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Gatsha Mazithulela
In the last article I wrote about the importance of policy congruence between industry and Government and today I will explain why such agreement is vital in a globalised economy.
No country can exist on its own without paying attention to global issues and the development of and maturity of global industrial complexes. The growth of the world economy has always been spurred on by the growth of particular industries at different times. This synchronisation is in turn linked to a preceding technology breakthrough, which is in turn linked to the existence of a core group in a knowledgeable population and also preceded by policy development. This process is indeed a race and that is why we have chosen the title of the column to be “The race to the top or to the bottom”.
Global Industry goes through waves of “popular fashion.”
It is generally accepted that there have been at least four major waves of global industrialisation. The first wave was related to innovations in water engineering for power, textiles and iron from about 1785 to about 1845 and it lasted about 60 years of massive growth. The second wave was related to steam, railways and steel from about 1845 to about 1900, lasting about 55 years. From 1900 to 1950 was the wave related to the internal combustion engine, electricity and a chemicals industry being globalised and this wave lasted about 50 years. The fourth wave from about 1950 to about 1990 saw aviation, petrochemicals and electronics being the growth leaders and this lasted about 40 years.
The current global industrial wave of digital economy, multimedia, biotechnology and nanotechnology started around 1990 and is predicated to lead global economic growth up to about 2020, a period of only 30 years and this period is almost over with about six or so years remaining.
In the race to the top, it is important to note that the shifts in popular technology and products for the world are accelerating as shown in the diagram (industries now last a shorter time before a completely new growth is driven by something different). Companies that produce the same products for more than 30 years truly belong to another era, a historical era, and are inherently uncompetitive. Such companies produce products that are relegated to the category of “basic needs”. They do not offer any prospects for high profits or the ability to grow the economy above a very low world average. New growth is driven by those companies that embrace products related to new local and global demands.
The manufacturing industry that we are trying to revive in Zimbabwe generally belongs to past industrial waves and has been reduced to basic needs products. It is essential only for the fulfillment of the country’s basic needs and, in my opinion, it is incapable of driving enough growth to compete with other developing countries. In fact it is difficult to see which wave this country has ever taken a leading role in. Some may say food production, but that is hardly a global wave, it is a basic needs industry. Unless we are content with a mediocre growth rate when corrections (because of a low starting base) are made, then reviving Zimbabwean industry of a past era is not enough, we have to catch the next wave in the race to the top.
How have other developing countries won the race to the top?
There are countries that are industrial power houses today that looked worse-off than present day Zimbabwe just 50 or so years ago. At the end of World War Two, Japan was a collection of jungle and building rubble. Treatable infectious diseases were prevalent and food shortages rife. The situation was similar in most of Asia but was reversed very quickly due to industrial policies that focused on a global industrial wave, the electronics wave (if you see the pun). It is not a chance occurrence that most of our electronics somehow were made in those countries; it is the result of alignment between government policy and strategies at individual industry level. Despite a World Bank report crediting neo-liberal policies with the responsibility for the boom, including maintenance of export-led regimes, low taxes and minimal welfare states, institutional analysis also shows that state intervention was involved (Dictionary of Human Geography). The World Bank report acknowledged benefits from policies controlling activities of the financial sector, such as state-imposed below-market interest rates for loans to specific exporting industries. As a result these economies enjoyed extremely high growth rates sustained over decades. Other important aspects included major government investments in education and relatively authoritarian political systems which demanded industrial alignment during the early years of development.
Of course you can say that the growth of those economies was driven by supportive global superpower policies but I can also give you an example of world-class growth under economic sanctions in Cuba. At the start of US economic sanctions against Cuba, there was a decline in public health indicators and Cuba responded by accelerating the training of scientists, medical doctors and engineers rather than what was expected, asking the Soviet union for these skills. National policy in Cuba during the 1980-90s identified the biotechnology global growth wave and used those scientists, engineers and doctors to create a biotechnology industry from scratch.
By 2005, Ernst and Young reported Cuban biotechnology exports to be US$300 million. Cuba’s biotechnology industry is expected to double over the next five years, bringing in more than $5 billion in export revenues.
Jose Luis Fernandez Yero, vice-president of Cuba’s biotech firm BioCubaFarma recently reported that the revenue for the 2013-2017 period is projected to double the $2,5 billion that earned in the last five years. Products manufactured by the biotech industry are currently sold in more than 50 countries and local authorities are working to expand the market. Locally within Cuba, La Farmacia sells medicines with the lowest costs anywhere in the world.
This group has led to the manufacturing of generic drugs, therapeutic and prophylactic vaccines, biomedicine, diagnostic systems and high-tech medical equipment. Of the 881 generic drugs used in Cuba, 583 are manufactured in the country. BioCubaFarma, was founded in April 2011 after the Sixth Congress of Cuba’s Communist Party called for “strengthening domestic pharmaceutical and biotechnology industries to boost the economy as the sectors had the greatest export potential”. Now that is how to catch a global industrial wave in the race to the top in modern industry-alignment between national policy and industrial development. There are many other examples of so-called Third World countries that have jumped the queue by understanding the waves of industrial development, in the race to the top.
I have been to Cuba on several occasions and visited the Centre for Genetic Engineering and Biotechnology (CIGB), The Finlay Institute, Centre for Molecular Immunology, The National Centre for Bioproducts, Pedro Kourí Tropical Medicine Institute, National Centre for Neurosciences, National Centre for Scientific Research, National Centre for the Production of Laboratory Animals, Centre for Immunoassays and National Centre for Agricultural and Animal Health (CENSA). For such a small country to be so focused on one industrial value chain is unusual, and it is the reason that they are now making unusual profits.
Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset) gives certain directions but it is the duty of industrialists to translate these into strategies that lead to Zimbabwean industries catching the next industrial wave. Industry bodies, investors, universities and politicians have a duty to translate Zim Asset in terms of creating advanced industries, using local natural resources. The other reality that if we do not begin to talk about Zimbabwean industry in modern terms, and continue to ask only for bailouts of 50-60 year old companies, we may be running in the wrong direction on the race track; we would be leading the race to the bottom.
Dr Gatsha Mazithulela is a scientist with international experience and holds a PhD in Genetic Engineering and Molecular Virology. Among other posts, he has served as innovation manager and executive director of the Council of Scientific and Industrial Research and vice-president of the Research Infrastructure and National Research Facilities in South Africa.
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