22 January 2018
   
Winky D gives voter registration oomph
Cholera: Zim on high alert as 4 killed
ANC confirms Zuma exit discussion
Government orders blood price reduction
- One day’s supply left of key blood group
Kasukuwere begs ED for forgiveness: official
Chinamasa to divert wages to devolution
Dump Mugabe regalia, Zanu PF official
MORE NEWS
Gemmology center in Mutare soon
NRZ loss as gold miners damage rail line
MORE BUSINESS
Unpaid Mr ugly reports sponsors to ZRP
Zim author releases new book in USA
MORE SHOWBIZ
Billiat might still leave: Sundowns coach
Anger as Dembare approach City player
MORE SPORTS
Mnangagwa’s ‘New’ Zim merits support
Zhuwao: kleptocracy and EDiots in Davos
MORE OPINION
 
Mnangagwa off to Davos empty handed
Economy: the need for a paradigm shift
MORE COLUMNISTS
 
 
Zimbabwe ponders the struggle to industrialise
04/11/2014 00:00:00
by Tony Hawkins I Ft.com
 
His department has come up with industry recovery plan ... Industry minister Mike Bimha
 
RELATED STORIES
Zim's half year import bill tops US$2,9bln
Bimha in China, seeks aid for ailing firms
Bulawayo companies in meltdown
Govt keen improve business environment
Foreign buying govt killing local industry
Capacity utilisation falls to 30pc: CZI
80 Harare firms seek liquidation
300 Byo, Midlands firms seek liquidation
Import controls to help save industry
Bimha: WTO deal no use to Zimbabwe

AS the world’s least industrialised region with a youthful and fast-growing workforce, African policymakers have for decades put industrialization at the top of their development agendas. To date, however, industrialisation policies have failed as the share of manufacturing industry in sub-Saharan GDP has declined over the past 35 years to 10 per cent from 16.5 per cent in 1980.

In two of the few countries that did industrialise rapidly – South Africa and Zimbabwe – manufacturing’s share in GDP has halved from earlier peaks in the 1990s so that today both are striving to reverse this “premature de-industrialisation.”

Zimbabwe, though, is hardly typical. Its manufacturing sector took off in the 1960s and 1970s when the government of the then Southern Rhodesia imposed blanket import controls to counter mandatory UN economic sanctions following its unilateral declaration of independence. At the peak of the “sanctions boom” in the mid-1970s, manufacturing accounted for 22 per cent of GDP, reaching 27 per cent at the start of the 1990s.

Today, it is a mere 13 per cent and the sector, which, at its peak, employed over 200,000 people – one in five of non-farm formal employees – now has 97,000 workers. There is no single explanation for the decline which began after President Robert Mugabe was persuaded to implement an International Monetary Fund (IMF) and World Bank structural adjustment programme in 1991 as a result of which trade was liberalised and manufacturers lost their blanket protection against foreign competition.

Following the demise of apartheid in 1994, potential investors turned to neighbouring South Africa with its more favourable logistics, much larger market and lower unit costs. Mugabe’s fast-track land resettlement programme in 2000 fractured the strong supply linkages between commercial agriculture and manufacturing and as the country slipped into hyperinflation – with inflation running at billions of per cent – industrial production collapsed.

Dollarisation at the start of 2009 stabilised the economy, but industry has grown at 4.5 per cent annually – less than half the rate of GDP growth – and manufacturing output in 2014 is no higher than in the early 1970s. Hardly surprising then that the 2014 survey by the Confederation of Zimbabwe Industries (CZI) released recently paints a bleak picture of industry’s prospects.



Advertisement

It estimates capacity utilization at 36 per cent, down three points from last year, while over a third of respondents to its survey said they are operating at less than 50 per cent of capacity. Over half said their businesses were no longer viable – a figure supported by published corporate results showing that half of the firms to report in recent weeks are making losses.

Respondents blame weak domestic demand (28.8 per cent), working capital constraints (26.5 per cent) and competition from imports (14.2 per cent) for this situation. 80 per cent said Zimbabwe’s infrastructure is in a “deplorable” state – so poor that without massive investment it would be impossible to sustain economic growth over the medium term.

At the CZI survey launch, industry minister Mike Bimha revealed that his officials had drawn up a plan for industrial recovery which has since been approved by cabinet. Details have still to be published but in the recent budgets the government has increased import tariffs to protect local manufacturers while simultaneously taking a number of items off the open general licence list, meaning that importers must obtain a licence to bring in goods from abroad.

Protection is unlikely to do the trick. At $14bn, the domestic market is small and forecast to grow at around 3.5 per cent a year for the rest of the decade. In a landlocked country, industry is poorly located geographically with neighbouring South Africa which produces half of the sub-Saharan region’s manufactured goods accounts for 48 per cent of Zimbabwe’s imports.

The investment climate is poor as reflected in the country’s ranking (171st out of 189 countries down from 156th in 2010) in the 2015 World Bank/International Finance Corporation Doing Business report, and a similarly dismal place in the World Economic Forum’s Competitiveness Index.

Improving competitiveness will be a tough ask in a dollarised economy where, according to the IMF, the US dollar was 15 to 25 per cent overvalued earlier this year since when the US unit has appreciated significantly, while with a sliding rand South African imports become more competitive.

Higher import tariffs are an unpromising avenue too for a country which only this week signed to join the proposed 26-nation Tripartite free trade area, made up of the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and the Southern African Development Community (SADC), due to launch in 2017.

It is time for policymakers across sub-Saharan Africa, including Zimbabwe to face up to the new realities of industrialisation for late-starters. Some academics and researchers drawing on emerging market experiences believe that the African development path might well bypass manufacturing altogether as countries leapfrog from dependence on agriculture mining or oil to a service-driven economy.

They should take heed of George Magnus who warns that the increased role of industrial supply chains, intangible capital, skills, and services in the structure of advanced manufacturing output is “eroding a past guarantee of successful development” – industrialisation driven by plentiful low-wage labour.

If he is right, policymakers and entrepreneurs need to look for new development models rather than seeking to copy what worked in Asia 20 years ago.


 
Email this to a friend Printable Version Discuss This Story
Share this article:

Digg it

Del.icio.us

Reddit

Newsvine

Nowpublic

Stumbleupon

Face Book

Myspace

Fark

 
 
 
comments powered by Disqus
 
RSS NewsTicker