Look East Policy: Final blow on Zim textile industry

On the back of frosty relations between Zimbabwe and the Western world after the former had controversially deposed former white commercial farmers off their land, Zimbabwe in the year 2003 proudly declared its “Look East Policy”.

By Durban Marukutira

Facing an embargo from the United States by way of the Zimbabwe Democracy and Economic Recovery Act (Zidera) of 2001 and European Union (EU) article 96 of 2002, the Zimbabwe government shifted its economic relations from the West to the East. This, however, did not come without its disastrous consequences along the way. The textile industry suffered the most from this policy direction we had chosen to pursue.

Zimbabwe made a number of fatal mistakes in their negotiations of the terms of trade conditions with the East, especially China. There is need to highlight that Zimbabwe, prior to the Look East policy, had a big and thriving textile industry, which at its peak employed over 24 000. Cotton Printers, Merlin, Con Textiles and David Whitehead were some of the leading brands in this industry.

With the Look East Policy, the government of Zimbabwe opened floodgates for a lot of Chinese textile players, who would come to Zimbabwe to trade all sorts and manner of textile materials. Considering that China and the Far East nations have far much advanced production methods and could afford to offer their products at better prices, local textile companies started to face viability challenges. Where, for example, a locally-made face towel would be sold at $5 in Zimbabwe, Chinese dealers would sell the same at $1. With a rational consumer always looking at maximising his/her utility, it is not rocket science that Chinese products proved popular at the expense of locally-made commodities. The downstream effect of the same was felt with an estimated 20 000 employees (83% of the workforce) who used to be employed by textile firms, having lost their jobs in the 12 years this policy has been in place. Production capacity utilisation for the same players in the textile sector has correspondingly declined to below 10%.

The negative spiral effect of the Look East Policy spread its tentacles to the cotton production industry. The epitome of this came when the Cotton Company of Zimbabwe (Cottco) applied for judicial management in November 2014, citing an increasing debt burden of $56 million, poor capacity utilisation and other viability challenges. The story is similar for Cottco’s peers like Cargil and Terrafin.

COTTON FIELD

It is important to explain that the problems faced by many cotton ginners and retailers in Zimbabwe have nothing to do with the overall performance of cotton lint prices on world futures markets. Cotton has been consistently trading at $1,60/kg for fine lint. This is in sharp contrast with the paltry $0,37/kg that cotton is fetching in Zimbabwe. The real issue lies in micro-economic demand and supply factors obtaining in the our economic space. With the secondary consumption market for cotton operating at 10% of its production capacity on the back of cheap Chinese textile imports, there is little demand for cotton and as such prices for cotton lint have adjusted downwards.

At their peak Cotton Ginners used to provide a market for an estimated 250 000 rural small-scale farmers who used to make a living out of cotton. Areas like Chegutu, Sanyati, Zaka and Gokwe had for a long time been almost entirely reliant on cotton for the sustenance of their population and economies. With secondary markets failing to provide a market for cotton lint, the number of small-scale farmers involved in cotton production has recorded an embarrassing 32% decline over the years to only
170 000 farmers to date.

This is a very serious matter and families have suffered and continue to suffer as a result of the government’s inability to carefully consider repercussions of some of the investment and trade decisions that they make. If we consider that the fall of the textile industry alone has rendered an estimated 100 000 people of their direct livelihood, one is left to ask: how many people have been impacted by such a decision?

In the process, China has continued to benefit because Zimbabwe has provided home for their poor quality exports which their own government cannot allow to be sold in China. Despite the short-term benefit to local consumers, the bigger picture is that whenever we are purchasing a Chinese textile product ahead of a locally-made product we have in fact exported jobs to China. No wonder today the smoking skies of Bulawayo, which used to be home to most of the leading textile companies, can no longer be observed from a distance. The majority of the population in Midlands, Masvingo and Matabeleland who used to proudly take up employment opportunities in Bulawayo textile firms have instead chosen South Africa as their preferred destination of employment.

Events and circumstances in our textile industry have proved the Look East Policy was one of the worst policies this regime has ever implemented!

l Durban Marukutira is a Zimbabwean economic analyst based in Germany. He can be contacted on Durban.Marukutira@gmail.com

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