HomeEconomyEconomyManufacturing sector neglect: Are we majoring in minors?

Manufacturing sector neglect: Are we majoring in minors?

A certain scholar once said, “Without a sound manufacturing industry, a nation will never succeed”.

Zimbabwe has been predominantly an agro-based economy, which is also making strides in trying to make the mining industry a great contributor to the nation’s success. The principle of comparative advantage has always taught nations that they should specialise in producing and engaging in trade with one another, exporting goods that they have a relative advantage in.

Tariro Chivige
ECONOMIST

This has seen many African countries, Zimbabwe included, having an economy that is centred on almost one particular sector of the economy and for Zimbabwe this has been agriculture and a bit of mining. To some extent, the concentration on agriculture and mining has led to the suffering of most African countries. A study of the most successful emerging countries has shown that those that base their economies on the manufacturing sector tend to perform economically better than those that mainly specialise in agriculture and mining.

Countries such as Taiwan, Japan and Singapore have proven that the manufacturing sector has the greatest capacity of turning a country’s fortunes for the better.

The manufacturing sector basically comprises firms engaged in chemical, mechanical, or physical transformation of raw materials, substances, or components into finished and semi-finished consumer or industrial goods.

The transformation in the sector is usually attained through the use of factories and plants making use of raw products obtained from agriculture, mining as well as products of other manufacturing sectors.

In most developing countries, the manufacturing sector can potentially play a very important role in the overall economic development, as well as creating employment, which will ultimately lead to the reduction of poverty.

The sector is capable of becoming an avenue through which Zimbabwe can position itself as an exporter of high value finished products which are more rewarding as compared to exporting raw materials.

Operating at full capacity, this sector can also contribute significantly to national output and can be used as a solid anchor upon which a strong economic takeoff can be premised.

When managed well, the sector also provides a key link between producers of raw materials and consumers of the manufactured products, thereby positioning the sector to play an influential role in determining the extent to which an economy can be self-sustained.

Concentrating on agriculture and mining sectors will always make the country a supplier of raw materials, which we export to developed countries at a portion of the maximum value that the country can attain had the produce from agriculture and mining been put into the manufacturing chain and produced the end product.

Concentrating on the mining sector makes the country prone to illicit financial flows that are mainly present in the mining sector, which may not allow us to benefit much from the sector.

Though government can be commended for advocating for value-addition in the agriculture and mining sector, in my view, if the country focusses on a vigorous industrialisation path, the country can benefit even more rather than focusing on production and export of raw materials.

Relying on mining and agriculture exposes the country’s economy to international economic shocks, as the country will always be at the mercy of the developed nations, which determine the price of the international commodities.

By focussing on these sectors, we put ourselves at the mercy of the developed countries, as our growth will highly depend on their intentions with our economy.

Developed nations will always put policies that are beneficial to their success and, as such, it is likely that those policies will always be to our disadvantage, as raw material-producing countries are always seen as playing a fundamental role in the success of global prosperity which benefits advanced countries through the provision of cheap commodities.

Also, agricultural activities have become more prone to climatic shocks like drought and hence there are high risks of crop and livestock failure.

The “Buy Zimbabwe” concept is a very encouraging concept that, if pushed in the right direction, can benefit the economy immensely. Thanks to the Covid-19 pandemic which disturbed trade in a way; we have managed to see the emergence of quite a number of Zimbabwean products on the shelves.

An interesting point to note is the increased productivity in some sub-sectors such as pharmaceuticals, chemicals and petroleum, rubber, foodstuffs and ICT, as well as exporters.

Due to reduced trade brought about by the Covid-19 pandemic, these sectors managed to also perform well during the year, giving evidence that the sector could really improve and proceeds from it could be reaped.

However, multinational manufacturing corporations should promote the manufacturing of goods in the country rather than import a complete finished products and then only package the product while it would have been manufactured elsewhere.

Government should put in place measures that make locally-produced goods much more competitive on the market. There should be measures that promote and ensure that quality and affordability are always the top priority of the producer.

This will promote brand loyalty and once products have established themselves on the market, demand will increase, thereby promoting a snowball effect that will ultimately lead to economic growth.

Though government has in various ways tried to cushion the manufacturing sector by providing some concessions that may reduce set up and production costs, there is still a lot more that needs to be done in order to make the sector much more productive.

Strides can be noted in the support that have been given to fertiliser producers though rebate concessions. Also, most of our country’s imports sometimes are mainly composed of consumables and it is really depressing to note that the country has the capacity to produce these goods since there already is comparative advantage in producing the raw materials used to produce the imported end product.

The shoe manufacturing sector has also been remembered when rebate concessions were forwarded to it through free importation of raw materials that cannot be sourced locally, but the price of a new good quality pair of shoes is still considered expensive to an ordinary citizen.

The motor manufacturing industry, though being also awarded free importation of semi-knocked-down and completely-knocked-down motor vehicles, the sector also has not been performing as expected. Vehicles produced from this sector are still very expensive as compared to similar vehicles being produced elsewhere in the region.

Consumers end up opting to source their vehicles elsewhere. The issue of quality and durability of locally-produced vehicles is still a case to consider.

The government has in the past years been advocating for increased performance in the manufacturing sector and in the recently published national budget statement and the strategy papers, the government calls for the promotion of industrialisation through the strengthening of value chains which utilise local raw materials. The progress made so far is, however, very discouraging.

There has been a declining trend in both the manufacturing sector’s growth rate, as well as the manufacturing index, giving indications there has been a decline in the productivity, as well as investments into the sector. Preliminary projections indicate that the sector is likely to contract by -9,6% in 2020.

There is a need to move away a bit from the norm and give more focus on the manufacturing sector. Though the 2021 national budget statement outlined a number of ways in which the government aims to promote industrialisation in the country (increased financing to producers, improve competitiveness and investment attraction, formulation of institutions that promote and support the manufacturing sector “The Zimbabwe Investment Development Agency” and the granting of rebate concessions to subsectors of the manufacturing sector), there is need to go back to the drawing board and really see how the sector can be fully revived.

It is high time producers and the government representatives sat down and came up with ways that can really make the sector thrive again.

Proper research and development should be conducted, economic gurus should also be taken to task so that a collective approach can be taken to attain the maximum efficient and effective ways of improving the sector.

There is a need to devise ways of promoting industrialisation locally and not rely on foreign investment and loans which will keep the nation indebted to already developed countries.

There is a need to move away from traditional economics and try to take roads that are aligned to Zimbabwe’s way of doing business. The country should establish its own economic structures that are perfect for its sustainability and that also promote industrialisation.

In my view, I believe that giving the necessary attention to the manufacturing sector’s capability to improve our national output can greatly improve the performance of our country, thereby improving the lives of the general population.

Chivige is an economist. This weekly New Horizon  column is coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society  and past president of the Institute of Chartered Secretaries and Administrators in Zimbabwe. Email: kadenge.zes@gmail.com/ Cell: +263 772 382 852

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