adminhas globalised.
Mr Devenish was speaking at the Institute of Chartered Accountants winter school in the resort town of Victoria Falls last weekend.
He said Government had, unfortunately, assumed the same policies at independence that protected local companies from external competition.
Liberalisation of the economy after dollarisation in 2009 brought stiff external competition in the form of cheap and high-quality imported products.
Local firms have failed to withstand the external competition stemming from high production costs due to inefficiencies caused by old equipment.
The net effect was the closure of several companies that failed to secure fresh capital to recapitalise to be able to produce competitively.
“From 1965 to 1980 (the Unilateral Declaration of Independence era), the country had a completely closed economy . . . characterised by two distinct themes — import substitution and hard-currency generation,” said Mr Devenish.
“This closed and inward-looking economy, sadly, set the tone for our new Government at independence in 1980, who inherited this closed economy,” he said.
This is believed to have continued in closed mode, leading to all kinds of inefficiencies, the biggest being the current shortage of capital equipment.
As a result of the economy being largely closed and inward-looking foreign exchange became a rare and precious commodity, so that firms could only recycle old equipment, which led to a gradual build-up of production costs.
According to Industry and Commerce Minister Welshman Ncube, local industry now requires at least US$2 billion to regenerate the industrial base.
Confederation of Zimbabwe Industries president Mr Kumbirayi Katsande said this year’s profile of the situation in the sector would dwell on the competitiveness of local companies compared with external producers.
Local industry is presently operating at an average of 57 percent, but is characterised by extreme levels of high and low production.
“We all lived in a controlled environment, until March 2009, when we all of a sudden, and without much warning, found ourselves in what, in my view, is one of the freest economic environments in the world,” said Mr Devenish.
He said he believed that due to policies that existed from 1965 to 1992 and 1996 to 2008, companies have found themselves in a free world, short of resources and a banking system without capacity to finance industry.
“Our local companies, such as Cairns, Colcom, Dairibord and Olivine, were, in spite of the excellent quality of their products, unable to compete due to aged and badly maintained equipment and, in most cases, a desperate shortage of working capital,” he said.
The AICO Africa boss said that to be globally competitive, there was need for a conducive environment and two key conditions for these were political harmony and, at least, the building blocks of a competitive economy.
The building blocks include quality education, foreign direct investment, infrastructure, increased savings, competitive tax rates, export-oriented economy, an environment good for foreign investment and an efficient Government — all these spiced with a dose of good corporate governance.
Online Reporter