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No need to invest in non-productive assets

We are what we consistently do. Who we are is also informed by the decisions and choices we make. Where we allocate increased financial resources says a lot about our mindset and what we believe to be essential and crucial at any point in time.
By Gloria Ndoro-Mkombachoto

The domestic scene

One of the fundamental human rights is access to decent and affordable housing. Dignity and a sense of pride are experienced when a family owns a home adequate enough to house its permanent and visiting members. When the home is far much bigger than required, it is often considered progress. But owning a home is not an investment because the home you live in is a non-performing asset. It is a net drain on resources in the form of maintenance costs, municipal rates, taxes, other levies etc, and over time those charges add up. Home ownership is merely a lifestyle choice for those not wanting to own a home, including not wanting to be burdened by paying rentals every month. Moreover, if your capacity to generate significant cash inflows is compromised at any time, for whatever reason, a month can be a very short time to find ways to meet that monthly rental payment.

Even if there is significant equity in the home that you own and live in, unless you are planning to sell your home at some point in the future and therefore, realise the equity, that equity, the investment you are banking on, will remain untapped.

Unexploited equity is good money going to waste because it is not working for you. You are working for its preservation. As a result, the unrealised equity in your home cannot be an investment if it remains idle. Many of us are risk averse. Rightly so.

Many who took what they thought were calculated risks lost both home and equity when our economy became pear shaped. Be that as it may, your home equity is within reach to create more wealth for you but your continued lodging in your fully paid up quarters makes it inaccessible when you are cautious enough to remain with unencumbered title deeds.

Since for many of us home ownership expenditure is the highest personal expense, it has been suggested by many financial experts that it is wiser to spend moderately on our personal homes and free up money for investing in performing assets elsewhere. But this is easier said than done. A drive around Harare in most of the areas in the north east, the north and the north west where most influential people, captains of industry and senior decision-makers in government reside, tells a curious story.

It is a story that equates one’s self-worth, self-importance, self-image and indeed self-esteem, with the size of the house they live in. The personal homes Zimbabweans have built and continue to build are humongous, many of them with amazingly beautiful architecture, with many more looking like wild monumental formations.

The universal truth is that when a home surpasses a particular value, in the event of its sale, fewer but keen discerning buyers operating in that price bracket and ordinarily with cash, will ensure that the house is sold at below its brick and mortar value. With the passage of time, if the house is not sold, the hidden costs of maintenance escalate as the ability to generate renewed cash inflows by the aging owners diminishes.

Many, if not all of these big homes around the city are double storey or more with bedrooms usually located in the upper floors.

Obviously, no thought was put into duplicating the spacious main bedroom downstairs to cater for the sunset years when arthritis, diabetes and heart disease set in. I am digressing. The point I am putting across is, I wish we could build moderately sized homes and invest more in massive warehouses.

I wish we could invest in say, mining equipment to do our own mining rather than outsource instead of spending all that money on our beautiful non-performing homes. I wish we could build smaller houses or houses where all spaces in the homes are fully utilised daily and allocate more funds to building bigger factories and acquiring new technologies so that we could be champions of Zimbabwe’s renewed productive revolution.

The national scene

The mental model that informs our thinking at household level is the same mental model that we deploy in our work spaces. The decisions we make at household level invariably impact on the nature and quality of decisions we make in other spheres of our lives.

Many people I know with big homes drive very big expensive cars. Either those cars are self-funded or the employer is arm-twisted through legally defined benefit structures to buy them. In many organisations, government or private, car purchases are prioritised before renewal and replacement of machinery. This jaundiced value system has permeated into many organisations, including the church, where instead of prioritising the poor and disenfranchised and building more schools and churches, as was the practice before, the pastors’ welfare is now taking precedence. And like many from among us, those pastors also want big homes and big cars. Most church formations, in particular, the happy clapping church brigade, no longer shy away from primitive and conspicuous consumption habits funded by predominantly impecunious congregants.

As the school year started this month, nothing much has changed for many schools and their learners. Many rural schools do not meet the standard characteristics of normal schools because students are being taught in make-shift structures. Yet our government saw it fit to prioritise car purchases for chiefs before refurbishing old schools and building new ones.

Most recently, threatening the prosperity of Zimbabwe, we heard of how government admitted to buying snow graders, instead of motorised graders, in a non-snowing Zimbabwe. A government minister then proceeded to encourage the local authorities that received them to make do with the snow graders as proper equipment was on its way. Just last Monday, the Transport and Infrastructural Development minister Joram Gumbo said, “But we have them, we have to use them. They were bought by us, that is corruption between us, that is what we did, that is how we failed. Those who bought them erred. But let us forget about it. Let us move forward.” Zimbabweans remain hopeful that the presidency will get to the bottom of this shocking and unbelievable revelation and if there is chicanery and indeed corruption, the perpetrators should be brought to book without delay.

The building of a new Parliament in Mt Hampden, is another unnecessary investment that ought to be put on ice until our economy has turned a corner. Why do MPs need a new Parliament when about 70% of our city and national roads are riddled with potholes and many have no shoulders? Why do we need a new Parliament when there is rampant unemployment and the building of the new Parliament which will allegedly be done by the Chinese, might not guarantee the use of local suppliers, bricklayers, carpenters, plumbers, etc? We have bigger priorities than the building of a new Parliament. The timing is misplaced. And why in Mt Hampden? Why do we need a new city there? These are old ideas that ought to go back to the drawing board.

As Zimbabweans, we need to look in the mirror and exercise restraint at both household and national decision-making levels, particularly levels impacting on the lives of many fellow citizens. We must choose the high over the low road and desist and resist escalating our commitment towards investments that do not bring us lasting rewards.

 Gloria Ndoro-Mkombachoto is an entrepreneur and a regional enterprise development consultant. Her experience spans a period of over 25 years. She can be contacted at totemshumba@gmail.com

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