No reprieve to Zim de-industrialisation

While addressing the recent annual Congress of the Confederation of Zimbabwe Industries, the Minister of Industry and Commerce, Mike Bima, disclosed that President Robert Mugabe has requested him to prepare a comprehensive and detailed report on the state of Zimbabwe’s industrial sector.

Eric Bloch

Problems facing the manufacturing sector and ancillary industries in Zimbabwe are well known.

These issues have been highlighted by the Confederation of Zimbabwe Industries the Zimbabwe National Chambers of Commerce, the Association of Business in Zimbabwe, and various other authorative bodies.

These issues have also been recorded in reports by the International Monetary Fund, the European Union and the European Investment Bank (EIB), among other institutions.

Until recent years Zimbabwe had the second biggest industrial sector in sub-Saharan Africa outside South Africa. It was diversified, with its outputs which ranged from textiles and clothing, to furniture, pharmaceuticals and cosmetics, processed foodstuffs, toys, stationery, and other products and industrial services.

But, progressively, the sector shrunk and is continuing to do so.

The quantum of output of manufactured products has become minuscule by comparison with that of six years ago, numbers employed have diminished by more than 65%, almost without exception factories are operating at losses, and hence making no direct contributions to the fiscus, and very little to the economy.

Concurrently, the extent of exports has greatly diminished, whilst dependancy upon imports has intensified.

Moreover, many of the factories have become devoid of funding required for comprehensive maintenance, upgrading, and replacement of plant and machinery.

The de-industrialisation was fuelled by the record-breaking hyperinflation that prevailed up to 2008. As a result, working capital resources for industries were wholly eroded, precluding the holding of adequate stocks of manufacturing inputs, and disabling the ability to fund manufacturing costs.

Hyperinflation further impoverished the majority of the populace, and therefore very few could afford to buy any products manufactured by industry, with only the slight exception of bare essentials such as foodstuffs and pharmaceuticals.

Hence industry not only did it not have the resources to fund any substantial manufacturing, but could not attract consumers for such limited production.

Moreover the financial sector, in general, and banks in particular, were denuded of operational capital, while they were recipients of insignificant volumes of deposits, and therefore could not avail industry of funding to restore working capital.

As if these were not bad enough afflictions precluding the viability of industrial operations, government also compounded the operational constraints in various ways.

It approved substantial increases in the charges of the Zimbabwe Electricity Supply Authority (Zesa) and other parastatals.

Moreover, it failed to assure adequate funding for the parastatals, resulting in a progressive decline of service delivery.

Similarly, the availability of water supplies was erratic. Yet a further parastatal decline was that of rail services; for National Railways of Zimbabwe was not provided necessary funding by government.

Consequently, industry had to rely upon road transport for delivery of goods to customers, and for procurement of production inputs.

A further governmental hindrance to viable industrial operations has been the pronounced delays in import clearances at border posts, in general, and Beitbridge in particular.

In many instances trucks conveying goods to Zimbabwean manufacturers have had to await import clearances for two to three days, notwithstanding that they had all requisite clearance documentation, fully and properly completed.

Industry has also been severely, and negatively, affected by diverse interactions with labour. On the one hand, because of the sharply diminished demand for production, almost all industries needed to reduce the size of their labour forces considerably. Understandably that was extensively resisted by labour.

Concurrently, those who were not being retrenched had endless fears that they would be victims of further job cuts and these concerns impacted adversely upon their productivity. The troubled labour environment also motivated many labour representative organisations to be increasingly demanding and intensely confrontational.

And these are but a few of the many causes of de-industrialisation, but all of these causes can be effectively countered by positive actions by government. Those actions should include:

An immediate introduction of substantial export incentives (within the parameters prescribed by the General Agreement on Tariffs and Trade-GATT);

Urgent, and constructive, revision of the Labour Act and its underlying regulations;

Ensuring that utility providers prioritise assured, continuous supplies to manufacturers, and

Facilitation of Foreign Direct Investment (FDI) by ensuring investment security for FDI can be a major source of recapitalisation of industry (and of the financial sector, which can then provide funding to manufacturers).

The recovery, and subsequent growth, of industry would be a very substantial contributor to the revival of the economy.