HomeBusiness DigestNew industrial policy: Easier said than done

New industrial policy: Easier said than done

Since Independence in 1980, the government has never run out of blueprints to support industrial development, but these well-meaning documents, which are often not implemented, have not done much to stem the decline of the sector and help its revival in the context of the current economic recovery programme.

One of the main functions of government is to ensure economic development which basically refers to sustained, concerted actions of policy-makers and communities to promote standards of living and prosperity.

The process involves quantitative and qualitative changes in the economy. Some of the issues which are part and parcel of the process include development of human capital, critical infrastructure, competitiveness, literacy and social inclusion. All these factors must eventually help economic growth which is a function of productivity and rise in GDP, a key aspect of economic development.  

Policy intervention aimed at economic growth and the social well-being of the people is a critical element in economic development.

A series of blueprints have been produced but none of them fully implemented largely due to leadership and policy shortcomings in government. This has created scepticism in government’s commitment to its policies and economic progress.

The latest document, the Industrial Development Policy (IDP) 2012-2016, issued by the Industry and Commerce ministry last week, seeks to restore the sector’s contribution to GDP from the current 15% to 30% by 2016, while the share of exports is expected to rise from 26% to 50% in the same period.

The policy framework predicts an average GDP growth rate of 7%, but like its predecessors, the blueprint either lacks clarity or is rather silent on a number of key issues, making it susceptible to failure.

The policy document does touch on some issues in brief and makes only fleeting references to others. Of particular interest is the new policy framework’s silence on the roles of the Industrial Development Corporation (IDC) and other players such as the National Social Security Authority (NSSA),the Infrastructure Development Bank of Zimbabwe and the Zimbabwe Manpower Development Fund (Zimdef), which have  been on the back burner, not playing their full part in promoting the industrialisation of the economy.

A key pillar of any industrialisation programme is an enabling environment, infrastructure and communications system. The policy document pertinently identifies the infrastructure challenges the country faces, particularly with regards to energy, acknowledging that there can be no meaningful industrialisation if the current power shortages are allowed to persist.

It would be wishful thinking to have a thriving industrial sector when Zesa is failing to guarantee power supply. Apart from this, there is also the need for an overhaul of roads, railways, airports and other key infrastructure. Analysts say Zimbabwe’s industrialisation should actually begin with energy sector reforms and thus the new policy cannot be divorced from the urgent need to first upgrade current electricity generation and distribution capacity in the country to levels that actually support continuous efficient production based on power uptime and lower cost per kilowatt.

One of the most notable examples of policy failures not acknowledged in the blueprint is that in 2011, the country spent almost US$1,2 billion importing motor vehicles. Ironically, this staggering amount was spent mostly on second-hand vehicle imports.

The industrial policy does not seem to address such key issues like how to attract investment in the area to create a sustainable motor trade industry and help to rebalance exports and imports to address the issue of the balance of trade and balance of payments.

Another institution that has a key role to play but has been singled out for sitting on the fence on industrial development matters is NSSA. The authority’s mandate is to collect and pool compulsory pension contributions and to invest on behalf of pensioners. NSSA is expected to play a key role as a financier of infrastructure projects and in the Small-to-Medium-Enterprises (SMEs) sector. The SME sector is the new engine for growth for different economies and if NSSA plays this role well, nascent industries can be developed, positively impacting on broader industrialisation and development.

Although NSSA has been funding some development projects, its resources have not always been properly deployed as some have been wasted through unviable investments and corruption.

Industry and Commerce minister Welshman Ncube’s policy framework correctly identifies the need for institutional capacity-building and training to strengthen institutions such as the Consumer Council of Zimbabwe and the Standards Association of Zimbabwe, but does not mention the role key institutions such as Zimdef, whose mandate is to promote manpower development that supports  long-term skills supply for industry through vocational training.

Whilst Ncube stated in his policy framework that he supports indigenisation, he acknowledges the role of a vibrant agricultural sector, a key supplier of raw materials and critical inputs into the manufacturing sector.

A sound industrial policy can only be underpinned by a strong, well-run, and well- financed agricultural sector. The industrial policy does not deal with the present day-to-day challenges facing agriculture in Zimbabwe following the land reform programme which ruined the sector, the economy’s base, and spawned low productivity on the farms and shortages –– which naturally led to imports.

Given the ongoing onslaught on mining firms, the same can be said about the mining sector and industries that form backward and forward linkages with mining activities as higher perceived risks would lead to low investment levels in the sector, thus economic growth.

However, the policy does bring into focus the sub-sectors Zimbabwe has a distinct or potential competitive advantage in such as the manufacturing of pharmaceuticals and other chemicals from ethanol extracted from sugar cane and development of emerging industries such as diamond mining in Marange which can lead to the creation of a vibrant jewelry-making sector or manufacturing of diamond tools using abundant industrial diamonds.

Zimbabwe also has a potential competitive advantage in the manufacture of fertiliser given its huge coal-bed methane gas reserves and the new policy thrust should see government trying to exploit this, especially when a favourable regulatory framework is already being put in place.

While it has a lot of limitations, the new industrial policy is a good attempt at industrialisation, although the challenge lies in implementation and attracting investment to boost growth and development.

Recent Posts

Stories you will enjoy

Recommended reading