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Measures to resuscitate industry crucial

UNTIL 2008 Zimbabwe’s manufacturing sector was a major contributor to the national economy in general, and to a significant extent to that of Bulawayo, as was the contribution of the mining sector and, at one time, agriculture.

Eric Bloch

And since 2008 the industrial sector has progressively declined with many enterprises wholly ceasing operations, while others have markedly downsized their production levels.

The decline of Zimbabwean industrial entities is attributable to diverse circumstances, almost all of which were either caused by government, or which government failed to address. Amongst the main causes of industrial emaciation were:

Rampant hyperinflation that soared to such a great level that the official inflation rate once reached 231 000 000%; the Central Statistical Office (now Zimbabwean Statistical Authority), became unable to determine the magnitude of inflation, although economists assessed that the hyperinflation had soared to levels of several trillion per cent, a record figure.

Consequently costs of production escalated at an unsustainable pace, with immense surges in wages and salaries, materials and consumables, electricity and other utilities, transport, and much else;

The intensity of inflation almost wholly eroded the spending power of consumers, with most people even struggling to afford the most basic necessities. This reduced market demand for many products, and even contracted the demand for bare essentials.

The upward surge in manufacturing costs, and concomitant decline in production levels to service the domestic market, inevitably escalated prices of products to export customers to such an extent almost all export opportunities that had beneficiated industries ceased to exist. Concurrently, locally produced goods ceased to be competitive against imported products;

The hyperinflation greatly eroded the capital resources of all industries, to the extent many were not only undercapitalised, but also virtually devoid of capital.

For the same reasons, the availability of new domestic investment resources was minimal, and potential foreign investors were deterred from investing in the troubled manufacturing businesses by the state of the Zimbabwean economy.

As a result, the sudden erosion of the capital essential for viable operations could not be reversed by procurement of new investment capital.

Moreover, the banking and financial sector had also been affected and suffered consequential major reduction in capital resources.

Furthermore, because of the state of the economy, deposits into that sector were relatively minimal. Consequently, few manufacturers were able to source required funding from the money market to meet their needs no longer serviced by own capital;

Without exception, the charges levied by public sector utility providers, and for local authority services, surged upwards, thereby increasing operation costs of manufacturers;

Notwithstanding recurrent wage increases, as a general rule wage levels did not suffice to meet all essential needs of workers, their families and dependants. Manufacturers have suffered repetitive labour unrest and considerably diminished productivity levels.

Despite the immense devastation the manufacturing sector can be resuscitated and grow to far greater heights conditional upon government pursuing the right policies, and facilitating a conducive industrial environment. Amongst the many attributes to such redevelopment of Zimbabwean industry are:

The country’s geographic location is such as would provide industrialists with access to a domestic market, and export markets, aggregating to more than 420 million customers;

As the agricultural and mining sectors recover, Zimbabwean manufacturers will have ready access, at reasonable cost, to many diverse manufacturing inputs;

Despite the many skilled Zimbabweans who have taken up employment elsewhere in the region or further afield, the country still has a considerable resource of skilled labour;

Considerable, currently under-utilised, industrial infrastructure exists (especially so in Bulawayo), notwithstanding that much of it needs upgrading or renovation; and there are many other factors conducive to Zimbabwean industrial recovery and growth.

However, for that to materialise, there are factors that need to be addressed.

Only a week ago, the Minister of Industry and Commerce Mike Bimha, whilst touring various Bulawayo–based industries, stated US$8 billion is required for the resuscitation of Zimbabwe’s distressed industries (over and above the funding required for the establishment of new industries).

Zimbabwe’s devastated economy does not have such investment resources, and foreign investment and international aid and loan funding of such magnitude will not be forthcoming until government creates a conducive investment environment.

Concurrently, government needs to address availability of essential utilities, and in view of the state’s bankruptcy, that will not be timeously achieved unless it expeditiously effects total or partial privatisation of the utility and service-providing parastatals.

Significant revisions are also required to the country’s direct, and indirect, taxation policies. Realistic tax rates, conducive to investment motivation, are essential, as is the reintroduction of export incentives and import duties which level the playing field between imported and locally produced industrial products.

Government must also restore good international relations, instead of the fractious interactions with part the international community, especially the West.

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