adminKudzanai Gerede Business Correspondent
SOONER or later resource based economies will only have themselves to blame if they do not hasten to industrialize as the global economy continues to be volatile whilst its competitive grip tightens.
The just-ended Zimbabwe International Trade Fair held in Bulawayo spelt the need for the revival of industry to foster productivity in the local economy following years of deindustrialization in all major industrial cities like Bulawayo and Mutare.
The industrialisation call comes at a time when it’s not just the local economy taking initiatives towards revamping industry but the entire African economies collectively having realised that economies have been exporting jobs through exports of raw materials.
The overreliance on commodities has contributed to many regional economies ‘downfall’.
The past few years has seen global media discourse awash with Africa’s rising narrative owing to commendable average GDP levels as a result of mineral, oil and gas discoveries which have translated to significant export receipts, Zimbabwe included following diamond discoveries in Marange.
This has, however, gone to haunt the region following drastic falls in commodity prices and a slowdown in Chinese economy, the continent and world’s biggest commodity buyer.
This has sent clear signals that industrialisation was essential for the survival of modern economies.
The continent’s supreme bloc, the African Union has took the initiative of setting the tone for member countries to industrialise and modernise their economies by crafting pro-production strategies like Agenda 2030.
However much to the skepticism of many economic analysts is the absence of assurance on what will ensure that the new blueprint (Agenda 2030) will not be mere talk but a success and overcome what other economic documents like the Abuja Plan of Action and New Economic Partnership for Africa Development (NEPAD) have failed before.
Analysts have, however, remained optimistic that despite global economic adversities in recent years, the continent has remained consistent to its regional average growth rate of 5 percent in the past 5 years, a sign of resilience that spirit can be entrusted in the continent’s ability to start on its industrial course.
Locally, observers have warned of the haste in adopting international and regional agreements of free markets and free trade when the country was not producing significant exports, rather it was creating what Vice President Emmerson Mnangagwa addressing delegates at the International Business Conference referred to as a “market for other countries”.
Indeed the industrialisation trajectory will be a staggering walk for most regional economies and for Zimbabwe in particular, which is facing a myriad of macro-economic headwinds chief among them, liquidity constraints, cash shortages, deflation, poor investment flows, low capacity utilisation in its industries and negative balance of account to name a few.
The country has seen low levels of Foreign Direct Investment which has further derailed financing for the latest technologies in the productive sectors of the economy.
The 2015 United Nations Conference on Trade and Development World Investment report showed that Zimbabwe received only US$ 545 million in 2014, the lowest in the region with Mozambique and South Africa receiving over US$ 5 billion each.
The 2015 Confederation of Zimbabwe Industries (CZI) manufacturing survey suggested that most the country’s industries suffered from inefficiencies arising from antiquated machinery which was slowing down on productivity.
Zimbabwe’s yawning trade deficit with industrialised South Africa, its biggest trading partner stood at US$59 million in the first two months to February 2016, a worrying trend analysts say can be reversed only if Zimbabwe can start producing.
Outside South Africa, Zimbabwe had been the closest to a multi-sector economy in the region before the effects of the economic embargo on the country by the western nations since the new millennium.
Following years of massive deindustrialisation the country’s export receipts have had to rely on agriculture and mining sectors hence the need for diversification through revamping of manufacturing industries.
This however faces a stern test as industrialising the economy will require economic policy makers to come up with home-grown strategies which speak to the local socio-economic context.
Zimbabwe’s economy is unique from the rest of the African continent.
The local manufacturing industry has been on a downward spiral due to a number of challenges and prominent among them has been use of hand-made and antiquated machinery.
According to the Confederation of Zimbabwe Industries (CZI)’s Manufacturing Survey 2015, capacity utilization has declined to 34,3 percent in 2015 from 36,5 percent previous year.
In contextual terms, reindustrialisation should be private sector driven and should also be inclusive of the expanding SMEs sector as currently, public sector is battling fiscal constraints.
Whilst on one end, the economy is predominantly run by informal players who shun tax payments as there are no proper tax systems in place targeting the informal sector which has been a major attribute to lean revenue stream to Treasury, on the other end emerges a bloated public wage bill straining public financing towards infrastructural development.
Small and Medium Enterprises should therefore aspire to grow and this will entail an organic development strategy where industrialisation starts with a local peanuts grinding cooperative mechanising their production processes to a medium-sized shoe-making syndicate scaling production by acquiring modern shoe making equipment into a big shoe factory up to a huge corporate in the special economic zones.
“We cannot talk of economic transformation in this country and further talk of industrialisation without throwing in the SMEs sector in the mix of things,” Alternative Business Alliance, director Mr Israel Mabhoo said.
“Over 70 percent of businesses operating in this country are either small or medium enterprises but there has to be acknowledgement that they have not produced and exported in a significant way which I think has been a result of antiquated and inefficient tools of work,”
“We need to see support to the sector because if they are supported through mechanisation, they can immensely improve production both the quality and volumes of finished products and ultimately compete on regional and international markets,” he added.
Recently Small and Medium Enterprises players called on the government to ensure they play a part in the Special Economic Zones as it was essential for small businesses to be supported and expand into big businesses in the long-term.
In his 2016 National Budget presentation, Minister of Finance and Economic Development, Patrick Chinamasa emphasised the importance of industrialisation by putting into effect incentives to promote local businesses to mechanise.
The minister’s introduction of rebate of duty on capital equipment imported by mining, agriculture, manufacturing and energy sectors for equipment valued at US$1 million and above will be pivotal in spurring industrialisation.
There is however the need for the country to identify its comparative advantage in this tightly contested global economy where merely having finished products does not translate to profits, but market linkages and emerging competitive are the key determinants.
Whereas the country is well endowed with mineral resources, downstream industries such as diamond cutting centers and jewelry production factories will be vital to emerge as the region’s diamond and jewelry forte just as robust mechanised agri-business systems can position the country as a regional food security giant.
Analysts have however noted the importance of reviving State enterprises and Parastatals in the industrialisation narrative.
Parastatals like the National Railways of Zimbabwe (NRZ) and Air Zimbabwe play a major role as intermediaries between manufacturing industries, suppliers and markets at viable prices.
In an interview with Post Business last year, Sugar Association president, Mr Muchadei Masunda bemoaned the state of affairs at the national rail company (NRZ) and highlighted that the failure by the rail company to transport 50 000 metric tons from the lowveld to Maputo for Europe was forcing local sugar producers to seek the services of haulage trucks which more expensive hence impacting on the ultimate cost of the commodity.
He said the trend had a negative bearing on the competitiveness of the local product on the international market.
The Official 2014 NEPAD year book, suggested that rail revival will boost Africa’s trade and will be central in the industrialisation process.
It highlighted that in South Africa for instance, rail transportation was cost effective for local industries, being 75 percent cheaper than road transport.
Government is however in the process of carrying out State enterprises and Parastatals reforms with the assistance of World Bank in order to restore these moribund institutions which will spur the industrial transformation.
With successful setting up of Special Economic Zones, Zimbabwe’s industrial muscle will be tested once the Tripartite Free trade agreement comes into force which will see 26 member states from Africa’s 3 sub-regional economic blocs SADC, EAC and COMESA brought together and liberalise their market which has a combined population of 632 million.
Merchandise trade within the tripartite region reached US$55 billion in 2012 and is expected to grow as each member state takes off on its industrialisation journey.
Online Reporter