Principles for industrial transformation

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A truck carries scrap mental to a steel company in the Willowvale Industrial site.

By Vince Musewe
IN his book titled “How rich countries got rich and why poor countries stay poor”, Erik Reinert explains to us that it will only be when we adopt strategies to deliberately industrialise through manufacturing that we can begin to achieve increasing marginal returns to create wealth, employment and sustainable higher incomes. We should, therefore, deliberately move away from resource-based revenues because they give diminishing marginal returns and instead, move towards rapid modernisation and industrialisation to achieve our developmental objectives.

Rich countries became rich through industrialisation and the promotion of vibrant local business class while protecting their industries from foreign competition in order to allow themselves to build the necessary momentum and capacity to compete. In addition, they secured markets in colonies by any means necessary and even prohibited the manufacture of specific goods there. Free trade is, therefore, a myth.

In the book he talks about Phillip von Hornigk’s “Nine points on how to emulate rich countries” written in 1684, well before Adam Smith in 1930. (Hornigk is the author of a book which outlined Austria’s strategy in 1684 which resulted in the greatest increase in Austria’s wealth over 100 years.)

The first point he raises is that “a country should inspect its soils with greatest care not to leave any agricultural possibilities of a single corner or clod of earth unconsidered. Every useful form of plant under the sun should be experimented with and considered for adaptation to the country.”

We are all aware that agriculture remains a critical trigger to our economic revival and we must, therefore, do all we can to restore a vibrant market driven agricultural sector driven by security of tenure, access to long-term capital, high productivity and diversification of products. We must also increase our research capabilities so that we come up with new production methods and new products.

Secondly, Hornigk says that “no trouble or expense should be spared to find gold or silver and to keep it. Gold and silver once in the country, whether from own mines or obtained by industry from other countries, are under no circumstances to be taken out for any purpose. They should never be converted into any use which destroys them.”

We must, therefore, invest in more mineral exploration and increase our mineral production. For example, Zimbabwe can achieve the production of 100 tonnes of gold per annum compared to the current 25 to 30 tonnes. However, we must do all we can to increase our gold reserves by dealing with leakages and if we can, avoid the need to convert all of it into cash and thereby build our own gold reserves. In addition, we must maximise output of platinum, chrome, nickel, diamonds, coal, phosphates, lithium among others and avoid exporting them raw.

The third point is that “all commodities found in the country, which cannot be used in their natural state should be worked up within the country since payment for manufacturing generally exceeds the value of raw materials by two, three, ten, twenty or even hundred-fold and the neglect of this is an abomination to prudent management.”

In carrying out the above, people would be needed for cultivating the raw materials and for working them up. Therefore the people should be turned by all possible means from idleness to remunerative professions instructed and encouraged in all kinds of inventions, arts and trades and if necessary instructors should be brought in from foreign lands for this.

This basically means that we must create employment and stifle the importation of finished products but add value locally. Value addition driven industrialisation is the key.

Fourth, “the inhabitants of the country should make every effort to get along with their domestic products to confine their luxuries to these alone and to do without foreign products as far as possible and if necessary such products should be exchanged for other wares and not for gold or silver.”

Our government must lead here and the imminent introduction of sector-based local content policy (LCP) is a move in the right direction. I, however, think that industry and not government needs to lead the effort. We must aggressively promote the “buy Zimbabwe” philosophy and lead by example.

Fifth, such foreign imports should be obtained in their unfinished form and worked up within the country, thus earning the wages of manufacturing there.

“Except for important considerations, no importation should be allowed under any circumstances of commodities of which there is a sufficient supply of suitable quality at home. In these matters, neither sympathy nor compassion should be shown foreigners, kinsfolk, allies or enemies. All friendship ceases when it involves my own weakness and ruin. This holds good even if domestic products are of poor quality or even highly priced. It would be better to pay for an article $2 which remain in the country than only $1 which goes out.” says Hornigk.

Lastly, “opportunities should be sought night and day for selling the country’s superfluous goods to foreigners in manufactured form for gold and silver if possible and their consumption must be sort in the farthest ends of the earth and developed in every possible way.”

Regional integration is, therefore, key. The Sadc and Comesa markets for example, have a total of 600 million consumers who can buy our goods and services. AfCFTA is also a huge opportunity with 1,2bn consumers. We are also strategically placed in the centre of the region and can also be the trade gateway.

Infrastructure rehabilitation and development must be a priority.

Now if this is not economic development policy and practice simplified, I don’t know what it is. These principles worked in 1684 and still work to this day. I have always argued that to come up with economic policies is a simple matter for its principles are universal and proven. What matters is the value system of leadership and the ability to implement, manage and allocate resources prudently.

It is the ability of skilled technicians, prudent accountants, ethical lawyers, experienced engineers and disciplined administrators, industrious farmers, good miners and innovative entrepreneurs all of whom we have in abundance both locally and in the diaspora. Ours is to merely harness their skills and create the necessary space for them to do what they do best.

A compelling inclusive national vision which accepts the above principles as sacrosanct combined with competent management and an alignment of government policies which are consistent and well thoughtout can truly unlock our full potential as a country, improve our quality of life and create wealth for ourselves and generations to come.