It is widely known that one of the key areas of Zimbabwe’s embattled economy that has become very weakened is the manufacturing sector.
Report by Eric Bloch
The decimation of industry has occurred nationwide, but has had a marked impact upon the industrial sector of Bulawayo, which for long has been the hub of Zimbabwean industry.
Bulawayo had far more manufacturing enterprises than other cities or towns.
Industry was not the sole contributor to Bulawayo’s economy, for the city also benefitted extensively from tourism, the distributive sector (wholesale and retail) and service provision. However, proportionately, other cities and towns have suffered similar industial decimation since 2008.
Of the many causes of Zimbabwe’s industrial decline, foremost was the hyperinflation that peaked in 2008, when prices were rising by an average of 98% per day.
It is that hyperinflation which denuded almost every manufacturing enterprise of its essential working capital — vital to fund stock-holdings and to fund operational, marketing, distribution, and administrative costs.
By 2009, every industrial business required trillions of dollars to maintain operations effectively. However, access to working capital was virtually impossible. Banks and other financial institutions had minimal resources to fund the borrowings necessary for industry to re-establish its working capital base.
What miniscule funding the banks could make available was for untenably short periods, wholly unaligned to the industrial needs, and only made available at substantially high rates of interest and allied charges.
Alternative sources of accessing working capital, being new investment into the enterprises was rarely available.
Because of hyperinflation, domestic investors had been stripped of investment capital, while foreign investors were deterred from investing in Zimbabwe by the draconian, ill-conceived and structured laws of indigenisation and economic empowerment, as well as by the overall political and economic instability which prevailing.
The gross insufficiency of capital further impacted negatively on Zimbabwean industry by precluding industrialists from being able to replace plant, machinery and equipment timeously.
This failure to operate the latest, state-of-the-art technologies, adversely affected local industry’s ability to be market-competitive against products manufactured externally. The antiquated machinery of most Zimbabwean industries negatively affected productivity and quality.
Another debilitating constraint on manufacturing has been, and continues to be, the frequent non-availability, or erratic availability of essential utilities, as electricity and water, compounded by the exceptionally high costs of such utilities.
Not only are the advertised load-shedding schedules not adhered to, but in addition, there are inumerably frequent supply interruptions. These cause loss of production, and in some instances, irreparable damage to manufacturing inputs and especially in the pharmaceutical, food processing, and textile industries.
Another impediment to the viability of manufacturing is unfair competition from foreign manufacturers who are able to supply like products.
On the one hand, those competitors enjoy the benefits of economies of scale, being able (with state-of-the-art technologies) to produce substantial quantities of products than Zimbabwean industrialists.
In addition, some countries are providing subsidies to their manufacturers of very greater substance (generally considerably greater than prescribed by the World Trade Organisation (WTO)), resulting in the selling prices being immensely reduced.
Despite endless representations to Zimbabwe’s government, import tariffs are not imposed at levels which would eliminate that unfair and unjust competitive advantage. Concurrently, excessively great import duties are imposed upon many essential imports of the Zimbabwean manufacturers, including many material inputs and consumable spares, further minimising the ability of manufacturers in Zimbabwe to be price-competitive.
Aligned to such negative and debilitating fiscal policies is absence of export incentives, albeit such incentives should be consistent with the provisions of Gatt. It is long overdue and necessary that Minister of Finance and parliament ensure the provision of equitable and effective export incentives and the re-creation of export processing zones, as well as constructive revision of import policies and tariffs.
Industrial viability is also severely prejudiced by the never-ending delays in clearing imports at Zimbabwe’s border posts. They are neither adequately structured or staffed to ensure timeous clearance of imports. All too often goods being held up for many days, and sometimes weeks, before being cleared. This impedes industrial productivity and exacerbates cash flow constraints.
It is also all too frequent that customs officers of the Zimbabwe Revenue Authority (Zimra) deliberately create impediments and delays to customs clearance in order to motivate the offering of bribes, although fortunately this does not pertain to all Zimra personnel.
Some in government have recognised certain of the restraints confronting industry and have taken some limited actions to address them, such as the creation of the Distressed Industries and Marginalised Areas Fund, although the funding thereof is grossly inadequate. The selection of recipients of funding is not transparent and the loan conditions are unduly burdensome.
If government is genuinely intent on a substantive recovery of the economy, and of achieving ongoing real growth, with the concomitant reduction of nationwide poverty, creation of employment and meaningful national well-being, all of these hindrances to the success of the manufacturing sector must be urgently and constructively addressed.