This article attempts to draw lessons from the past in order to cast the net further into the future and provide a bird’s eyeview of what is likely to come given the prevailing economic situation and expected out turn as at December 31 2016.
By Eve Gadzikwa
The current economic landscape is characterised by low confidence levels, high operating and production costs, old inefficient equipment, liquidity crunch, lack of competitiveness due to high cost build-up, limited fiscal space, low investor confidence and limited foreign direct investment (FDI) inflows. Notwithstanding all these factors negatively impacting the economy, the crystal ball is still revolving and our eyes are firmly set on the prize.
Steered by unprecedented resolve for a new narrative, it seems that all concerned quarters agree that higher levels of production and faster growth are the solutions to earn the elusive US dollar.
In the year 1989, the United Nations Industrial Development Organisation (Unido) declared November 20 as Africa Industrialisation Day after realising that the business of industrialisation is taken very seriously globally. Since then, leaders around the world have been refining their ideas on the subject.
This year, global leaders including representatives from Zimbabwe convened in the city of Vienna, Austria to discuss various approaches to industrialisation.
To mark Africa Industrialisation Day, Zimbabwe hosted a follow-up national event under the Theme: “Financing Industrialisation in Africa: Challenges and Winning Strategies.” Zimbabwe joined the rest of Africa in commemorating this important day on December 5 2016 to raise awareness, exchange views with stakeholders on common approaches and to craft a clear vision towards sustainable industrialisation in Zimbabwe. The theme of the event was quite apt, given that Zimbabwe is desperately looking to lure investors in 2017 noting the dire economic situation. In recent years, very little FDI has found its way into Zimbabwe to support industrialisation. To date, between US$28 billion and US$40 billion FDI has been channelled into the entire African continent. This is not enough to spur a significant level of industrialisation in the face of the myriad of challenges including corruption, poor infrastructure, low confidence levels, consumptive spending patterns, mistrust and poor accountability all round.
The commemorative event underscored the Country Programme Framework (CPF), which articulates a comprehensive, supportive and aggressive developmental path towards achieving sustainable industrial development in Zimbabwe. The CPF is designed to enhance assistance to the government in order to implement a roadmap towards inclusive and sustainable industrial development (SID) as stated in the 2013 Lima Declaration and endorsed during the 15th Session of the General Conference.
In doing so, developmental partners including Unido, government, Standards Association of Zimbabwe (Saz) and other economic actors are firmly aligned to the national development priorities as outlined in the recently developed vision document titled “Zimbabwe Agenda for Sustainable Socio-Economic Transformation” ZimAsset 2013-2018, the Industrial Development Policy 2016-2020 as well as Zimbabwe United Nations Development Framework (Zundef) 2016-2020. Indeed, Unido must be applauded in their efforts to drive this process to industrialise Africa in collaboration with local ministries of industry.
The CPF is also intended to build on the achievements of past industrialisation projects and programmes. As industrialisation is a long term endeavour and gateway to development involving various stakeholders, synergies and joint programming activities, every effort will be made to increase the impact of activities and hence minimise duplication through partnerships. If well executed, this programme has the potential to create the much-needed boost to the economy but, clearly, some issues must be given top priority;
Better legislation to facilitate growth in industries.
Robust and inclusive economic growth is needed and can be realised when developmental partners such as Unido, AU, Uneca and other economic actors collaborate and coordinate their efforts.
Unido specifically expressed its commitment to support African countries including Zimbabwe to develop a robust industrialised environment through the respective country programmes.
Sustainability Development Goal Nine has been recognised to be key in accelerating industrialisation in Africa.
Realisation that no region of the world has ever developed without industrialisation.
A bold transformation agenda is needed in Zimbabwe.
ZimAsset, the national economic blueprint must drive industrialisation.
Industrialisation will curtail the export of raw commodities leaving Africa which is already vulnerable to global commodity price shocks.
Agriculture, the backbone of the Zimbabwean economy, must support diversification through industrialisation.
Build on successes of 2014 Distressed and Marginalised Areas Fund (Demaf) and Zimbabwe Economic Track Revival Facility (ZETREF) funding arrangements to support the distressed productive sector.
Productive sector must capitalise on government programmes to retool and enable businesses to compete globally.
Zimbabwe must accelerate investment into energy to support industrialisation.
Technology is changing very fast and industrialists must set a portion of their budgets towards technology upgrades.
More than ever before, partners are needed urgently to arrest further recession and rescue the slow pace of economic growth.
Despite these arguments in favour of industrialisation in Zimbabwe and Africa as a whole, a number of more practical and pressing matters must receive special attention for sustainable industrialisation to be realised in the short term.
Correcting external debt position
Zimbabwe is procuring inefficient debt and external debt is estimated at US$10,7 billion or 11% of GDP of which 59% is in arrears (International Monetary Fund (IMF) 2012 Article IV Consultations report. Basically there is very little funding for industry because Zimbabwe cannot borrow from any MFI because sovereign risk is priced into lending).
Zimbabwe operates regionally and is integrated in Sadc and Common Market for Eastern and Southern Africa (Comesa) and must therefore take advantage of strategic global value chains. Although the Sadc industrialisation Strategy and Roadmap was mooted by Zimbabwe, the country is suffering as it cannot keep pace with its regional peers who are now taking the lead in terms of industrialisation.
Challenges of improving productivity
Challenges for industry are many including low productivity, low economies of scale and over-staffing. Zimbabwe has a lot to learn in terms of improving productivity and efficiency in a number of sectors including manufacturing, timber, dairy farming.
Enablers of industrialisation in 2017
Access to affordable working capital and long-term funding to retool.
Sustainable growth in output.
Innovative funding models through multilateral agencies.
Winning industrialisation strategiesRebuild capacity and competitiveness in key sectors like steel, clothing, pharmaceuticals, chemicals, tourism, metals, timber, leather through engagement with African Development Bank (AfDB), World Bank (WB), Preferential Trade Area Bank (PTA), Industrial Development Corporation (IDC), International Finance Corporation (IFC), Afreximbank,
- Establish a diaspora bond.
- Establish an industrialisation bond.
- Optimal level of protection for key identified sectors.
- Create a tax moratorium for key sectors.
- Reduce interest rates.
- Mobilisation of donor /investor and private equity funds.
- Revive depleted nostro accounts.
6. Establish a National Annual Industrialisation Agenda (NAIA).
7. Establish Robust and Efficient Investment Funding Solutions through banks.
When all is said and done, there is always a silver lining amidst all the depressing news that is churned out every day. However, it will take more than mere intentions but all of us to play our part, to commit, to executive that which is required to move this mountain. I am convinced that, until the nation is united around a shared vision of industrialisation, no meaningful development can take place, no new jobs can be created and no significant amount of foreign currency can be earned that is enough to drive development and halt the sinking ship.
Let us set a new standard in 2017, to increase capacity to produce enough high quality goods for local market in areas we have comparative advantage and to increase export earnings.
Happy New Year!
Dr Eve Gadzikwa*, ARSO President & Director General Standards Association of Zimbabwe (SAZ). EgadIkwa@saz.org.zw Www.saz.org.zw. 0772214240. New perspectives column is coordinated by Lovemore Kadenge, president of the Zimbabwe economics Society (ZES) Email firstname.lastname@example.org and Cell +263 772 382 852.