Writing in 1987 about Zimbabwe’s manufacturing sector, Roger Riddell noted that “with favorable domestic policies and a supportive external environment, Zimbabwe could (perhaps with South Africa) be the first country in sub-Saharan Africa to join the ranks of the handful of Newly Industrialising Countries currently confined to Asia and Latin America”, but sadly 30 years later we wish as a country to go back to those glory days where places like Bulawayo were called “Kontuthu Ziyathunqa” because of the city’s robust manufacturing position in the region.
Butler Tambo,Policy analyst
Special Economic Zones (SEZs) are the new silver bullet that is supposed to jump-start the obsolete machinery to get us back to production status, but the advantages of yesteryear, which gave Bulawayo the privileged position, have long since been lost and this article seeks to show why it will be foolhardy to revive the textiles industry.
Factors for growth of textiles industry
Federation of Rhodesia and Nyasaland: It is estimated that by 1940, the manufacturing sector accounted for 10% of GDP and 8% of exports (Ndlela and Robinson, 1995).
When the Federation of Rhodesia and Nyasaland involving what is now Malawi, Zambia and Zimbabwe was established in 1953, this accelerated the process of industrialisation, with much of the investment going to Rhodesia (Kanyenze, 2006). The collapse of the Federation in 1963 was followed by the Unilateral Declaration of Independence (UDI) by the minority white regime in Rhodesia in 1965, which resulted in the imposition of sanctions by the international community. This ushered in the import substitution industrialisation (ISI) and an intensive process of industrialisation where the state played a central role in resource allocation.
A centralised foreign exchange allocation system was introduced, with an elaborate system of state enterprises and price controls. This foreign exchange rationing benefited the companies that were in existence in the late 1960s, undermining new and especially small enterprise growth. This preferential forex allocation system longer exists in 2017 and with the current acute forex shortages that the country is currently facing, one does not see how the textiles industry will be prioritised for allocation even if they were to fall in an SEZ, especially in an environment like Zimbabwe’s where such essential commodities like essential drugs fail to access forex and are forced to purchase it from the black market.
Kanyenze, in the 2006 textiles study, noted that the deliberate policy of compressing imports to contain the balance of payments situation left capital stock in an obsolete and depleted state. The manufacturing sector itself became a net user of foreign exchange. Although it contributed 32,1% of export earnings in 1984, it accounted for 90,6% of imports during the same year.
The ISI which had performed well during the sanctions period, (particularly during the fastest growth period of 1966-74), was already showing signs of severe stress by 1980. All easy and moderately hard industrialization had been exhausted by 1975 (Green and Kadhani, 1986). This then means that de-industrialisation and poor machinery is what the textiles industry relied on into Zimbabwe’s independence and for most firms, is still in use today thereby compromising quality and taking away the economies of scale enjoyed prior to 1975.
Export treaties with South Africa
Jackson (2004) found that the Zimbabwe textile’s market structure in the years immediately preceding introduction of the Economic Structural Adjustment Programme (Esap, 1991-1995) and in the years immediately after Esap (1995-1999) was oligopolistic.
A similar conclusion had already been arrived at by Jansen’s study of 1983. There were six large firms that controlled over 75% of the local market. This bred inefficiencies that, in the view of Ndlela and Robinson (1995), caused firms not to improve on the quality of their products, resulting in them meeting difficulties upon trying to penetrate the export market.
Through ISI, the textiles industry had been a major beneficiary of the 1964 Bilateral Trade Agreement between Rhodesia and South Africa. Rhodesian manufactured goods, textiles included, enjoyed preferential treatment in the South Africa. In time, this privilege bred complacency with respect to matters of quality and best practice aspects of business that enable a manufacturer to penetrate a market and retain its position.
South Africa ceased to be a market for Zimbabwean goods in the 1990s. South Africa did not renew the 1964 bilateral trade agreement after the attainment of democratic rule in 1994, and the treaty was officially terminated by 1997. Zimbabwe’s independence came with a loss of skills and experience, especially in the industrial sector. The loss of skills in industry was substantially replenished during the 1980s, due to the country’s progressive education system, only for those skills and experience to be lost again at the start of the 21st Century. Esap induced transformations of the textiles sector threatened jobs, resulting in emigration of skilled workers from the sector with most going to South Africa and this worsened after 2000.
Esap and its effects
With pressure from the World Bank and International Monetary Fund (IMF), the government introduced Esap in 1991 whose measures included the removal of export incentives, phasing out of the import-licencing regime, elimination of foreign currency controls, reduction in tariffs to create a tariff band ranging from 0-30% and achieving an export growth rate of 9% per annum.
These measures were followed by further liberalisation within the multilateral context of the World Trade Organisation since 1994 and the regional frameworks such as Sadc Trade Protocol and Comesa Free Trade Area (since 2000). Following Esap the textiles industry was hardest hit by the closure of companies that accompanied the influx of cheap imports.
Like other major producers of textiles Zimbabwe was hit on two fronts i.e. cheap imports, especially from Asia, particularly China are crowding out local producers on the home market and in third markets where the quota system is under threat following the expiry of the Agreement on Textiles and Clothing (ATC) in December 2004.
Is textiles sector worth saving?
Kanyenze noted that data on the distribution of manufacturing output by sub-sector are only available up to 1995 and indicates that the textiles accounted on average 10% of total manufacturing output between 1985-1995, while clothing and footwear represented 6,2% of manufacturing gross output over the same period. The share of the manufacturing sector in GDP averaged 21% during the respective period.
While the textiles produced on average 11% of total manufacturing output during 1985-1990 its share declined to an average contribution of 9% during the period of Esap (1991-95). The share of the clothing and footwear sub-sector in manufacturing output declined from 7% during the pre-Esap period to 6% during the period of Esap.
Following the introduction of Esap, the share of the textiles sub-sector in manufacturing output declined from 11,3% in 1985 to 7,9% by 1995, while that of the clothing and footwear sub-sector dropped from 7% in 1990/91 to 5% by 1995.
The share of the manufacturing sector in GDP declined from 27% in 1992 to 19,2% by 1995 and 7,2% by 2002. The decline during the Esap period (1991-95) was mainly due to the influx of competing cheap imports, while the further decline after 1995 reflected both the liberalisation of trade and the current economic crisis.
The Leather and Allied Industry Federation of Zimbabwe (2013) noted that an estimated 3,4 million pairs of shoes is imported mainly from Far East. The duty is 40%, plus US$5 per pair plus 15% value-added tax thus minimum retail price should be US$7 per pair. However, shoes are being sold for as little as US$1,50 per pair. Because of rampant smuggling. A 1997 study by the Economic Affairs Division of Commonwealth Secretariat together with a ZimConsult noted: “Whether or not Zimbabwe can survive as important exporters and raise their market shares will depend on their ability to use their local raw material base effectively, raise technological levels and skills through the industry, develop better marketing techniques and move into specialised high quality marketing niches.”
The Commonwealth secretariat study quoting a World Bank research on Zimbabwe, World Bank (KSA, 1996), observed that “collection and product development is one of the greatest weaknesses of Zimbabwean companies. In most of the companies the creative part of collection making is missing. The concentration on orders according to buyers’ specifications is dangerous for the future development of the clothing companies because the success factor, price, gets high priority and the industry becomes vulnerable to countries providing lower prices”.
Other issues raised by that secretariat study were:
Lack of specialisation and sub-contracting;
Poor training and lack of computerised cost systems;
Organisational structure that is inappropriate and over-centralised;
Need for quality orientation;
Technology weaknesses included pattern making and marking, cutting and finishing;
Quality control improvement with greater use of quality audits and statistical quality control; and
Lack of necessary worker and middle management skills.
This is just a small sample of the issues, suggesting that even were the external environment to improve significantly a lot would still need to be done by the manufactures themselves in getting up to speed in order to be world competitive again.
Tambo works for the Centre for Public Engagement. — firstname.lastname@example.org