Industrial Development Policy awaits approval

longer to experience the requisite levels of growth to effectively and efficiently drive the economy.
Industrial efficiency, by and large, calls for capacity utilisation levels in excess of 80 percent.
However, capacity utilisation for local industry has somewhat stagnated at around 45 percent to 50 percent from the close of last year, and this is for a sector that has received minimal new investment for over a decade.
The draft document of the new Industrial Development Policy, which was earlier this year presented to industry for debate, had been anticipated to be legitimised by the close of the first half of the year is said to be still awaiting Cabinet approval.
Deputy Minister of Industry and Commerce Mike Bimha has said authorities are still working on streamlining the policy document.
“The policy is still there but we need to correct anomalies and ensure transparency,” said Deputy Minister Bimha.
Such assurances are, however, inadequate to repress calls by several observers for expedient implementation of the policy.
However, it may be noted that the delay in promulgation of the Industrial Development Policy could be a positive thing, especially in view of “anomalies” inherent in the draft document as hinted by the Deputy Minister of Industry.
One of these “anomalies” perhaps lies in the fact that the draft document as presented to industry earlier in the year fundamentally targets a few sectors as growth points.
In that document, the Government apparently identified four priority sectors as the policy’s pillars namely, agro-processing, fertiliser industry, metals and electrical and pharmaceuticals.
The idea, according to the Ministry of Industry, was to enhance production capabilities and firm competitiveness in diverse and non-traditional sectors of the Zimbabwean economy that are considered both niche and high growth.
However, observers generally contend that industrial development policy should typically be non-targeted, but appropriately choosing the right sectors can also be of extensive benefit.
One of the most debated points of the proposed Industrial Development Policy document was the “picking out” of specific sectors. The difficulty in this respect usually relates to selecting the appropriate industries and simultaneously the appropriate firms; the risk of wasting valuable and scarce resources, and distorting market mechanisms to the detriment of the economy.
Any one Industrial Development Policy has the potential to be successful to the extent that the authorities target industries and/or activities that possess existing or latent.
It is to this extent that one wonders why the authorities have left out sectors such as agriculture and mining, which are traditional significant contributors to the country’s Gross Domestic Product.
Zimbabwe’s manufacturing sector that has historically contributed significantly to the economy in terms of the GDP has, however, lagged behind of recent due to a number of inherent structural weaknesses that are dogging the economy.
Some of the structural challenges include inconsistent and inadequate power supplies, high tariffs and utility charges, the lack of long-term finance at reasonable interest rates, and unjustifiable wage demands.
The drafting of a National Trade Policy comes at a time when there have been calls for Zimbabwe’s shift into a net exporter of value-added goods, as opposed to primary commodities.
Insofar as this is the norm, the Ministry of Industry and Commerce has said the establishment of the new Industrial Development Policy will, as expected, be accompanied by a trade policy.
That is, while the former deals with the productive capacities of an economy, the latter will help determine the strategies and policies that facilitate their exchange/trade.
A critical factor with national trade policy is the consolidation of existing markets and diversification into non-traditional ones.
On the other hand, a focus on the exportation of value-added goods can facilitate the generation of new employment and investment opportunities.
To the extent of the latter, the implementation of the country’s industrialisation policy will certainly be boosted by indications by the Ministry of Economic Planning and Investment Promotion to take advantage of non-equity modes of international production and development, which appear most suitable for the manufacturing sectors.
Non-equity modes of international production and development include models such as contract manufacturing, service outsourcing, franchising and licensing.
It is believed that these relatively new phenomena present opportunities for developing economies to deepen their integration into the rapidly growing global economy by strengthening their home-grown productive capacities and improving their international competitiveness.
It is also important for the authorities to appreciate that since industrial development policies on the one hand and investment attraction policies on the other characteristically interact, there is need to ensure that the former are not structured as essentially protectionist.
Relating to this, the United Nations Conference on Trade and Development has warned:
“Foreign direct investment policy increasingly interacts with industrial policy, both at the national and international levels.
“The challenge is to make the two work together for development, to avoid investment protectionism and to enhance international coordination,” said Unctad in a recent report.
Effecting blanket protection measures will also – in Zimbabwe’s present circumstances – come at the expense of consumers who end up paying the high price of protectionism since most local producers currently highly inefficient.