Bounds of possibility: Re-industrialising Zim

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Zimbabwe’s industrial infrastructure has collapsed.

“We must unite for economic viability, first of all, and then to recover our mineral wealth in Southern Africa, so that our vast resources and capacity for development will bring prosperity for us and additional benefits for the rest of the world” — Kwame Nkrumah said in 1964

By Vince Musewe

Left to rot ... Without fundamental political and economic reforms, Zimbabwe will not be able to re-industrialise.

Left to rot … Without fundamental political and economic reforms, Zimbabwe will not be able to re-industrialise.

Leaders of 15 southern African countries, ranging from resources-rich Democratic Republic of Congo to the continent’s manufacturing hub of South Africa, adopted a half-a-century strategy to industrialise the region.

The strategy, to be implemented in three stages, spanning from 2015 to 2063, was endorsed at the Southern African Development Community (Sadc) extraordinary summit of heads of state and government held in the Zimbabwean capital Harare in April 2015.

The industrial strategy, according to the communiqué, was aligned to the continental vision, Agenda 2063, a pro-people strategy aimed at optimising the use of Africa’s resources for the benefit of its people.

The strategy is anchored on three pillars, namely industrialisation, competitiveness and regional integration and aims to turn the region from an exporter of minerals to a key global net exporter of processed goods.

The proposed industrialisation projects seek to create value chains across borders and upgrade existing and develop new infrastructures while creating significant jobs and trade opportunities within the region.

Sounds good, does it not? But we must remember that Africa has been trying to industrialise since 1951 with the independence of Ghana. Its failure has really not been about the lack of resources or good intentions, but about the lack of visionary leadership and political will to do the necessary. Corruption and the greed for power without responsibility have arrested Africa’s developmental objectives.

Conflict over political and economic institutions and the distribution of resources has been pervasive throughout the history of nations and Africa in particular. If we are to create a modern state in Zimbabwe characterised by inclusive political and economic institutions, we must first look at history and understand the conditions which are necessary for sustainable industrial development.

An industrial revolution in Zimbabwe is possible sometime in our future, but this can only happen when we radically change the institutions that we inherited from colonialism and also reverse Zanu PF policies, which have continued to arrest our development in the last 36 years of independence.

If anything, President Robert Mugabe’s regime has decimated our infrastructure and industrial base and although the skeleton still exist, we will have to almost start from scratch once Mugabe goes. Countries that have extractive or predatory political regimes do not develop; they actually regress as we have seen in Zimbabwe.

Extractive political and economic institutions are those institutions, which limit political and economic freedoms as means to prolong the rule of a predatory elite. They create a political elite whose main priority is not shared economic growth but concentrated wealth accumulation for a few at the expense of social progress for many.

In the first instance, any regional integration and industrialisation must be underpinned by political stability including the provision of adequate resources and skills. Countries can never live to their full potential where there is no peace and where there exists extractive political and economic institutions.

In addition, we will need government policies which are consistent and nurture a constructive co-operation between government and the private sector. These conditions do not yet exist in our country and we will therefore need to work on these things first, before we can see any meaningful industrialisation and development for that matter.

Zimbabwe has actually de-industrialised over the last 15 years since the chaotic fast track land reform programme of 2000. As a country where 60% of industrial inputs came from the agriculture sector, it is no surprise that the decimation of agriculture remains the main cause of the collapse of local industry, the increase in unemployment and the proliferation of cheap imports from China. Re-industrialising Zimbabwe is therefore going to be very difficult and a long road.

Zimbabwe launched its industrialisation blue print covering the period 2012 to 2016 but to date not much has happened due to political paralysis and too much focus on Zanu PF succession issues.

The most critical issue will remain that of economic freedom. We cannot expect significant investment inflows into our industrial sector until we address some of the fundamentals of creating economic freedom and encouraging free enterprise without the government playing both referee and player in the business sector.

Predatory state capitalism continues to crowd out the private sector investment and the state itself has proven incompetent at running profitable business entities as evidenced by the dire condition of the estimated 100 state enterprises that are run by government. Rampant corruption, patronage, red tape and lack of project management skills are a common feature in all sectors of government.

The principles of policy certainty, which avoid sudden changes to investment regimes and appropriate legal instruments, which protect the value and ownership rights of the investors are sacrosanct to any economic development.

My contention here is that if we work at creating economic freedom, deal with corruption ruthlessly, have consistent policies that look at business as a partner and not an enemy of government and protect private property rights, most of the other things will fall into place. We will have created an environment that attracts investment to rebuild our industrial base.

A stable and well regulated financial services sector is also an important factor to promote savings, access to capital and industrial growth. This means that institutions such as the Reserve Bank of Zimbabwe must not only be professionally managed, but must be depoliticised, have utmost integrity and be beyond reproach in all its dealings.

Our commercial banking sector must also be well regulated in order to attract deposits and savings which can in turn be on-lended to our business sector at affordable cost. The high cost of credit and bad debts in Zimbabwe remain barriers to industrial revival.

Zimbabwe’s industrial sector is operating well below capacity due to several reasons, the main ones being lack of access to credit for working capital, competition from cheaper imports, dwindling disposable incomes and therefore low demand for products, the high cost of power, government policy inconsistencies and out-dated equipment.
Our trade deficit for 2016 is likely to be in excess of US$4 billion and we continue to import an estimated 40% non-essential goods which could be manufactured locally. South Africa remains our main source of imports followed by Asia. The travesty of it is that 70% of our food needs are now imported despite the fact that we have all the necessary land assets and agricultural skills to produce and process our own food and even export to the region and overseas.

The Zimbabwe we want to create must focus on value addition, but it must not be a religious idea. We will value add where it saves us and export raw materials where it is more profitable to do so. The same applies to import substitution. We must take a balanced non-political view of things which maximises our advantages while also maximising our export earnings. There is need of course to optimise the value chain on specific products and in specific industries, but we must take a clinical approach so that we do not shoot ourselves in the foot and lose markets.

On the issue of technology transfer and research and development, as observed in the industrialisation policy paper of 2012-2016, “we will need to attain global competitiveness and to re-equip our industries with capital equipment to match global technology. Greater financial support for innovation and technology will be necessary in order to contribute to the national target of increasing and sustaining research and development expenditure to 2% of GDP.

Industrial establishments will also be encouraged to use technologies that minimise industrial emissions, the discharge of solid waste, and improve waste water management”.

This certainly sounds good, but we cannot achieve this unless we address the issue of country risk. We ought to source the best technologies and management practices out there, regardless of where they come from and yet our political policy of looking East and demonising the West has not helped at all.

Our politics need to be aligned to sound economic policy and this will take a new type of political leadership than we currently have. The non-alignment of political and economic objectives has cost this country time and money.

The African Development Bank has produced a comprehensive and well researched report on the pre-requisites for the re-industrialisation of Zimbabwe in the next 10 years that was estimated to cost US$14 billion. This will mainly hinge on institutional arrangements and effective project management. There is therefore no lack of resources out there once we get our politics right particularly on the issues of indigenisation and dealing with corruption.

The country obviously has a skilled deficit due to an exodus of many skilled Zimbabweans, who are now all over the globe. We will need to attract these skills back home through tax incentives and put into place soft landing returning resident policies because those Zimbabweans in the diaspora can indeed be our competitive advantage as we try to reindustrialise and catch up to international developments both in production methods and new technologies.

In conclusion, Zimbabwe has no lack of ideas on how to re-industrialise but the main issue is always that of our political leadership. Without fundamental political and economic reforms, we will not be able to achieve our industrialisation objectives.

Our key objective must therefore be to renew our political leadership first and then attract the necessary resources so that we can renew our institutions, both in the public and private sector, so that they become inclusive and geared to nurturing a vibrant and viable industrial sector.

Another Zimbabwe is possible!

Musewe is an economist and author based in Harare. These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society. E-mail: kadenge.zes@gmail.com, cell +263 772 382 852.

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