Industry revival possible

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President Mnangagwa

Vince Musewe
DEAR President Emmerson Mnangagwa.
Your Excellency, there is no doubt that if Zimbabwe is to embark on a new economic trajectory it must be underpinned by key principles which have, throughout history, led to the emergence of successful economies worldwide. These include leadership accountability, meritocracy, rule of law and protection of private property, institutional integrity, economic freedom and inclusivity, food security and industrialisation, human capital preservation and development, effective and efficient resource management, infrastructure development, the promotion of foreign direct investment and lastly, citizen empowerment and poverty alleviation.

Rapid re-industrialisation is one of the cornerstones upon which we can build a new prosperous inclusive economy. The re-industrialisation of Zimbabwe will, indeed, determine our ability to achieve higher incomes and better quality life for citizens. However, it is important that our policies and strategies borrow from those countries which have travelled the same road. We must emulate countries who have become industrialised by adopting the same principles and practices which have made them rich.

The National Development Strategy One (NDS1) seeks to implement some productive sector reforms in order to revive industry. It must institute measures that address underlying causes of high cost of doing business, including inputs supply across various value chains, access to enabling public utilities, domestic cost of finance, and introduction of flexibility in Zimbabwe’s labour laws.

It is now accepted that we need to prioritise increased investment in the manufacturing sector, with emphasis on value-addition and beneficiation of agricultural produce and minerals in order to increase job creation and export earnings. Business must be incentivised and encouraged to take this route especially with regard to benefaction taxes which must be scrapped.

We have to also focus on supporting sustainable micro, small and medium enterprises growth and development through access to working capital, business linkages, market access, cluster development, business incubation and support services.

The most critical issues are to increase investment inflows into our industrial sector and to support and encourage free enterprise. The private sector must be a partner in creating new growth trajectory and government must be open to advice on how this can be a reality.  The idea of an industrialisation venture capital fund as suggested by the Finance minister must gain traction, but it must be easily accessible. Previous efforts have been hugely unsuccessful because of the inability of many businesses to access funds.

Your Excellency, international experience shows that it is only when we industrialise through manufacturing that we can begin to achieve increasing marginal returns to create sustainable higher incomes. This involves deliberately moving away from a resource-based dual economy primarily dependent on the exporting of primary raw products, because this makes us vulnerable to fluctuating international commodity prices and other stochastic shocks.

The full utilisation of our factor endowments as a country through value addition and beneficiation is, therefore, key to our industrial policy thrust.

Developed countries became rich through industrialisation and the promotion of vibrant local business class while protecting their industries from foreign competition to allow themselves to build the necessary momentum and capacity to compete internationally.

In addition, they secured markets in colonies by any means necessary and even prohibited the manufacture of specific goods there to ensure that value from the colonies was transferred and retained within their economies.

The protection of local industry is, therefore, key and a common thread in all successful industrialisation efforts in other countries. Added to this, AfCFTA presents an opportunity for us to access a market of 1,2 billion consumers.

Your Excellency, our long-term intentions must be to ensure that all primary commodities found in the country, which cannot be used in their natural state, should be value added within the country.

That way we not only retain value and resource wealth within our economy, but we will be able to create high income skilled jobs and also trigger both upstream and downstream industrial linkages which will create their own momentum.

In carrying out the above, we will have to build the necessary skills, re-tool industry with new technologies (for example Industry 4.0) and attract the essential long-term investments.

Added to this, must be the deliberate reduction of imports so that as a country we can produce what we consume.

Anything that can be made here must not be imported. Internal self-sufficiency is the principle we must surely pursue. This has begun to happen to some extent as we see most products on the supermarket shelves are locally made, but more must be done.

National consensus and unity of purpose among major stakeholders — policymakers, banks, industrialists and labour unions — with regard to industrialisation development strategies and the appropriate policies to achieve them is, therefore, important.

It cannot be a one-man show, where the government prescribes from on high, but a collaborative and inclusive effort is necessary and likely to be more successful. Our industrialisation policy must also focus on meeting internal local input needs — agricultural implements fertilizers, pesticides, agro-chemicals as well as basic consumer goods such as soap, bread, mealie-meal, edible oil, flour and beverages.

This must be supplemented by rebuilding and investing in our heavy industry including iron and steel, structural engineering, agricultural machinery and sugar milling.

Light industry must produce components and spares locally to reduce dependence on expensive imports.

NDS1 has identified local value chains which we must focus on.

Your Excellency, domestic producers must, therefore, be incentivised to replace imports and industrialist must be protected from foreign competition without compromising quality.

Added to the above, appropriate infrastructure, information communication and technology, water, roads, rail, serviced industrial land must be developed to promote industrialisation.

To achieve all the above, we need to revive the agricultural sector which will continue to play a critical role for local industrial inputs.

Land productivity and irrigation and infrastructure development of rural agricultural properties is essential.

We must certainly pay attention to this matter including a comprehensive land audit to ensure that all land become productive assets.

In mining, we need to ramp up production and export revenues.

This can only be possible if we beneficiate our minerals and also add value so that we retain value in our economy and thereby increase our GDP.

Investing in exploration to exploit new resources and revival of old mines is key.

Our industrialisation strategy must, therefore, be a multi-pronged strategy based on reviving factor endowment productivity, value addition and beneficiation, infrastructure rehabilitation (both urban and rural), attracting new long-term friendly local and foreign investment into both heavy and light industry resulting in import reduction and local job creation.

If we pursue the above policies seriously and consistently, I have no doubt we will achieve our industrialisation objectives.

Vince Musewe is an independent economist and is reachable on vtmusewe@gmail.com