adminGift Mugano Business Correspondent
I must start by congratulating you in advance for assuming the hot seat and would want to assure you that you have my support during your tenure. My message comes at an opportune time when every Zimbabwean expect nothing short of a turnaround of the economy and your ministry is key in setting the tone for the rest of the economy.
Firstly, our industry is facing a number of problems. Over the past 15 years, industry has faced various challenges as the economy contracted due to a number of challenges chief among them economic sanctions imposed on the country.
Traditional exports markets are being diverted to firms which are competitive, there is continuous displacements of local products from the shelves and de-industrialisation, loss of revenue and a disappointing impact on the consumers due to insignificant welfare gains which stand to be eroded by the vicious cycle of industry closures.
Establishment of supply side facility
The ministry needs to put in place capacity utilisation and retooling loan facility to encourage industries to increase their capacity utilisation and boost their efficiency and competitiveness in preparation for the reduction and removal of tariffs in some cases.
An industrial bank mooted in the 2012-2016 Industrial Policy should become a reality. The industrial bank objectives inter-alia include the provision of long-term finance to industry at concessionary rates for retooling.
This will enable the country to build industrial capacity and produce for export. Alternatively, Government may consider setting up a Sovereign Wealth Fund. International practice has shown that countries have used their minerals to create a Sovereign Wealth Fund to build a national fund which they use to support budgetary requirements and other pressing national matters.
These countries include Norway (US$656,2 billion), UAE (US$627 billion), Saudi Arabia (US$532,8 billion), Russia (US$149,7 billion), Botswana (US$6,9 billion) and Nigeria (US$1 billion).
The Sovereign Wealth Funds for the countries above are anchored on oil, except for Botswana, which is using diamonds and other minerals. Zimbabwe can therefore use its vast minerals such as diamonds, gold, platinum and chrome to create a Sovereign Wealth Fund.
Export diversification
Zimbabwe exports are mainly concentrated in primary products which are vulnerable for physical factors such as droughts and international prices volatility. It, therefore, becomes necessary for the country diversify export basket through value addition and production of high-technology goods.
Adopt a sensitive list
In order to save inefficient industry from total collapse due to displacement of local products by efficient foreign firms there is need to pull up a list of products so that they can be exempted from trade liberalisation.
These products include motor vehicles, tobacco, wooden furniture, copper, iron and steel, mosquito nets, smart cards, chemical fertilisers, human hair, machines for reception, boxes and cases, cathodes and roofing tiles. Adopting these products on the sensitive list for saving de-industrialisation will save not only the industry from collapse, but also has a multiplier effect of increased revenue generation as the saved industry will generate and sustain employment which will create more fiscal space from improvements in PAYE, VAT, excise duties and corporate tax.
However, the challenge that the Government has to grapple with is to ensure that the total list of sensitive products which are either revenue sensitive or sensitive to industry and employment should not exceed 20 percent allowed under all trade agreements provided under the multilateral rules for less than full reciprocity in the coverage of liberalisation.
Establishment of an adaptation facility
In order to resuscitate companies displaced by foreign firms Government may need to set up an adaptation facility.
From my study, companies involved in the production of motor vehicles, tobacco, wooden furniture, copper, iron and steel, mosquito nets, smart cards, chemical fertilisers, human hair, machines for reception, boxes and cases, cathodes and roofing tiles are under threat from foreign competition. Hence, adaptation facility should focus on these companies.
Revamp infrastructure
The current state of Zimbabwe’s infrastructure poses a serious threat the country’s competitiveness. Recent studies show that the cost of power outages is costing the economy US$1,8 billion which is enormous for a small country like Zimbabwe with a GDP of US$9,656 billion.
Zimbabwe has to improve its competitiveness by restoring its infrastructure which collapsed during a decade-long economic decay.
In the short to medium term, Zimbabwe should work on improving supply constraints as electricity, roads, water and ICTs. An improvement in the availability of this infrastructure enhances productivity.
Strengthen capacity of exports
supporting institutions
After having implemented the above strategies, the country will be ready to roar!
These efforts alone without sound institutional framework from ZimTrade will result in us scoring own goals.
Around the world, many governments have been able to stimulate exports by supporting their trade promotion organisations like ZimTrade as in our case. Just to mention South Korea as an example, the success of South Korea in terms of export flows has been largely attributed to Government support on trade promotion organisations.
The Korean Trade and Investment Promotion Agency was founded in 1962 and now has about 97 offices abroad.
The agency provides information regarding foreign business practices, cultural and market conditions and it directly supports Korean firms through its overseas investment support centres. The ministry must support ZimTrade through financial support, human capital development and broadening its geographical outreach in and outside Zimbabwe so that it can take centre stage in knowledge management and information dissemination related to market access for various sectors of the economy.
From this analysis, it’s clear that some of the strategies suggested above cannot be solely done by the Ministry of Industry and Commerce, but rather need an inter-ministrial committee that constitute Finance; Youth, Indigenisation and Economic Empowerment, Economic Planning and Agriculture with the Ministry of Industry and Commerce being the chair, not Ministry of Finance!
Gift Mugano is an author and expert in International Trade and Development and PhD candidate (Economics) and a lecturer of International Trade at Nelson Mandela Metropolitan University. He is based in Port Elizabeth, South Africa. Email: [email protected]; mobile: +27 780 174 112.
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