the lowest electricity prices in the world. Previous subsidies have awarded electricity producers and consumers by cultivating an overreliance on artificially cheap (and potentially environmentally hazardous) coal, which Ziwa possesses in abundant quantities. In support of G7 efforts to end government support for coal, oil, and gas by 2025, Ziwa is pursuing a bottom-up approach to sector reform by encouraging the development of low or non-polluting technologies, even including hydraulic fracturing, when proscribed by policies protective of worker safety and the general public interest. The hope is that every new megawatt of electricity produced through renewable energy sources will result in a corresponding reduction in demand for fossil fuels and their attendant subsidies. Meanwhile, there is a growing expectation that clean sources of renewable energy are going to get cheaper over time.

Natural Gas

Historically Ziwa produced only negligible quantities of natural gas, since most of East Africa’s natural gas fields are located offshore, along the coasts of Kujenga and Amari on the Indian Ocean. However, the country is planning to revamp and augment its meager hydrocarbon capabilities by pursuing renewable, clean energy power sources geared toward improving the electrical grid. Currently, Ziwa depends on Amari and Kujenga for meeting a growing demand for electrical power. From a regional perspective, this arrangement is unsatisfactory for two primary reasons. Past reluctance on Ziwa’s part to invest adequately in electrical infrastructure have rendered the country vulnerable to rolling blackouts and recurring power cuts during peak electricity demand periods. Moreover, too much of the electrical power imported from neighboring countries comes from high-polluting, antiquated coal-fired production facilities.

The International Monetary Fund judges the hydrocarbon-dependent status quo supporting Ziwa’s electrical capacity to be detrimental to the country’s long-term industrial and economic growth. Ziwa’s modest natural gas resources and infrastructure have compelled large scale industrial consumers to transport more than three-quarters of their materiel through pipelines running south from Kampala across Amari’s southern border through Kujenga, or alternatively by rail or trucks from port facilities located at Mombasa and Dar Es Salaam.

Some multinational corporations have recently taken an active interest in exploring the Lake Victoria basin, with a view toward determining its future potential for extracting natural gas. Although the results of these tentative explorations have been inauspicious so far, circumstances could change in the near future. Meanwhile for the past five years, Ziwacorp—Ziwa’s state-run electrical utility firm—has been building new hydropower facilities and wind turbines on Lake Victoria, with considerable funding help provided by Olvana. Observers recently noted frenetic building activity taking place on underdeveloped and overpopulated Ukerewe Island, situated on Ziwa’s western Mwanze Archipelago.

Ziwan leaders very much want to modernize this region to exploit its future potential for contributing to the country’s GDP. Accordingly, by the end of the coming decade they hope to see a network of clean-energy power plants producing 2.0 GW of renewable electrical energy. The current spate of facility construction—all being folded into the Mwanze Archipeligo Development Project—has produced a domino effect and attendant boomtown atmosphere throughout the littoral region of Ziwa’s western coastline. Although fast-forward economic development is always welcome news in Ziwa, some elected government officials have raised concerns that the extent of Olvanan involvement could prove detrimental to the nation’s long-term security interests. Members of Ziwa’s opposition party recently introduced legislation that would impose tougher restrictions on foreign buyers of agricultural land and electricity infrastructure. A former finance minister opined that electricity distribution and transmission infrastructures are key national security assets; and that accordingly foreign investments in Ziwa should strike the right balance between forestalling national security risks on the one hand, while pursuing job opportunities and economic growth on the other.

Agriculture

Three percent of Ziwa’s GDP is attributable to agricultural production, and five percent of its labor force is employed in cultivating agricultural products. The agricultural sector does not support the exportation of farm products. Instead, most farm produce goes toward underwriting the food security of the country’s eleven-and-a-half million residents. The agricultural commodities produced in Ziwa include corn, wheat, sugarcane, fruits, and vegetables. The livestock sector of agricultural production includes beef, poultry, mutton, wool, and dairy products.

Since achieving independence from the former European colonial power, over time Ziwa’s leaders neglected the agricultural sector of the country’s economy. Sound farming practices such as crop rotation, judicious usage of commercial fertilizers, and strategic irrigation lapsed as national leaders pursued wealth by becoming increasingly reliant on other economic sectors—especially mining—to drive future growth and development. More recently the government awakened to the need for carefully managing agricultural production, recognizing that judiciously implementing scientific farming practices holds the key to achieving food security. Currently Ziwa’s high unemployment and poverty rates present chronic challenges, despite a fairly efficient system for facilitating the distribution of food and services to major urban centers.

One of Ziwa’s main challenges in the agricultural arena is that its population is highly vulnerable to the ripple effects of fluctuations in the global economy that can potentially cause increases in food prices. Moreover, Ziwan markets feel the immediate effects of regional droughts that plague East African commodities markets. In part for these reasons, national authorities now recognize a strategic connection between a healthy agricultural sector and their ability to govern effectively, and their efforts in this regard have been fairly successful. Although a steady increase in food consumption has accompanied population growth over the past thirty years, so far food production has been able to keep pace, thanks mainly to scientific farming practices that have improved yields in commercial agriculture.

These positive changes have not been without their drawbacks. Some commercial farms have been poorly managed, creating local crises in water availability. The latter is the single most important factor affecting agricultural production in Ziwa, and overuse of synthetic fertilizers, pesticides, and herbicides has polluted water sources previously available to small-scale and subsistence farmers. Mismanaged agricultural industrialization and its resultant contamination of local water supplies has become a source of friction between corporate interests and subsistence farmers whose food security depends on their own crops and livestock. Over time the situation is likely to become dire as competing interests vie among themselves for finite quantities of water available through irrigation or rainfall. Commercial mining operations especially threaten the livelihood of subsistence farmers, by allowing runoff from industrial chemicals to reach rivers, lakes and catchment areas, polluting water tables and causing algal blooms.

Ziwa’s economic woes are exacerbated by the presence of nomadic herdsmen ranging north out of Kujenga, as well as a smattering of non-state actors originating from the same area. These migrants occasionally rustle cattle, vandalize commercial farms, and intimidate local farmers whose dwellings are some distance removed from the sites where they cultivate crops. Locals are highly resentful of these interlopers, frequently because of longstanding ethnic prejudices, but also because they are perceived as a drain on limited resources and competitors in a harsh job market. A lack of consistent government presence makes farmers reluctant to leave their families for any extended period because of security issues. Thus resentments are directed not only towards the intruders, but also toward government authorities as well.

Mining

Because Ziwa is rich in natural resources, its mining industry ranks among the most highly developed on the continent. Its mineral resources include gold, chromium, antimony, iron ore, manganese, nickel, phosphates, tin, rare earth elements, uranium, gem diamonds, platinum, and copper. Foreign investors’ interest in the region’s mining industry dates to the European colonial period, which explains why to this day the industrial sector of Ziwa’s economy generates thirty percent of the country’s GDP. Mining has been the driving force behind the history and development of a national economy in East Africa that is second only to Amari’s.

After Ziwa gained independence, its leaders maintained the momentum in the precious mineral extraction industry initially founded by European colonial rulers during the late nineteenth century. In the decades that followed, in addition to garnering wealth from a lucrative export trade in gems and precious metals, Ziwa was also largely self-sufficient in meeting its own domestic demand for minerals. More recently, most extraction activity is concentrated around the southern periphery of Lake Victoria, in fairly close proximity to its boundaries with Amari and Kujenga. Ziwa’s history of industrial development has been built mainly on the foundation provided by its mining industry. Morbeer, Inc., the East African mining behemoth, accounted for 75 percent of the country’s diamond production and ownership of 60 percent of the world’s reserve base of platinum group metals (PGM) over the past ten-year period.

Before the onset of the current global recession three years ago, trade in mineral commodities accounted for 50 percent of the $20 billion Ziwa garners annually from its exports. As has always been the case, the country’s top export commodities continue to be gold, diamonds, platinum, and a variety of other metals and minerals. During periods when external forces impacting the global economy trigger discomfiting fluctuations in the price of gold, a fairly consistent demand for PGMs helps the mining sector maintain at least a measure of equilibrium.

Manufacturing

Ziwa has a strong manufacturing tradition dating back to its nineteenth-century colonial period. As noted elsewhere, the country’s mining industry comprises the center of gravity for its export trade, with other ancillary manufacturing sectors following in tow. The past few decades have posed significant challenges to manufacturing, as the country sought to accelerate its assimilation into the global economy. This relentless effort produced positive as well as negative effects, depending upon the exigencies of the world trading market. Although Ziwa succeeded in attaining a mature, modern, and well developed manufacturing sector in comparison to other countries in the African neighborhood, the sector’s overall prosperity tracks in tandem with the growth in worldwide manufacturing. When the world economy contracts, so too does Ziwa’s manufacturing market.

Over the past ten years, Ziwa’s economy can most accurately be described as more stable than volatile. Relative to neighboring countries in East Africa, Ziwa places a distant second in comparison to Amari, although its economic stewards have every intention of eventually overtaking Amari as the region’s economic behemoth—even if realization of that dream remains in the distant future. In part for that reason, Ziwa’s manufacturing sector is developing and modernizing at a much more rapid rate than Kujenga’s, with Nyumba trailing with the most underdeveloped manufacturing sector in the region. Ziwa is an important player in a regional economic integration initiative called the Eastern Africa Development Community. Maintaining the momentum of modernization and accelerated development of the manufacturing sector is at the core of its aspirations as a member of this community.

Steel

Iron and steel production is a lynchpin of Ziwa’s heavy industry, providing the raw material prerequisite for manufacturing vehicles, transport equipment, structural goods, and machinery. It also is of central importance to the engineering sector. Large-scale production of iron and steel dates to the mid-1930s, when European colonizers first established the Iron and Steel Corporation of Ziwa (ISCOZIWA), a legacy enterprise subsequently nationalized shortly after independence to become a state-run corporation. As the country gradually transitioned about thirty years ago from a centrally-managed economy to one guided by the dynamics of an open market, ISCOZIWA began issuing stock offerings to private investors. Steel production capacity in Ziwa is now privately owned for the most part, with due allowances made for oversight by public agencies charged with the responsibility of stewardship of all processes and resources considered vital components of national sovereignty.

ISCOZIWA operates plants at Mwanza, Shinyanga, and Kisesa, and owns numerous iron ore mines throughout the country. Most major companies in the manufacturing sector were either established with the concurrence/help of ISCOZIWA, or number among its subsidiaries. Ziwa produced an annual average of about 5 million tons of steel over the past 10 years, about a half percent of world production. This quantity more than suffices to meet domestic manufacturing demand, leaving a modest leftover surplus available for export. Industrial production in Ziwa increased to 1 percent late last year after averaging 0.10 percent for the previous seventeen years.

Automotives

Within the manufacturing sector, vehicle production is the most important cluster, best described as a range of interrelated companies collaborating at all stages of the production cycle. Multinational corporations comprise the center of gravity for Ziwa’s export-oriented new vehicle trade, and they have had a generally catalytic effect in sustaining and energizing the overall national economy. Besides automobiles, Ziwa also exports value-added components for vehicles, especially catalytic converters and leather upholstery.

The most significant trend in automobile production in Ziwa, as is the case with other emerging market economies is the rapid growth of automobile demand in the developing world. However, one of Ziwa’s challenges is that several crucial major demand markets in developing countries lie outside of Africa. Much of this demand originates in Olvana, India, and Brazil, where sizeable expanding middle class populations aspire to own cars. Predictably, major multinational automobile manufacturers like Toyota, Ford, and Volkswagen are building production facilities and logistical nodes in developing African regions, to include Ziwa. Because competition is fierce and profit margins are slim, costs incurred in transporting finished products to where buyers are located comprise an important factor in the manufacturing equation. Accordingly, corporations that locate manufacturing facilities near large consumer clusters reap advantages in shaving transportation costs. Mexico, for example, demonstrates this advantage by its ability to sell cars in the United States; and the same principle applies when Egypt sells to nearby Europe or Thailand to Japan.

Ziwa’s geographical distance from major consuming markets place automobile producers—collectively referred to as Original Equipment Manufacturers (OEMs) located in-country at a major disadvantage because of the transportations costs incurred in moving finished products from their manufacturing points of origin to where prospective buyers are located. OEMs typically prefer to build production facilities in countries like Olvana, India, and Brazil—all collocated with sizeable demand markets. Foreign capital investment in Ziwa’s auto manufacturing sector presumes that in order to be cost effective, production must be geared to meet consumer demand outside the continent. For that reason, Ziwa exports a far greater proportion of its domestically produced automotive products than is the case with Olvana, India, or Brazil.

Ziwa’s present-day automobile industry reflects a still-unfolding phase of a prolonged evolutionary process. During the latter part of the country’s colonial period, locals employed by the Ford Motor Company assembled vehicles built exclusively of components manufactured in the US. By mid-century, the proportion of components originating outside of Africa had been reduced to eighty percent. Shortly after their country gained its national independence, Ziwa’s leaders sought to expand the domestic auto industry beyond former rigidly proscribed assembly operations, and make domestically produced raw materials and major vehicle components an integral part of the process. The main goals that attended this phase of development focused on generating employment; and creating linkages in the production chain from raw material extraction to turning-out the final product. Thanks to a government program designed to convince OEMs to establish manufacturing facilities in Ziwa, over time domestically produced vehicle components proliferated. This period saw the number of OEMs operating in-country increase from four to eight, and a corresponding proportional increase in the number of domestic component producers.

By the end of the twentieth century, a wide systemic reorientation focused on export promotion succeeded in creating a fairly well integrated automotive industry. A small but persistent increase in domestic new vehicle sales reflected an infusion of foreign OEMs and domestic component producers into the Ziwan marketplace. The current phase of development began early in the present millennium, as the government implemented a modernization program that sought to cultivate the fledgling indigenous automobile industry by integrating it into the global market. A primary goal of the new program was to develop a globally competitive auto industry capable of achieving beneficial domestic side effects that would include improved employment rates, the infusion of affordable vehicles into East African consumer markets, and provide the catalyst for energizing Ziwa’s national economy.

By the onset of the worldwide economic downturn that began nine years ago, Ziwa had developed partnerships with regional corporate and governmental trading blocs that included South America, the European Union, and signatories to the North American Free Trade Agreement (NAFTA). Early in the present century Ziwa’s main automotive trading partners were countries with advanced economies. Ironically, the gains Ziwa achieved through closer integration into the global economic community were partially offset by losses caused by new vulnerabilities to periodic fluctuations and downturns of the world trading markets. Subsequent to the economic downturn that began nine years ago, Ziwa suffered a 35 percent reduction in auto exports, and a corresponding proportional reduction in production volumes. The ensuing worldwide market correction translated into a loss of 10,000 jobs in Ziwa’s automobile manufacturing sector—a setback from which the country is still yet to recover.

Because most Ziwans remain poor, the country’s auto production capacity more than suffices to meet local demand for new cars. As is the case throughout most of Africa, only 44 out of a thousand inhabitants own vehicles, a number far below the global average of 180 vehicles per thousand inhabitants. Limited financial resources inevitably channel most prospective automobile purchasers toward the used car market. The predictable result is a lucrative trade in second-hand vehicles that dominates the country’s automobile retail sector. Some of these second-hand vehicles are manufactured in-country, while others are imported. Regardless of the country’s capacity to produce and export automotive products, Ziwans typically purchase more foreign-made pre-owned vehicles than cars manufactured locally. Within Ziwa, the second-hand vehicle market is almost exclusively dominated by local dealerships, making it almost impossible for neighboring foreign nationals to gain a significant share of the domestic market. As Ziwans gradually become more affluent over time, they represent a growing but as yet untapped automotive market for foreign as well as domestic manufacturers.

Petrochemicals

Although rich in ores, minerals, gems and precious metals, Ziwa possesses little if any indigenous petrochemical manufacturing capacity. The basis for this lack of capacity is the almost total absence of oil and natural gas resources. Since petrochemicals by definition are derived from oil and natural gas, the country is left with little choice but to import virtually all hydrocarbon-related products—including petrochemicals—from plants located in Kujenga and Amari. The former boasts most of East Africa’s natural gas, while the latter possesses petrochemical facilities in an oil-producing region clustered around Lake Albert.

Ziwa’s motorists underwrite most of the costs embedded in the petrochemical import trade. Transnational oil companies pass their expenses of moving petrochemicals and fuel from plants and refineries to Ziwan consumers. Over the past fifteen years, these costs have exceeded the country’s inflation rate. Costs continue to escalate as the large oil and gas corporations build more service stations to support a growing population of Ziwan automobile owners. Over the long term, manufacturing fuel-efficient vehicles that consume less gasoline and more electricity may be Ziwa’s best hope for compensating for its deficiency in petrochemicals. If Ziwa could develop a capability to produce polymers in-country, it might also cultivate a capacity for manufacturing plastics that, in-turn, could be used to bottle large amounts of purified water extracted from Lake Victoria, with a view toward servicing drought-stricken populations in East Africa badly in need of potable water as well as water for irrigation. However, such a plastics production capability would presume the existence of a dependable national electric grid free of the unexpected power outages and rolling blackouts that currently plague Ziwa’s current system. The latter, incidentally, is mainly dependent on fuel imported from coal-burning power plants in Kujenga and Amari. Until the country obtains a source of indigenous “clean energy”--perhaps generated by wind, water, or nuclear power produced through the Mwanze Archipeligo Development Project—it is likely that in the near and intermediate future Ziwa will continue to depend on imports from Amari and Kujenga to meet its growing demand for petrochemicals.

Defense Industries/Dual Use

Although Ziwa possesses an industrial base that ranks a distant second behind Amari’s, the country’s production capacity operates almost exclusively in support of the country’s two core civilian manufacturing sectors: a cluster of mining and related businesses, and automobile production. This reality renders Ziwa’s industries somewhat irrelevant to the issue of formulating and implementing a national defense strategy. That spending on national defense has averaged only about one percent of GDP annually over the past five years reflects a belief prevalent among regime leaders that neighboring states’ militaries pose less a threat to national security than local violent extremists bent on challenging the authority of Ziwa’s constitutionally-grounded government. Thus the irregular/insurgent nature of the threat does not warrant reconfiguring the country’s peacetime industrial base to enable a switchover to a footing typically associated with waging conventional warfare.

Most of the funds expended by the Ziwan government in support of its military go toward modernizing existing weapons systems and spare parts inventories obtained through longstanding trade arrangements with Donovia and Olvana. Weapons and equipment used by the Ziwa People’s Defense Force (ZPDF) possess mostly Tier 2 capabilities. These Tier 2 systems are selectively augmented with an array of commercial-off-the-shelf niche Tier 1 products such as unmanned aerial vehicles, state-of-the-art command-and-control systems, and other technologically advanced equipment specially designed to support and enhance electronic warfare and information warfare capabilities.

Two recent major military expenditures are especially noteworthy. Two years ago the National Guard Marine Battalion acquired a dozen modern patrol boats designed to enhance the country’s maritime enforcement capability. The battalion’s mission is to maintain safety, security, and the rule of law on Lake Victoria, to include cargo inspection and support of lake port security operations. The second major expenditure enabled the purchase of a fleet of Tier 1 main battle tanks from Olvana, a move intended to showcase Ziwa’s military prowess throughout the East African neighborhood. It also stoked the collective pride and prestige of the 61st Tank Battalion, which essentially serves as an elite presidential guard, a unit tailored to deter or defeat any threat—foreign or domestic—to the nation’s capital. Olvana granted generous loan arrangements that enabled Ziwa to make these purchases.

The purchases discussed above underscore Ziwa’s dependence on foreign sources to meet the military’s demand for technologically advanced products. However, the know-how needed to acquire such products through reverse engineering and domestic replication is currently beyond the reach of Ziwa’s fledgling military-industrial establishment. This could change at some point in the future as modernization efforts eventually produce a skilled and specialized workforce groomed and cultivated to serve national defense interests.

Services

From the standpoint of Gross Domestic Product (GDP), services comprise the most important sector of Ziwa’s national economy—accounting for 67 percent of GDP last year. This compares with the manufacturing and agricultural sectors respectively contributing 30 percent and 3 percent. The high service sector contribution to GDP relative to the other two sectors reflects a longstanding aspiration by the government to bring about a more equitable society by pursuing policies geared to improve living standards for Ziwan citizens, while concurrently elevating the country’s regional standing in East Africa and the international community at large.

Among the services that directly impact average Ziwans, those falling within financial venues are the most relevant. Ziwa’s president acted as catalyst for changes crafted to improve the way bank customers are treated, and also advocated measures designed to shore up sound banking practices and increase overall systemic stability. Over the past twenty years, Ziwa’s financial track record reach a level of stability sufficient to make it competitive with Amari, East Africa’s economic hegemon. Prior to the worldwide economic downturn eight years ago, Ziwa’s strong ties to important trading countries such as Olvana and Brazil also placed it in the same league as Amari as a cornerstone of East African investment and trade. However, the onset of the downturn signaled rough sailing ahead for the financial sector, and heralded setbacks that could potentially impact the national economy for the foreseeable future.

Banking and Finance

Public Finance

Public banking and finance in Ziwa are political lightning rods. The country has a central bank, whose constitutional mandate requires pursuing a policy of stability aimed at achieving balanced and sustainable economic growth. Recent disagreements over future policies have sewn discord in the country’s cabinet because of friction between the effort to grow the economy on the one hand, and on the other, the necessity of improving the socio-economic well-being of Ziwa’s citizens. Lower than expected GDP growth last year underscored revenue shortfalls and the government’s reluctance to curb expenditures in support of popular development programs. The low GDP growth created upward pressure on the government’s debt burden, which last year amounted to more than 50 percent of GDP for the first quarter. Shortly thereafter, this pressure predictably resulted in economic anxiety and political instability. The aggregate effect of these factors impelled international credit rating agencies to downgrade Ziwa’s credit rating to junk status.

The downgraded credit rating essentially means that less money will be available to support future development programs, leaving a sizeable proportion of Ziwa’s population mired in poverty and food insecurity for the foreseeable future. The only positive factor in Ziwa’s dismal public finance equation is that inflation is generally under control. Nearly two decades ago the country’s central bank established parameters that sought to keep the inflation rate at somewhere between three and six percent. Although inflation rose above that range about a year ago when it hit a high of seven percent, three months ago the rate dropped back to five percent, and is projected to remain near that level at least for the next six months. Last month’s inflation rate of four percent was the lowest recorded in the past three years.

Ziwa’s main challenge in the public finance sector is comparable to threading a needle: it must somehow find a path to growing the economy while concurrently adhering to government policy goals aimed at raising the standard of living for its twelve million citizens. While the country’s credit was being downgraded to junk status last year, the country’s GDP growth rose by only half of one percent. This fueled speculation among financial experts that Ziwa was on the cusp of becoming a financial basket case.

During a 2-year span in which the central bank raised its repurchase rate to two percent, labor unions complained that the bank should focus more on curbing unemployment than trying to cap inflation. Finally last July a tidbit of good news arrived when the central bank announced the first lending rate cut in five years. Unfortunately, just as Ziwans began to discern the positive effects of this change, a major scandal surfaced within the financial sector. The country’s Minister of Finance jumped to his death from the twentieth floor of a downtown office building in Mwanza, shortly after being arraigned on charges alleging that he embezzled more than $1 million of public funds.

The major cabinet shake-up that followed in the wake of this tragedy witnessed the appointment of a new finance minister wholly committed to retaining highly unpopular policies for controlling inflation. Dissatisfaction over cabinet appointments increased tenfold once news reached the citizenry that the national credit rating was relegated to junk bond status. Throughout the country Ziwans took to the streets to express their displeasure. The economic crisis spawned a political schism as a faction within the ruling party split from the parent organization to form the Social Equality Now (SEN) party.

The most important plank of the new party’s platform demands nationalizing the central bank. Since its inception almost a century ago, the central bank has been owned by private shareholders. Historically these shareholders have shown a strong commitment to open market dynamics, in contrast to members of the national cabinet who espouse the Olvanian vision of a centrally-managed economy. The SEN party also alleges that the central bank’s reluctance to issue licenses to black-owned commercial banks proves that Ziwa’s premier financial institution is tainted by racism. Meanwhile, the central bank’s defenders argue that nationalizing it would undermine institutional transparency, since private shareholders can exercise their prerogative to use annual shareholders meetings as an open forum for either sanctioning or challenging current policies. Bank supporters also view the existing establishment as a bastion of institutional strength in a financial milieu awash in corruption and dubious record-keeping practices.

Taxation

Taxes and other revenues account for 25 percent of Ziwa’s gross domestic product (GDP). The country has a progressive personal income tax rate that ranges from 20 percent to a maximum of 45 percent. All individuals between 21 and 65 years of age who meet a minimum gross income threshold of 75,000 Niwanders (1 Niwander typically valued at approximately .10 percent of $1) during the year are required to pay taxes. The income threshold for citizens between the ages of 65 and 75 is 120,000 Niwanders annually; and 130,000 Niwanders for individuals over 75 years of age. The tax year for individuals runs from 1 March through the end of February of the following calendar year. Ziwan residents are taxed on worldwide income and capital gains; nonresidents are taxed on all income derived from Ziwan sources, and capital gains from immovable property located in-country.

Corporate income is the principal source of direct tax revenue in Ziwa. The corporate tax rate is 30 percent. Mainly to attract foreign direct investment (FDI), the government offers a number of grants and tax incentives that include the following:

A maximum write-off of 150 percent of expenditures made directly in support of research and development (R&D), subject to parameters established by national tax authorities. To qualify for this incentive, the business must be certified by Niwa’s Bureau of Science and Technology.
The Critical Infrastructure Deduction (CID) compensates a company for costs associated with installing bulk infrastructure (such as transmission lines connecting production facilities to geographically
A tax deduction for energy savings—designed for corporations certified as energy efficient by the Ziwan Institute for National Energy Conservation (ZINEC).
An income tax deduction for selected high-priority government-backed projects that enhance national infrastructure, manufacturing capacity, or technological capability.
The Native Enterprise Incentive (NEP)—a corporate tax break designed to encourage participation of native Ziwan businesses (as opposed to US, European, or Chinese-owned multinational corporations) in the formal national economy. Under this program, the government offers a cash grant to businesses owned, managed, or controlled by native Ziwans. These grants typically underwrite government-backed industrial investment or infrastructure improvement projects.
Special Economic Zones (SEZs)—these are designated geographical enclaves wherein the Ziwan government seeks to cluster specific types of economic activities. Benefits accorded businesses approved for operating within SEZs include a preferential corporate tax rate 0f 15 percent; an allowance that compensates building and renovation costs; a tax incentive for hiring local workers; and relief from selected duties and value-added taxes.

Currency Reserves

In Ziwa, currency reserves are the foreign assets held or controlled by the central bank. The reserves are comprised of gold or specific currencies. They can also include special drawing rights and marketable securities that are denominated in foreign currencies such as treasury bills, government bonds, corporate bonds and equities, and foreign currency loans. Ziwa’s gross foreign currency reserves hit an all-time low of $30 billion 10 years ago at the inception of the global economic turndown. Four years later, they peaked at $52 billion before leveling off and remaining ever since with a range between $44 billion and $50 billion. Ziwa’s national currency is the Ziwander; its exchange rate remains fairly consistent, with 10 Ziwanders equaling $1. In the same vein, 10 billion Ziwanders are the equivalent of $1 billion.

Private Banking

There are a dozen commercial banks in Ziwa. These include the CBZA—the Consolidated Bank of Ziwa; the Ziwan Merchant Bank; the Global Finance Boutique; the Ziwan Cooperative Bank; and the Development Bank of Ziwa. Private banking is defined as financial services targeted at customers who have over $1 million in investable assets. In Ziwa, the CBZA ranked as the top private banking group in the country. It also ranked at the top of the list for super-affluent customers (with assets of $1 million to $5 million), high net worth customers (whose assets total between $5 million and $30 million), and ultra-high net worth customers (whose assets amount to more than $30 million). CBZA also topped the list of private banks specializing in the delivery of research and allocation advice, as well as the best banks for representing the interests of international clients. The Ziwan Merchant Bank ranked as the nation’s second-best private bank overall, followed by the Global Finance Boutique, the Ziwan Cooperative Bank, and the Development Bank of Ziwa.

Historically, Ziwa’s private banking sector has benefitted from an ongoing government drive to improve recordkeeping and leverage advances in information technology. This factor, along with a fairly predictable open market environment and government policies adopted in support of direct foreign investment, has garnered Ziwa an enviable reputation among prospective businesses customers. Recently, apprehension seized the private banking community when word spread of a recent decision by the Ziwan parliament to entertain legislation supporting a constitutional amendment that would allow land expropriation and redistribution with no guarantee of compensation to the owners.

Well-to-do banking customers who potentially could incur the greatest financial losses as a result of any broad-based land redistribution policy are white landowners. Their cultural connection with former European colonial rulers is widely resented by the country’s sizeable indigent population. Ziwaforum, an economic/political pressure group that acts as an advocate for Ziwans of European descent, has launched an international public information campaign warning multinational corporations and other potential foreign investors that the Ziwan government is on the cusp of eliminating private property rights long regarded by Western nations as a cornerstone of democratic capitalism.

The intensifying controversy over land reform currently roiling the private banking market is viewed by many Western observers of East Africa as symptomatic of a fledgling democracy experiencing growing pains. Foreign governments and corporate investors are highly desirous of a social milieu capable of providing a stable backdrop conducive to open-market dynamics. In stark contrast to this mindset, many of Ziwa’s poor and marginalized elements often interpret government measures aimed at achieving stability as proof that the existing power structure is dismissive of their grievances, and all too willing to accept class-based abuse and exploitation as the price to be paid for the all-important necessity of maintaining an investor-friendly status quo. In confronting the land reform issue, the legitimacy and sovereignty of Ziwa’s government could hang in the balance.

Banking System

Although technically speaking there are no state-owned banks in Ziwa, the country does have a central bank that serves as the hub of the national banking system. Legacy antecedents of the Ziwan National Reserve Bank (ZNRB) date to the period of European colonization and the unique set of monetary and financial conditions prevalent at the outbreak of the First World War. At that time the colonial parliament established a select committee to determine whether establishing a central bank would be in Ziwa’s national interest. The resulting ZNRB organization was (and remains) privately owned, albeit modeled on a variety of state owned European institutions.

The bank’s basic charter requires pursuing a policy of stability aimed at achieving balanced and sustainable economic growth. Despite this mandate, some Ziwan bankers—Olvana-indoctrinated and convinced of the superiority of centrally managed economies—argue that stability and growth can be part of the problem if they leave a destitute majority at the mercy of a privileged oligarchy. Officially, the functions of the Ziwan National Reserve Bank are as follows:

Formulating and implementing monetary policy
Issuing and controlling the (Ziwander) national currency and money supply
Standardizing record-keeping norms and supervising the banking system
Ensuring that the national payment system functions effectively
Managing official gold and foreign exchange reserves
Acting as banker for the government
Administering the country’s exchange controls
Acting as a lender of last resort in exceptional circumstances

The ZNRB has a board of directors consisting of a governor, three deputy governors, and eleven directors. The governor and deputy governor are appointed for five-year terms by Ziwa’s president, in consultation with the minister of finance. Four of the directors are appointed by the president for terms of three years; the remaining seven directors are appointed by the shareholders of the bank, also for three-year terms. The Ziwan National Reserve Bank is privately owned, with 2 million shares issued. Currently there are just over 300 shareholders with equity in the ZNRB. No single shareholder is allowed to own more than 10,000 shares.

The central bank’s collective leadership stand by their longstanding conservative policies geared toward growing the national economy and curbing inflation. Arrayed against the board of directors is a younger faction demanding that the ZNRB’s traditional emphasis on achieving sustainable economic growth be abandoned in favor of dismantling the current racial imbalance favoring white ownership of businesses, eradicating the chronic unemployment rate, and generating more infrastructure improvement projects. The country’s biggest challenge—rampant corruption among stewards of public resources—recently surfaced in the guise of a scandal that implicated the minister of finance, who jumped to his death while under investigation for allegedly diverting public funds into his personal bank account. Shortly after this tragedy, as the investigation spread to other members of the ZNRB’s board of directors, a new faction—the Social Equality Now (SEN) party—surfaced to demand nationalization of the central bank. The economic and social repercussions of the ongoing political debate continue to impact the national psyche; and the final outcome of the crisis is yet to be determined.

Stock/Capital

Ziwa’s national stock exchange—the Mwanza Stock Exchange (MSE)—is located in the capitol city of Mwanza on the southern shore of Lake Victoria. The MSE is Africa’s third-largest stock exchange and the second-largest in East Africa, ranking behind Amari’s (its primary economic competitor in the region). There are 350 companies listed on the MSE. The combined market capitalization of these companies is $120 billion, and the average daily volume of executed trades on the MSE is $4 billion. It is the twentieth-largest stock exchange in the world.

The MSE aspires to create a pan-African exchange to enable companies geographically dispersed throughout Africa to trade in securities. The plan’s initial phase envisions focusing on the neighboring states of Amari, Kujenga, and Nyumba before shifting to a long-range expansion that will encompass the rest of Africa. Inevitably, this will entail the tacit consent if not outright active cooperation of the larger Amari stock exchange—a requirement fraught with complexity given the longstanding competition between these two East African nations.

The history of the MSE dates to the era of European colonization, when gold was discovered at several locations around the southern periphery of Lake Victoria. The nascent precious minerals industry fueled a need among mining companies for increasingly sophisticated financial services, including a forum where shares issued by these companies could be traded. Thus late in the nineteenth century, colonial era investors founded the Mwanza Stock Exchange, a legacy corporation that was re-chartered after Ziwa gained its independence.

Eighteen years ago the Mwanze Stock Exchange made the acronym MSE synonymous with the company’s original name. Not long afterwards the MSE struck agreements with both the London Stock Exchange and the New York Stock Exchange to create a common lexicon and permit transactions and a range of other financial services to be shared among the three trading houses. The MSE provides a forum for trading in shares and other securities under rules of engagement regulated by the Ziwan government. It also assists companies that need to raise capital by administratively linking them with other members of the exchange.

The MSE is managed by a fifteen-person board of directors, 10 of whom are elected by members of the exchange, with the remaining five appointed with the advice and consent of the Ziwan Minister of Finance. The finance minister has the discretion to choose the five appointed members from fields outside the stock brokering community. All MSE board members have access to services and facilities provided by the exchange. The MSE annually applies to the Minister of Finance for renewal of its charter. The finance ministry controls stock exchange operations through a Financial Monitoring Board (FMB), Ziwa’s administrative infrastructure responsible for regulating the country’s non-banking financial institutions.

Fifteen years ago, the MSE’s outdated legacy electronic system for executing trades was upgraded to a newer platform shared by the stock exchanges in New York and London. Tailored to meet the unique needs of brokers operating out of Mwanza, the new, centralized system provides a streamlined infrastructure for placing orders at established intervals throughout the business day. It also gives traders access to an administrative hierarchy that encompasses a variety of sectors, segments, and securities.

Twenty-five years ago, the MSE launched the Ziwa Exchange News Service (ZENS). Its original intent was to infuse greater transparency into the exchange’s administrative record-keeping procedures, in hopes of boosting consumer confidence in open-market trading. Initially members were allowed to use the news service on a trial basis for ninety days. Over time, however, MSE changed the rules in a way that required all companies participating in the exchange to channel price-sensitive information through ZENS prior to releasing it to any external news media. Although most MSE members view this change as benign, a vocal minority argues that it increases the danger of insider trading and undermines the original goal of making trade transaction procedures more transparent. When allegations of corruption surfaced that tainted the country’s (now deceased) finance minister, ZENS critics became more vocal. All major newswire services carry ZENS, although challenges impugning the accuracy of its data have recently become more frequent. Critics also suggest that crony capitalists wield undue influence on the prevailing climate within the MSE, too often at the expense of Ziwa’s national interest.

Informal Finance

As with a number of other African countries, Ziwa has a sizeable informal sector, due to an oversized labor pool that lacks the specialized skills demanded by a rapidly modernizing economy. Shortly after the onset of the financial crisis that roiled global markets ten years ago, Ziwa’s economic growth slowed drastically. To energize the growth process, government authorities encouraged modernization efforts in the agribusiness, telecommunications, and financial services sectors. Despite reforms intended to ween the country away from an overdependence on its mining industries, efforts to achieve consistently strong growth through diversification have fallen short of the mark, failing to improve the lot of Ziwans facing dire food security issues.

Longstanding tribal taboos and superstitions prejudice large numbers of Ziwans against participating in the formal economy. Without benefit of specialized skills that can only be acquired through education, many laborers are left with little choice other than turning to subsistence farming or menial domestic work in a last ditch effort to earn a livelihood. Both of these venues are conducive to barter or cash payment arrangements, making it easy for employees to avoid the attention of government revenue collectors.

The informal finance sector includes a significant number of expatriates residing in locations outside Ziwa, who channel private payments called remittances to relatives, lenders, and other acquaintances living in their home country. Members of this remittance community make payments through the hawala system—an informal, trust-based network of individuals organized to facilitate fund transfers—thus avoiding government-imposed taxes, and occasionally tapping into an exchange rate on foreign currencies that is more generous that what the government can offer through the formal economy. Although the hawala system is technically illegal, government tax law enforcers tend to overlook infractions out of a sense of empathy for people who turn to it in desperation.

Internet penetration of the African continent, accompanied by the exponential growth of popular access to mobile telephones—especially smartphones that provide broadband access speeds—are having a catalytic effect on traditional cash-based or barter communities. Ziwa is no exception to this general rule. The increasing popularity of virtual currencies is a predictable by-product of these recent advances in technology. Virtual currency is not legal tender, but can serve as a substitute for legal tender when electronically transferred within a proscribed digital community whose members are linked together through blockchain technology and sophisticated authentication procedures. Cryptocurrencies attempt to meet a legitimate market demand by customers seeking alternative payment options that are versatile and capable of retiring debt with the dispatch and finality normally associated with legal tender. Virtual currency is highly popular among Ziwan entrepreneurs who historically have demonstrated little trust in governments or large banking institutions. The latter, however, are skeptical of virtual currencies because online (and cross-border) transactions with capabilities more versatile than cash carry an inherent risk of illegal financial manipulation and potential exploitation by organized criminal elements.

Labor Demographics

Five percent of Ziwa’s 4.2 million-strong labor force work in agriculture, a sector that accounts for 3 percent of the country’s GDP. The industrial and service sectors respectively employ 24 percent and 71 percent of the workforce, proportions that roughly parallel the contributions those sectors make to the GDP. Although in a literal sense the Ziwan economy is gradually generating more jobs, its nominal rate of growth remaining steady at less than 0.5 percent over the past four years drastically reduces expectations of most Ziwans for improving their condition through higher pay and advancement. The most lucrative positions are few in number and cordoned from the bulk of the population by a lack of formal education, functional specialization, and prior work/management experience. As a result, the majority of Ziwans are consigned to menial low-pay positions within the informal service sector.

Although recent government reforms seek to steer the country away from an exclusive dependence on revenues gleaned from the mining sector and toward a more diversified economy, these changes have been slow to take effect because of a combination of slow economic growth rate, losses accrued from shoring up faltering state-run businesses, and widespread endemic corruption. Thus none of the economic reforms initiated so far have translated into any meaningful decrease in Ziwa’s chronically high poverty levels. Meanwhile, an analysis of Ziwa’s population demographics reveals a growing youth bulge more than sufficient to meet the country’s labor demand for the foreseeable future. Ziwa’s labor force in the 15-24 age range has grown steadily over the past ten years, a trend demographers consider likely to continue. Over the past 17 years, Ziwa’s labor force has shifted towards the services sector, especially towards community, social, and personal (CSP) services, and financial services. These two areas accounted for 75 percent of Ziwa’s shift in employment throughout the past two decades. The CSP sector (which accounted for 40 percent of the shift) is comprised mainly of public sector jobs, suggesting that this sector is more capable of absorbing surpluses in unskilled and medium-skilled workers during times of exceptional economic and labor market stress. Fifty-five percent of the public sector workforce are now women, compared to 40 percent 10 years ago. The percentage of African workers in this sector also increased during this same period from 70 percent to 80 percent. It thus appears that since the period of European colonization, the public sector has been more successful in adapting to the realities of the post-colonial labor market, since both native Africans and women historically were marginalized by the legacy labor market that formerly existed in Ziwa.

Labor Market

Ziwa’s unemployment rate has been stuck in the neighborhood of 25 percent since the onset of the global economic downturn 10 years ago. Prior to that time it had seen a gradual decline from a previous high of 31 percent, hitting a low of 20 percent in the months that immediately preceded the crisis. The current unemployment rate in Ziwa stands at 25 percent, but increases to 35 percent when data parameters are expanded to include discouraged workers; and goes higher still among youth within the 15 to 24 age group. The chronically high unemployment rate parallels Gini coefficient data—a measure of statistical dispersion intended to reflect the income distribution of a nation’s residents—indicating the existence of a high degree of inequality in Ziwan society.

Results of a recent household survey suggest that experience, age, race, sex, and insider-outsider dynamics play an important role in determining success or failure in the Ziwan job market. At least in the short run, prior work experience appears to be more important in enhancing an individual’s employability than education level. Education matters, but the dubious quality of the Ziwan school system also factors into the hiring process. The survey found that people with prior work experience have almost a 50 percent higher job-finding rate than those without experience. This dynamic becomes even more important for young job candidates. Similarly, long-term unemployment reduces the likelihood of a successful job search, and the statistics indicate that women seeking employment face stronger headwinds than men.

The informal sector of an economy—also frequently called the informal economy or grey economy—is the part of an economy that is neither taxed nor monitored by any government authority. The absence of record-keeping within this sector means that activities of the informal economy are not included in calculating a country’s GDP. The Ziwan employment/unemployment survey found that employment in the informal sector can serve as a bridge to finding a position in the formal sector. Conversely, those individuals who have never worked have a much lower probability of finding a job in the formal sector.

The influx of women into the labor force at the beginning of Ziwa’s post-colonial era significantly increased the supply of low-skilled workers in the job market. A predictable spike in unemployment ensued that continues to plague the national economy. While education remains crucial to upward mobility in the long run, providing work experience for the most disadvantaged groups—youth, women, and blacks—is considered a prerequisite for achieving any significant reduction in inequality that pervades Ziwan society. The Ziwan employment survey also focused on job exit rates. Among individuals already employed, education surfaced as an important long-run determinant of job retention. Relative to other segments of the population, young people, blacks, and women also have high job exit rates, which in-turn drive up the country’s overall unemployment figures.

Labor organizations play an important role in Ziwa’s labor market. A direct correlation exists between membership in a trade union and increased job security. Conversely, however, trade union militancy in advocating policies favoring their members can negatively impact outsiders who have had no prior association with organized labor. It is also true that former union members who have lost their positions face an uphill battle in seeking employment with businesses whose leaders harbor a strong anti-union bias. A longstanding track record of unions for supporting nation-wide (and occasionally violent) sympathy strikes has alienated numerous prospective employers. The country’s public sector has a higher unionization rate (70 percent) in comparison to the private sector (25 percent). As public sector employment has grown, so too has its proportion of unionized workers. As a general rule organized labor has few qualms about putting its power in play in support of workers in state-owned companies perceived to be at risk for privatization. There are 10 state-owned companies that run the gamut from electrical, water, and telecommunication utilities, to broadcasting, to the national postal service.

Illegal Economic Activity

Ziwa endures a broad spectrum of illegal economic activity, some of which is grounded in the chronic poverty and famine that has gripped the rural countryside for decades. The equation definitely contains an ethnic factor, as tribes with longstanding traditions of mutual enmity compete for scarce natural resources, especially including water and grazing land for livestock. Cattle rustling, smuggling, and banditry are common, and typically accompanied by ethnic clashes. Accelerated urbanization in recent years has caused ethnic animosity to migrate from the rural countryside into the cities, especially during periods of extreme economic hardship and/or intense political agitation.

From an international perspective, government enforcement authorities pursue a policy of benign neglect in support of an unofficial willingness to sustain economic ties to North Torbia. In the closing decades of the last century, North Torbia styled itself a supporter of African nations aspiring to gain independence from European colonial powers. More recently, Ziwa has reciprocated this support by flouting international sanctions aimed at discouraging North Torbia from developing its aggressive nuclear weapons program. Defiance of these sanctions assumes several guises that collectively provide a modest funding stream to the North Torbian dictatorship. Ziwa’s clandestine support of North Torbia includes purchasing bronze statues commemorating and deifying regime leaders; entering contractual agreements for constructing hospitals, museums, and education facilities; the purchase of Tier-2 and Tier-3 military small arms and radio equipment; and selective intervention on behalf of North Torbian nationals pending prosecution for violation of poaching and smuggling laws.

An illegal ivory trade flourishes in the vicinity of the Serengeti National Park and the Maswa Game Reserve. North Torbian and Olvanan purveyors of elephant tusks and rhinoceros horns are important contemporary players in the illicit ivory trade. When their nationals are apprehended in smuggling or poaching operations, Olvanan and North Torbian authorities emphatically and categorically deny all knowledge of the illegal activity, and declare their intent to strictly abide by local laws that forbid these practices. They also claim ignorance of any tourists caught violating hunting laws or caught with ivory at Mwanza and other international airport.

As communications technology has given rise to mobile money systems, Ziwan authorities have encountered increasing frustrations with tracking illegal fund transfers. The Watasi Gang (sometimes called the “Sasa Sasa”), an extremely violent militia group operating in Ziwa’s mountainous northeastern region, has been implicated in this kind of illicit activity. Watasi gang members routinely engage in banditry, raids, poaching, kidnapping, smuggling, and drug trafficking. When they execute fund transfers, much of the money is moved in small amounts, typically in less than $1,000 per transaction, to avoid detection by law enforcement. The increasing widespread use of cryptocurrencies complicates this picture, since terrorists and criminal organizations like the Watasi Gang run front organizations such as small restaurants, gas stations, and transport companies to conceal their nefarious activities.

Illegal mining operations have a disruptive effect on Ziwa’s economy by denying the government the benefit of collecting tax revenues. A license is required to engage in mining operations, and many small-scale “wildcat” enterprises—sometimes including individual miners—seek to avoid government restrictions and detection in an effort to clandestinely generate as much income as possible in the shortest possible period of time. Meanwhile, multinational mining companies in possession of government licenses are notorious for major safety infractions and making their employees work long hours under execrable conditions. These mining companies also hire security personnel who over time have become a law unto themselves, and have a reputation for violating the rights of locals with impunity. Charges of human rights abuses leveled against these corporations rarely elicit thorough investigation, legal action, or redress of grievances, since local law enforcement agencies receive bribes and payoffs from the alleged perpetrators.

Corruption in its many guises is the most widespread and pervasive illegal economic activity in Ziwa. That the country’s late finance minister preferred suicide to standing trial for misappropriation of public funds lends credence to the notion that corruption may pose the most dangerous threat to Ziwa’s national sovereignty. It has an undermining effect on all government initiatives to implement popularly mandated political, economic, and social reforms. The current government, elected on a platform that vows to fight corruption, has so far achieved only limited success against this insidious nemesis to national authority. Corruption—especially in the economic realm—must be drastically reduced if not eliminated in order for Ziwa to realize its full potential as a modern East African nation-state.