HomeOpinionEric Bloch: Addressing industry’s recovery needs

Eric Bloch: Addressing industry’s recovery needs

LAST week this column sought to address some of the many critical actions required to halt, and reverse, the decline presently being experienced by the manufacturing sector, and which must be addressed in the forthcoming 2011-2015 industrial policy framework for revitalisation of the economy to be released shortly by the minister of industry and commerce, Welshman Ncube. 

Some of the most urgent needs addressed last week were enablement of access to working capital (for almost all manufacturing enterprises desperately require recapitalisation), restoration of effective and reliable services by parastatals in general, and by Zesa, TelOne, National Railways of Zimbabwe and Air Zimbabwe, in particular.  Also identified was that there is a pronounced necessity for restoration of harmonious and collaborative employer-labour relations.
However, as important as it is that those issues be rapidly and dynamically addressed, there are many others which must also receive urgent and effective attention if a real and meaningful transformation of the decimated manufacturing sector is to be achieved.  Some of the key urgencies which need to be focused upon include:

  • Reversal of the intense brain drain experienced by Zimbabwe over the last decade.  The skills resources of all economic sectors have been grievously depleted, and the manufacturing sector has not been an exception. As the economy declined inflation soared upwards, infrastructure  declined, education and health services deteriorated and life for many became increasingly unbearable. Millions left Zimbabwe for perceived greener pastures elsewhere in the region, and further afield.  For the manufacturers, this included the loss of skilled management, of the technologically endowed, and of trained, experienced labour.  The result has been  diminished volumes of production, lowering of quality output and failure to keep pace with international technological developments.

Although most Zimbabweans, when seeking livelihoods elsewhere, had every intention to return home once Zimbabwe transformed for the better, they have since sunk new roots.  Many have experienced career advancement, married and had families, acquired investments, and now have sharply diminished expectations of coming home, save for those negatively impacted by international economic declines, rendering them unemployed.  Therefore, reversal of the brain drain now requires an intensive focus upon development of new skills resources. 
Tertiary education and training within industry must be vigorously upgraded, in part by seeking transitional services of expatriates, and guidance and support by international development agencies.  Concurrently, those skilled who are still in Zimbabwe, and those whose skills are to be developed, must be motivated to remain in Zimbabwe.  This necessitates infrastructural restoration, internationally correlated remuneration packages, and regionally aligned taxation levels.

  • Another urgent need is for government to ensure that Zimbabwean industry is not (as is presently the case) confronted with unfair import competition.  Manufacturers must be prepared to confront competition, where such competition is based upon quality and delivery reliability, and upon price, save and except when the price competitiveness of the imported product is a result of pronounced subsidisation by governments of the countries from whence the competitive goods emanate.

The internationally prevailing General Agreement on Tariffs and Trade (Gatt) prescribes acceptable levels of export incentivisation and subsidisation, but certain Far East countries operate with contemptuous disregard for Gatt.  (By way of example, one of those countries subsidises textile and clothing exports to an extent of 180% of wage content!)  Zimbabwe must impose custom duties upon such products as would substantially level the playing field between the Zimbabwean products and the competitive imported products.  Moreover, many products enter Zimbabwe disguised as manufactured within Sadc, and therefore duty exempt, whereas they are actually manufactured further afield and should have been subjected to duty. 
In addition, considerable volumes of goods are smuggled into Zimbabwe, evading the customs duties’ net.  All these circumstances create advantage for the imported goods which cannot viably be competed against by Zimbabwean industry, and government must intensively contain the prejudice.

  • Although the extent thereof must not exceed Gatt limitations, Zimbabwe needs to facilitate, with export incentives, enhanced manufacturing sector exports, as the extent of domestic consumer spending power generally does not suffice to accord the manufacturing sector viable production volumes.

Linked to all those needs is the great requirement of restoration of business confidence, for no businesses can survive, let alone grow, when the owners and management are devoid of confidence as to the future.  Absence of confidence results in demoralisation, which clouds vision as to opportunities and suppresses motivation to strive for change.  Currently, business confidence in the manufacturing sector is at an all-time low.  As if working capital inadequacies, recurrent confrontation with labour, erratic resource availability from parastatals low levels of consumer spending power  and unfair import competition do not suffice, manufacturers also fear loss of ownership and control of their enterprises because of the unjust Indigenisation and Economic Empowerment legislation.  That fear is exacerbated and compounded by the draconian demands of indigenisation activists, staunchly supported by some of the more extremist politicians.
In addition, intensifying political instability, and endless and increasing confrontation between the different arms of the so-called “inclusive government” inevitably fuel concerns that economic recovery will not occur, that necessary foreign investment is increasingly alienated, and that prospects of international lines of credits required to restore liquidity to the money market, are increasingly declining. 
Therefore, yet another essential need for recovery of industry is that government, finally and very belatedly, unites in constructive actions to restore business confidence, and reincarnates the economy.

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