EconoZim

Indigenisation and the world economy

2012-01-31T14:01:00.000+02:00

A few years ago when Indigenisation was first mentioned the business community feared the worst and thought Zimbabwe was finally coming to its knees.
In recent years however we have seen the fall of a great many 'stable' economies, and the fall of a number of 'dictators' in Africa all of which I would attribute to poor economic planning and the intervention of foreign influence in the economies of independent countries.
While it still seems farfetched that Indigenisation will be Zimbabwe's first line defense against economic downturn, it is time Zimbabwean awoke to the reality that a great deal of economic protection and prudence in policy development is the key to maintaining sound economic sustainability.
Many may ascribe the Indigenisation policy to ZANU PF, and by virtue of the party having mooted it and pushed in into law, all can be justified to do so, but the fact remains that this policy should be seen in the vain of its relevance to maintaining Zimbabwe's economic integrity in times of global economic downturn.
I submit that the toil that Zimbabwe will suffer during the transition to full indigenisation will be much worth it when we realize the fruits in a few years when all the nations of the world will find it hard to feed their own populations and nations like Zimbabwe which maintain full control of their economic resources will stand and look on at what could have become us had we lost sight of the big picture.
With the global population in excess of 7 billion people, it doesn't take an Ivy League education to tell that the war for resources is getting more intense and political prudence, and in the future crude brute force, is what is going to determine who survives.
Food for thought!

Manufacturing economy of Zimbabwe 2011 (Full Text)

2012-01-31T13:44:00.002+02:00

THE MANUFACTURING ECONOMY OF ZIMBABWE
A stochastic approach to revival and sustainability planning

Addi Mavengere AMIMechE MCIPS
September 2011

Abstract

The manufacturing economy of Zimbabwe has been significantly affected by political, social and economic pressures. The absence of a comprehensive industrial policy has resulted in the manufacturing economy, as a subset of the economy of Zimbabwe, faltering and in the present day, struggling to achieve meaningful capacity utilisation and sustainable growth.
This paper presents proposals on how to address some of the critical factors that have contributed to the decline of manufacturing in Zimbabwe and set out metrics for the sustainable development of the country’s manufacturing economy into the foreseeable future.

Glossary
BOP – Balance of Payments.
Capability rating – The ability of an industry to produce a range of products against set benchmark.
Capacity – The rate of output that can be achieved from a process.
Capacity utilisation – Weighted average utilisation of the factors of production of a facility or industry.
Competitiveness – the relative position in the marketplace.
CZI – Confederation of Zimbabwe Industries.
ESAP - Economic Structural Adjustment Program.
GDP – Gross Domestic Product.
Greenfield development – Innovative industrial development initiatives that are too high risk for private investment but with high potential for return on investment and long-term sustainability.
IDC – Industrial Development Corporation.
Import substitution – A deliberate industrial strategy that encourages the local production of products.
Manufacturing’s value-add – The increase in value of a product that is achieved from raw materials passing through a manufacturing process.
PPP – Public Private Partnerships
Productivity – output per unit input.
STERP – Short Term Economic Revival Program.
Toll manufacturing – The local production of products intended for foreign markets on contract for foreign organisations.
UDI – Unilateral Declaration of Independence.
ZIDERA – Zimbabwe Democracy and Economic Resuscitation Act.

Table of Contents
1. CHAPTER 1: INTRODUCTION 1
1.1. Introduction 1
1.2. Objectives 1
2. CHAPTER 2: BACKGROUND 2
2.1. Introduction 2
2.2. Historic perspective 4
2.3. Growth and development of manufacturing 5
2.4. Challenges affecting manufacturing 9
3. CHAPTER 3: METRICS IN ZIMBABWE’S MANUFACTURING ECONOMY 12
3.1. Contemporary approach 13
3.2. Systems perspective 14
3.2.1. Competitiveness 15
3.2.2. Supply management 16
3.2.3. Capacity utilisation 16
3.3. Viability of the manufacturing economy 17
3.3.1. Demand assessment 17
3.3.2. Technical capability survey 17
4. CHAPTER 4: INDUSTRIAL AND SUPPORT POLICIES 20
4.1. Industrial development 20
4.1.1. Import substitution and value addition 22
4.1.2. Greenfield development 26
4.1.3. Capitalisation 27
4.1.4. Protectionism 27
5. CONCLUSION 30
6. BIBLIOGRAPHY 31

1. CHAPTER 1: INTRODUCTION

1.1. Introduction
Beginning with an overview of the development of the manufacturing economy of Southern Rhodesia, this paper highlights how the business environment as relates to the macroeconomic fundamentals changed between the periods from 1938 to 2011, and based on the findings, proffers policy recommendations for the enhancement of the manufacturing economy of Zimbabwe.

1.2. Objectives
The objectives of this paper are to:
1. Identify the factors that affect Zimbabwe’s manufacturing, show where they emanated from and propose mechanisms to address these.
2. Establish a framework to determine the viability of manufacturing in Zimbabwe and chart a way forward for the manufacturing economy based on the findings.

2. CHAPTER 2: BACKGROUND

2.1. Introduction
The manufacturing economy of Zimbabwe was in 1980 inherited from Rhodesia; which economy was designed to favour European settlement around the country and developments across Southern Africa, with the railway line from Cape Town to Harare being a key infrastructural development that influenced the distribution of industries and thus labour and settlements along the central, Highveld region of Zimbabwe.
Established to support developments in mining and agriculture, manufacturing developed in the early 1940s to become, at some point, a bigger contributor to the gross value of economic output than both agriculture and mining combined.
The post-World War Two years saw a rapid growth in Southern Rhodesia’s manufacturing sector, which was supported by the development of transport infrastructure, housing and water supply. The post-World War Two era stimulated considerable development in technology with scientific innovation and engineering working to produce more efficient machines and ushering in an age that would domesticate engineering innovations.
Trade relations between Rhodesia and other countries grew; the growth of the productive sectors of the country created the demand for heavy equipment, which the country sourced internationally. In addition, the liberation war created the need for military equipment and spares and to this effect France and Russia were but a few of the countries that conducted business with Rhodesia.
Rhodesia relied on the import of petroleum; processed and semi processed, to support the transport sector, and the Feruka pipeline from the port of Beira in Mozambique essential infrastructure that enabled the flow of petroleum to Rhodesia.
From the late 1950s, a series of world political and economic systems, including embargoes and sanctions placed on Rhodesia, changed and significantly affected the manufacturing economy of Rhodesia. The imposition of economic sanctions on Rhodesia in 1965 inspired the need for economic independence and stimulated the implementation of industrial policies that would ensure that the productive sectors of the economy produce sufficient products to meet local demand and sustain export commitments.
In the 1960s, following the growth of the productive sectors, tobacco grew to become the single largest source of foreign currency for Rhodesia (Tow, 1960). This would later become one of the weaknesses of the Rhodesian economy and efforts would soon shift towards diversification of the country’s foreign currency earning avenues to fight sanctions.
The reliance on international markets for the supply of plant and equipment, and to a lesser extent, consumer goods, would be another of Rhodesia’s undoings and would put pressure on the country’s administration for the formulation of highly inward looking industrial policies that places high demands on manufacturing.
Several attempts, through policies such as ESAP, ZIMPREST, STERP and others, have, since 1980, been put into effect in attempts to develop Zimbabwe’s economy. The lack of a viable long term industrial policy on the back of which these medium term policies would operate contributed immensely to these medium term policies having little success, particularly to the effect of normalising disparities in the economy that contributed to the faltering of the economy in the first place.
In the present day Zimbabwe is in a situation of economic insecurity; with manufacturing productive capacity utilisation hovering at about 43% (CZI, 2011), and the cost of production in manufacturing making locally produced products uncompetitive locally let alone internationally.
Concerted effort and high-level, informed planning is required to ensure the revival of manufacturing; which contributed greatly to Zimbabwe gaining repute as the breadbasket of Africa.
Zimbabwe’s manufacturing sector, though largely technologically outdated, boasts of being well diversified, feeding into other sectors of the economy and contributing significantly to GDP. Manufacturing remains one of the most important of Zimbabwe’s productive sectors and for that reason, significant effort should be placed on studying and developing empirical means for its revival.

2.2. Historic perspective
The occupation of the territory between the Limpopo River and the Zambezi River in the 1890s brought about by prospects of rich gold deposits, and the subsequent establishment of gold and coal mines around the country stimulated modern industry which progressed from mining and agriculture to manufacturing and later services.
When the British South Africa Company came to realise that the gold in the territory fell short of expectation and that a vast proportion of the gold could not economically be mined on a large scale, attention soon turned to other economic elements to recover the investments made into the territory, raising the price of land in the central parts of the country where the settler population was concentrated (Hurungo, 2010).
Nonetheless, mining took place and the labour that was required to undertake this led to a growth in demand for food, starting the European agricultural economy. With the increased demand for food, and increasing output in the mines, manufacturing became necessary to supply the implements to sustain both mining and agriculture.
From its inception, a major part of manufacturing’s raw materials came from the mining and agricultural sectors, thus Rhodesia managed to develop a diversified, independent economy and could easily adapt to fluctuations on international supply markets. The country did however rely on foreign trading partners for processed and semi-crude petroleum and heavy equipment. In the mid-1960s however, Rhodesia still relied, though to a lesser extent, on the import of consumer goods, with 13% of local consumption being imported from South Africa (Tow, 1960).
As with other nations, Rhodesia experienced a significant boom following World War Two. This era is widely credited for its contributions to technological innovation particularly in engineering; where there was the development of efficient assembly lines for automobiles and other heavy equipment as well as efficient production lines for consumer goods.
While manufacturing was the fastest growing productive sector in the years that followed World War Two, the contribution of manufacturing’s value-add to the overall economy stood at only 20% (Tow, 1960). Regardless, the manufacturing sector served to make the economy less reliant on a limited number of products and make the economy less susceptible to changes in the operating environment.
From 1958 to 1980, several international and local forces would affect the economy of Rhodesia. In 1958, the world experienced a recession and this saw food prices increase internationally. Another such recession would be experienced in 1975 during which time Rhodesia had already sustained nine years of sanctions following the UDI in 1965. UDI came with several pressures including the expulsion of Rhodesia from the Sterling region and the UN imposition of sanctions among others. Prudent industrial policies would however ensure that the effect of these measures would only gradually affect the country, during which time countermeasures would be put in place to ensure sustainability.
The development of efficient transport and communication infrastructure, something that the country would come to boast of, supported the productive sectors of the country.

2.3. Growth and development of manufacturing
The manufacturing economy of Rhodesia was, at its prime, considerably diversified (Tow, 1960) and leveraged on the strength of its raw materials emanating to a large extent from the extractive and agricultural sectors. By the early 1940s, the manufacturing sector ranged from iron and steel production, to the production of basic consumer goods (Hurungo, 2010). The cost of production in manufacturing made it possible for locally made products to compete against imports, despite the fact that a significant proportion of local consumption was procured from other countries.
During the tenure of the Federation of Rhodesia and Nyasaland the Rhodesian economy experienced considerable growth, including during 1964 and 1965 following the dissolution of the Federation, when economic hardships were expected to befall the country. The establishment of the Federation created a common market in which much of the investment into manufacturing was located in Southern Rhodesia. At this time, the manufacturing economy served the markets of the three countries and contributed to the growth of manufacturing.
There was considerable growth in heavy industry in the 1950s, during which time the focus was in the areas of iron and steel and agricultural equipment. This was followed in later years by the growth of light manufacturing which served to ensure the availability of spares and components, particularly for transport, mining and agriculture.
Growth in energy supply, water and housing, encouraged the growth of manufacturing, particularly in the municipalities of Harare and Bulawayo, which were the main industrial centres at the time, contributing a combined 82.1% of total industrial output in 1956 and 1957 as shown in Table 1 below.
Table 1: Industrial output of Southern Rhodesia in 1956 - 1957

Source: Tow, 1960
By the late 1950s, manufacturing’s output far outweighed the combined output of mining and agriculture, with manufacturing’s Gross Value Output in 1957 of £105.1M being far in excess of the £67.6M output from mining and European agriculture. The Gross Value of Output of manufacturing first exceeded the output of mining and European agriculture in 1943 and manufacturing has consistently contributed to the economy since.
The regional distribution, product diversity and contribution to GDP of manufacturing all pointed to the fact that manufacturing had by the late 1950s attained a high level of maturity. The continued contribution of the extractive and agricultural sectors on the supply side would set up manufacturing to continue its growth and dominate as the biggest contributor to Rhodesia’s GDP.
During the years of UDI, Rhodesia experienced average growth in GDP of 5.42%, which, though much less than the average growth experienced a decade before UDI, indicated that the success of the industrial policies implemented to counter sanctions. To a great extent, the ability of the economy to grow despite the imposition of international sanctions were the trade relations between Rhodesia and countries such as South Africa with which trade grew as opposed to declining as a result of the UN sanctions.
The South African government worked closely with Rhodesia to evade the sanctions and ensure that Rhodesian products would find their way to international markets, albeit under the guise of being South African. This propped the Rhodesia manufacturing economy which at the time resorted to measures such as import substitution and foreign currency rationing as means of ensuring that sufficient foreign currency was held by the country. These policies strengthened Rhodesia’s manufacturing economy and made it more resistant to foreign influence, with many new industries being created to produce a wide range of products, and the government leading innovation by sponsoring Greenfield research and development through the Industrial Development Corporation.
Industry diversified and the range of products emanating from Rhodesia’s manufacturing grew to include a wider variety of heavy equipment, spares and components and consumer goods.

2.4. Challenges affecting manufacturing
The UDI and the sanctions associated with it, coupled with the war of liberation that brought about the birth of Zimbabwe in 1980, brought a slowdown in the growth of manufacturing and other productive sectors. This period marked the beginning of the steady decline of Zimbabwe’s manufacturing economy.
The problems would persist far into the 21st century with the political and economic landscape of the country changing dramatically. The years that followed independence were the most challenging for Zimbabwe on the economic front. Compounded by the devastation to infrastructure caused by the liberation struggle, and the political risk that ensued from the attainment of independence, the economy, which was largely controlled by the minority as well as multinational corporations, came to a gradual slowdown. The risk associated with the change in political regime made doing business in Zimbabwe much less favourable than it had been even during UDI. This lethargy continued well into the later years of independence and became the norm of business in Zimbabwe.
In 1990, ten years after independence, the situation was exacerbated by the uncertainty resulting from the implementation of land reform which was established by the signing of the constitution of Zimbabwe at Lancaster House. By this time, the economy had gone off track; running outside of the context of a comprehensive industrial policy.
ESAP which was adopted to revive the economy did not meet its objectives. Instead, ESAP resulted in the growth of the labour movement as well as disparities in remuneration. The disparities have persisted since. Efforts made to eliminate the disparities in wages ushered in a new dynamic to the challenges faced by the manufacturing economy; labour pressure. The labour movement gained impetus and its political influence grew in the late 1990s. The cost of production rose in manufacturing as remuneration was misaligned to production.
The economic policies implemented after independence strayed far from conventional economics and proffered only short-term solutions to the challenges which riddled the economy. Price controls have persisted even till the present day as a great evil to the economy, affecting cost recovery in manufacturing and agriculture mainly.
In the mid 1990s, the affirmative action movement became a political force to reckon with, increasing risk to ownership of manufacturing concerns owned by minorities. Land reform later that same decade destabilised agriculture and the supply side for manufacturing which depended a lot on the produce from farms for leather, food processing and beverages.
Economic measures were imposed on Zimbabwe by the United States of America by way of ZIDERA, and a number of European countries in the form of travel bans. While the measures were intended to affect specified individuals, the economic cost to the country has been considerable. This was as a result of the economic measures targeting the leaders of strategic institutions such as the National Railways of Zimbabwe and Air Zimbabwe for instance, which relied heavily on supplies from Europe and the United States. Such supplies could no longer be procured in these countries and territories following the imposition of the economic measures. In addition, the individuals targeted by the economic measures are business people of note, whose aggregate contribution to the economy of the country is significant. With the restrictions placed on them, their businesses were affected and inadvertently the overall economy of Zimbabwe.
The suspension of Zimbabwe from the IMF as a result of its failure to service loans extended to the country worsened the economic situation, and with reduced credit, the development of the productive sectors of the country became even more elusive. The supply of foreign currency reduced and this would affect the supply side for all productive sectors, sending the economy into a downward spiral that would see the productive economy of Zimbabwe hit rock bottom in 2008 where manufacturing capacity utilisation would dip below 30%.
To a certain extent, the political and social challenges Zimbabwe encountered emanated from the productive sectors of the economy; inability to meet demand, wages and ineffective industrial planning.
The economy rebounded with the adoption of a multicurrency monetary regime which would inspire the restocking of shops with consumer goods and enable the productive sectors to resume production without the risk of losing their investments as the case was when stringent price controls were imposed in 2008.
Two years after the introduction of the multicurrency system, capacity utilisation in manufacturing has experienced slow but determined increase. The absence of a robust industrial policy has however limited the growth of industry and not adequately addressed the supply of raw materials and the misalignment of labour cost and production.

3. CHAPTER 3: METRICS IN ZIMBABWE’S MANUFACTURING ECONOMY
Rhodesia managed to survive the onslaught of UN imposed sanctions following the UDI in 1965. The implementation of well calculated measures that considered the capability of the productive sectors of the economy, as well as the demand that existed were instrumental in ensuring positive growth of the economy even with punitive measures in place.
The ability to forecast demand, monitor and evaluate the performance of various sectors of the economy made the implementation of industrial policies such as import substitution successful.
While the publication of data relating to industrial performance during UDI was restricted, the performance of the economy indicated the application of a comprehensive industrial policy based on a full understanding of the supply and demand variables in the economy.
Given the existence of infrastructure that accommodates a well diversified manufacturing economy, coupled with the knowledge and experience of a highly educated workforce, Zimbabwe is well positioned to achieve industrial prowess and once again take its position as one of the biggest economies in Africa.
Never in the history of Zimbabwe has its people been under attack on so many fronts as it is today. This is a sign that the country has gone too far and too fast in the wrong direction, culminating in the need for societal and economic reforms that will once again bring about the semblance of a modern society.
While government is charged with setting course for the running of the economy and setting an enabling environment for business operation, the business community is responsible to the greater part for guiding the process and providing the decision tools for their representation at government to set out well informed policies.
The starting point is a clear understanding of the current state of manufacturing. The manufacturing economy of Zimbabwe, despite its underdeveloped state, boasts of plant and equipment and support infrastructure that enables it to produce a wide variety of products , as well as to be decentralised with centres such as Harare, Bulawayo, Gweru, Kadoma and Mutare having large manufacturing facilities producing specialised products. This is but a mere fragment of the knowledge necessary to build a viable industrial policy which would enable sustainable growth of manufacturing to the extent that the economy would be able to withstand another decade of recession. The first step therefore is to embark on a census to effectively measure the factors of production and put these into the perspective of the long-term objective of the overall economy.
Manufacturing relies on the extractive and agricultural sectors for its raw materials, and in the undesired case, imports. This means that any efforts to determine growth or decline of the manufacturing economy should take cognizant of the capabilities of these supply markets and be based on reliable forecasts of their medium to long-term performance. Such a census would in essence be an ongoing process that would provide up-to-date information on supply and demand within the economy thus advising policies on a moving basis.
The present state of Zimbabwe’s manufacturing economy, and as a policy due-diligence measure, requires this intensity of continuous research, monitoring and evaluation to maintain a healthy insight into the performance of the manufacturing economy. In addition, the influence of government and political pressures needs to be reduced to create an environment with a close semblance of a free market economy.

3.1. Contemporary approach
Present industrial measurement includes the measurement of capacity utilisation in large manufacturing concerns. The CZI has made concerted effort to measure capacity utilisation in manufacturing. This has widely been used as the main mechanism for measuring growth or decline in manufacturing, and to a lesser extent the economy as a whole.
The capacity of the production system defines the firm’s competitive boundaries. Specifically, it sets the firm’s response rate to the market, its cost structure, its work-force composition, its level of technology, its management and staff-support requirements, and its general inventory strategy. If capacity is inadequate, a company may lose customers through slow service or by allowing competitors to enter the market. If capacity is excessive, a company may have to reduce its prices to stimulate demand, underutilize its workforce, carry excess inventory, or seek additional, less profitable products to stay in business (N Aquilano, 1991).
While capacity utilisation is good in that it indicates the general performance of manufacturing companies, its viability as a strategic decision tool in the current operating environment is considerably low.
Without a comparison of how the Zimbabwean manufacturing economy operates against trading partners, the development of strategies to revive and sustain manufacturing will remain fruitless. To this effect, the measurement of capacity utilisation does not serve the requirements for the development of viable manufacturing strategies.

3.2. Systems perspective
The measurement of the output metrics of manufacturing does not serve to give a good indication of the effect of production factors on manufacturing.
With a plethora of factors affecting manufacturing, a more factor specific approach should be applied to matriculate production in both input and production. By benchmarking against the country’s most significant trading partners, measuring the competitiveness of manufacturing and the supply chains that feed into manufacturing will enable more specific analysis of the factors affecting manufacturing.
The competitiveness of the manufacturing economy, benchmarked against those of trading partners should serve as the baseline metric. This and the measurement of supply-side risk give adequate information for the development of long-term strategies for the sustainability of the manufacturing economy. A significant proportion of the products available in Zimbabwe consist of imports. To reduce the proportion of imports on Zimbabwean shelves, manufacturing of competitive products by Zimbabwean companies should be promoted and this can only be achieved by comparison.

3.2.1. Competitiveness
The ability of the manufacturing economy to produce competitively against trading partners is the fundamental metric which should serve to advise the development of strategies to revive and sustain local manufacturing.
Competitiveness as a metric takes into consideration the cost in financial terms and time resources that are required to produce a product. When compared, the cost and time it takes to produce one product in one economy and a similar product in another economy, strategic decisions relating to technology and other production factors can then be made.

3.2.1.1. Cost
The majority of the factors of production contribute to the cost of production. The cost of production can therefore be ascribed to various factors of production, from which decisions relating to the manipulation of production factors can be made to ensure the industry is well geared to compete against trade partners.

3.2.1.2. Time
Technology and human capability are the two main factors that affect the time that it takes to produce a product. By comparing the time it takes in the local manufacturing economy and other manufacturing economies, decisions can be made on the development of human capital as well as investment into manufacturing technology. To a lesser extent, the quality of raw materials will affect the time taken to produce comparable products, and the quality of raw materials is a factor which relates directly to the supply chain, which is the greatest source of operational risk once a production cycle commences.

3.2.2. Supply management
Manufacturing, by virtue of requiring physical raw materials, relies on efficient supply chains to be competitive. The supply chains and sources of supply of a number of manufacturing concerns have negatively affected and in some cases, causing the seizure of operations. The automotive industry for instance, because it relies heavy on imports, has over the years shrunk to unsustainable levels. While the capability of Zimbabwe’s manufacturing sector to produce the components for this industry is to be determined, this case serves to highlight the vulnerability of manufacturing owing to supply-side risks.
A census of the manufacturing economy should assess the sources of raw materials for manufacturing including the options of source markets. An ideal scenario would see a number of source options for each product emanating from the manufacturing economy, with local substitutes being available for internationally sourced raw materials and sub-assemblies in key product categories.

3.2.3. Capacity utilisation
Having determined the competitiveness of the manufacturing economy and the supply-side factors that affect manufacturing, the design capacity of the economy can be ascertained. This is essentially the volume that can be produced by the economy in different product categories. From this metric, the expected volume of imports can be determined and gradually reduced with the increase in design capacity.
The design capacity represents the output that the economy can optimally to produce at any given time, and this does not necessarily correspond to the capacity that is actually utilised. Various constrains will affect capacity utilisation, and from the metrics relating to cost and time, optimum capacity utilisation can be determined.
Note should be taken of the fact that capacity utilisation is economic in a given range, outside of which, the cost of production increases and reduces the ability of manufacturing to compete against other economies.
The measurement of actual capacity utilisation should therefore be accompanied by the measurement of the range in which capacity utilisation is economic.

3.3. Viability of the manufacturing economy
The systems approach for monitoring and evaluation of manufacturing applied in the present context of Zimbabwe’s manufacturing will highlight the fundamental areas of the manufacturing system and supply chains that affect the viability of the manufacturing economy.
Ideally, the exercise of measuring metrics in manufacturing should take a holistic approach, interrogating the appropriateness of production technologies in use, and the supply chains that feed manufacturing.

3.3.1. Demand assessment
To begin with, an understanding of immediate and future demand for manufactured products in local and export markets is essential to serve as the objective of manufacturing’s efforts.
Given the increase in world food prices and the increased influence of various political factors internationally, the need for local demand to be met locally cannot be avoided.
An in-depth analysis of the ranges and volumes of products required to meet both local domestic and industrial demand will give an indication as to the level to which the manufacturing economy needs to develop.

3.3.2. Technical capability survey
The collation of data relating to manufacturing is required at the start of the process of establishing an industrial policy and this should be the immediate concern of government and industry alike.
Conducted privately and supported by state and industry associations representing the interest groups, a survey of the technical capability of the manufacturing economy should lead the process of industrial policy making. Taking lead from the CZI’s annual manufacturing survey, this census should include a larger number of manufacturing organisations which are geographically more dispersed and cover a wider range of products. This will be achieved through voluntary participation, and in key sectors, though statutory requirement.
Among other variables that will be measured, the national manufacturing technical capability census will assess human capacity, energy supply, plant and equipment and production technology.

3.3.2.1. Human capacity
A comprehensive skills audit that aims at determining the availability of technical and managerial skills that are currently available in manufacturing will serve to inform decisions on the development of human capital.
While there is still a wealth of human capital with the technical skills required in manufacturing, despite skills migration, some human capital has been lost by the manufacturing sector to other sectors of the economy as a result of conditions of service in manufacturing, which the survey would be able to ascertain and proffer solutions for.

3.3.2.2. Plant and equipment
Many of the manufacturing concerns in Zimbabwe operate equipment that was commissioned during the early days of manufacturing in Rhodesia and before independence. Much of the equipment, while still operational, is no longer able to produce competitively.
Through the census, the age and capacity of the machinery in operation will be ascertained and strategies on the disposal, replacement and upgrading of the plant and equipment will be developed.

3.3.2.3. Energy supply
Having ascertained the energy demand and uptime of manufacturing facilities and their supporting infrastructure, the energy requirements of the manufacturing sector can accurately be determined to ensure the consistent generation and procurement of sufficient energy to meet the demand.

Through this survey all technical information pertaining to local industrial capability will be enumerated and made available for current policy support and future policy formulation. Once collected, this information can be easily updated and resources can also be directed on the basis of known capability and not unverifiable claims and assumptions.

4. CHAPTER 4: INDUSTRIAL AND SUPPORT POLICIES
Having set out the current status of the manufacturing economy through the census of production technology, skills and other factors of production, as well as setting up reliable monitoring and evaluation mechanisms, the next step, is to set out a long-term plan for the development of the manufacturing economy, focussing initially on the building of production and support infrastructure.

4.1. Industrial development
A national industrial policy should be premised on a few fundamental principles that, regardless of the changes in fiscal policy should subsist.
The security of the Zimbabwean economy hinges on the ability to consistently meet local demand and adapt in line with changes in the world economy. The following are recommendations that should form the underlying principles of Zimbabwe’s industrial policy. These recommendations are followed by policy recommendations to support these principles in the medium to long-term.
1. Non-inflationary measures
A national industrial policy should be such that it does not promote inflation. To this effect, industrial policy should ensure the adherence to prudent economic principles which include the alignment of cost to production. As such, labour should be related directly to production, wherein no component of production labour is factored into the cost of production as fixed cost, as may be the case at present due to low capacity utilisation.
The implication of such measures in the short-term includes the increase in unemployment. This will have the effect of reducing disposable income and further reduce inflation. The application of such measures should be stepped to ensure minimal social impact.

2. Support extractive and agricultural sectors
Industrial policy should support the extractive and agricultural sectors through the promotion of local sourcing. The sourcing of raw materials locally, particularly from the primary sectors of the economy should however not be promoted against cost advantage of sourcing internationally. In the case where subsidies can be applied over a short period to make local sourcing viable, these should be applied but only on the basis that these sectors can produce a return to pay back the subsidies in the medium to long-term.
The support of extraction and agriculture should be reciprocated by promoting value addition. Adding value by processing produce to partially-processed or finished goods increases the contribution of manufacturing to GDP and promotes Greenfield development.

3. Reduce risk
A fair part of the risk in manufacturing emanates from supply of raw materials as well as production technology. Efforts should be made to minimise the risks associated with supply chains, as well as the risks associated with the production technology used in manufacturing.
The financing of manufacturing poses another major risk, and to this effect, the consistency of supply of foreign currency should be ensured by any industrial policies. Rationing of foreign currency is one policy which could be helpful in the short tio medium term.
The element of risk emanating from the limited scope of manufacturing output in respect of product ranges poses a risk to the development of manufacturing and general economic development. Industrial policy should have a great focus on the diversification of product ranges, now more than ever in the areas of communication technology and consumer electronics.

4.1.1. Import substitution and value addition
The first of the strategies that should form the basis of Zimbabwe’s industrial policy is that of import substitution supported by value addition.
Import substitution and value addition are two strategies that have been applied in the history of Rhodesia and Zimbabwe to cushion against the impact of supply constrains. More recently, in 2006, the Government of Zimbabwe embarked on a program to promote import substitution and value addition but lacked the depth and scope due to funding constraints to achieve the industrial development necessary to bolster the manufacturing sector.
When implemented by the Rhodesian government during UDI, the import substitution and value addition program focussed on the development of product ranges that would support the productive sectors of the economy as well as meet the demand for consumer goods.

4.1.1.1. Import substitution
Import substitution focuses on the production of products to serve current needs which are being met by imported products. The substitution of imports is necessary to reduce the reliance of the local economy on trading partners. This mechanism in addition promotes the continued development of local industries, which are encouraged by global changes in technology and the need to remain competitive to continuously improve.
Import substitution in the present context of Zimbabwe will result in an increase in capacity utilisation and eventually reduce unemployment when the need to increase capacity arises. While the long-term result will be an increase in disposable incomes resulting from increased employment, the measure will result in a reduction in imported inflation and reduce the cost of goods thus minimising the effect of the inflationary tendency of increased employment.
When applied in various parts of the world, the principle reason for the failure of import substitution was that, as practices, it created an environment that discouraged learning (Brunton, 1998) Import substitution should therefore be applied in tandem with other policies that promote technology and skills development in the local economy.
The following is a summary of other benefits that will result from the implementation of import substitution.

1. Employment creation
Zimbabwe boasts of a highly educated population but due to the prevailing economic challenges, large numbers of highly skilled individuals are currently unemployed, with a greater number being underemployed, meaning that the country is losing potential revenue from their inactivity.
Through import substitution activities, employment is created in various sectors of the economy, from the supply side through processing to the consumer end. The greatest number of the jobs created will be in the manufacturing sector where a combination of skilled and unskilled jobs being created.
With wages aligned to production output, the inflationary effect of increased employment will be countered by the reduction in cost of finished goods, which will result in realistic product pricing.

2. Reduced BOP
By reducing imports through local production of goods that are currently sourced internationally, the deficit in trade will be reduced. Given that many local industries are operating far below capacity, and the capacity of the country to export significant volumes is low, the country already faces the challenge of generating sufficient foreign currency for its day- to – day requirements.
Import substitution, particularly in the areas of consumer goods, industrial components and spares would significantly reduce the country’s reliance on international sourcing.
The efficient management of the import substitution program may in the long-term result in the country producing an excess of high quality goods that can compete with the products that are currently being imported. At this point, the country will be able to generate extra foreign currency through the export of locally produced goods.

3. Increased availability of products
Increased production of consumer and industrial products by local manufacturers will ensure the supply of products to meet local demand. The increase in industrial capacity utilisation will increase the proportion of local products on the market.

4. Hedging
For over a decade the country has been subject to economic and political measures from Europe and the United States of America. The results of these sanctions have been far-reaching in both areas of import and export.
The country has sought other markets for the supply of machinery, spares and other essential equipment. Sectors that have been affected significantly include transport and defence, which rely on supply of equipment from international sources, notably the United States of America, France and Russia.
Since the inception of the import substitution program in 2006, manufacturing concerns have shown the potential that of import substitution as a mainstream industrial development strategy.
The abundant natural resources which Zimbabwe boasts of put Zimbabwe in a good position to develop industry through import substitution and reduce the risk of constricted supply from trading partners.

4.1.1.2. Value addition
Value addition involves the processing of raw materials and subassemblies to increase their economic value. The rationale behind increasing the economic value of materials and products is to increase the contribution of value to the economy.
In the present case of Zimbabwe, high volumes of raw and partially processed products from mining and agriculture are exported thus resulting in lower than possible contribution to GDP. Value addition should focus more on products for export, resulting in direct foreign currency earnings.
Among some of the benefits of value addition is:

1. Greater contribution to GDP
Value addition greatly increases the market value of the sold product, resulting in each unit of product having greater contribution to GDP than a comparable semi-finished product or the raw materials consumed in producing the product.
Through value addition processes, more human capital is engaged in developing the final product and it is likely in the case of manufactured products that more material is added to produce the final product. These activities directly increase disposable income in the economy as well as result in greater earnings.

2. Promotion of infrastructure development
As the focus towards value addition increases, industry at large will undertake to develop its facilities to cater for new product lines and improved manufacturing processes. Through the application of highly accurate stochastic information, making such decision will become much simpler and less risky. In line with such development, both local and central government will be positioned to contribute towards infrastructure development particularly in the area of transport, wherein road and rail networks will undergo upgrading to cater for increased capacity demand.

4.1.1.3. Export promotion
The determining statistics for the success of the import substitution and value addition program is the increase in exports.
The successful implementation of the import substitution and value addition policy will inevitably result in Zimbabwe’s manufacturing based exports increasing at a greater rate than the reduction in exports of mining and agriculture based products which are mostly unprocessed or semi-processed. The trend will begin with the exploration of new markets in the developing world and expand to markets in the developed world. Given this scenario, the manufacturing economy will achieve great success from the sale of low cost products it manages to produce.
While it is good for the country to promote local production for local consumption, it is only through exports that local industry can influence monetary policy and provide a solid basis for the reintroduction of a Zimbabwean currency, hence the need to fully exploit the export capacity of the country.

4.1.2. Greenfield development
Greenfield development plays a critical role in the development of the manufacturing economy. The development and production of new product ranges, which will result in the diversification of the manufacturing sector, will contribute towards Zimbabwe becoming more influential in international trade and becoming less dependent for its local consumption on traditional trading partners.
Greenfield development in Zimbabwe is stimulated by the wealth of natural resources that the country possesses and has only partially exploited. These resources which include gold, platinum, silver, and chrome are highly sought out for the development of innovative products. Greenfield development will bring about an increase in local demand for products from the extractive and agricultural sectors. This will support the rational of preferential sale of minerals, agricultural and horticultural products to local consumers that produce for international markets.
The management of Greenfields should ensure the investment of capital into ventures that have a considerable lifespan and result in the production of sustainable, cost effective products.

4.1.3. Capitalisation
The financing of manufacturing is essential for the sustainability of the economy. The ability to create capital makes manufacturing an important sector of the economy. The historic record of manufacturing’s higher net contribution to GDP than mining and agriculture positions manufacturing as the best sector to stimulate economic growth, making it essential to secure lines of credit for capital investment and order finance for manufacturing.
With the complement of commercial institutions in Zimbabwe on the rise, the idea of a bank to finance and support the manufacturing sector is not unrealistic. To encourage this, incentives may be given to financiers on capital invested into manufacturing to increase current productivity levels and ensure steady production in the long-term.
Foreign investment into manufacturing through PPPs, toll manufacturing and other arrangements will ensure that the local economy achieves economic capacity utilisation levels and continues to grow and improve production technology to remain competitive.

4.1.4. Protectionism
The enforcement of measures in the short term that cushion local manufacturing concerns from competition for the purpose of enabling the resuscitation of capacity should be encouraged in the country’s industrial policy. While this will affect existing trade relations, particularly with low-cost producers such as China, the effect will in the long-term enable manufacturing to produce a wider range of products to meet local demand. The application of protectionism should however be strictly controlled and applied in consultation with industry as opposed to being implemented as a blanket policy encompassing the entire manufacturing economy. Close cooperation between government and industry is required to determine which industries should benefit from various forms of protection.
With a clear picture of the production and supply economics of manufacturing derived from an industry census and the metrics derives from the same, the effect of protective measures can accurately be determined and monitored, with forecasts of the impact of policies being used as the basis for decision making relating to the extent of protection that should be given in each scenario.
Protectionism will apply more to consumer goods than capital goods. The premise of this is that the cost of production of consumer goods in developing countries, such as Zimbabwe is, would be relatively less than those of capital goods because production of the latter goods is assumed to be more capital intensive and tends to employ more complex technology (Brunton, 1998).

4.1.4.1. Sourcing policy
Industrial policies should serve to promote all productive sectors of the economy. The promotion of local sourcing only on the basis of cost advantage will ensure that the extractive and agricultural sectors continue to grow and support manufacturing. In the case where the sourcing of raw materials in the local market is not viable in the short-term, subsidies may be applied on the premise that subsidies will be paid back in the same manner as if they were long term loans extended to the industry by the fiscus so as to ensure the sustainability of supply in the long-term.
Efforts should be made to reduce imports through import substitution thus reducing the deficit in BOP and promoting local industry. This may be effected in the medium term through systematic rationing of foreign currency which will in the long run reduce the demand for foreign currency and create a situation where foreign currency demand and creation is highest in the productive sectors of the economy.

4.1.4.2. Tax incentives
Manufacturing and other productive sectors of the economy have been negatively affected by the impact of continued economic recession. Billions of dollars of investment are required for the recapitalisation of industry and the sourcing of markets which will sustain the productive sectors. The investment periods involved for meaningful returns to be achieved on productive sector investments are long and to encourage the much needed investment into these sectors of the economy, particularly manufacturing, tax incentives on capital investment may be introduced. Tax incentives should be reviewed on a going basis with the decision to maintain these incentives being based on the development needs of the productive economy. Incentives for Greenfield development and investment into capital equipment should however be a permanent feature of any industrial policy. Application of incentives should however be adopted on a fixed basis for capital investments that result in the diversification of local manufacturing into foreign currency earning areas as well as Greenfields.

5. CONCLUSION
The manufacturing economy of Zimbabwe has taken great strides since 2009 to be self rejuvenating, maximising on its ability to source raw materials on local and international markets following the introduction of a multicurrency monetary regime. This has eased the pressures on Zimbabwe’s economy, resulting in stocks of consumer goods on the shelves of shops increasing to pre-2003 levels, when major shortages of consumer goods became a regular occurrence around Zimbabwe.
The absence of an industrial policy that facilitates the operation of the productive sectors of the economy however impinges on the development of viable information that summarises the performance of all the productive sectors of the economy.
The journey for Zimbabwe has not been smooth since February 2009 and the introduction of the multicurrency monetary regime, with social, economic and political pressure all taking its toll on the nation.
While various novel and traditional orthodox policies have been proffered to make Zimbabwe’s economy self sustaining, the absence of a viable information generation mechanism for planning, monitoring and evaluation has hindered and will continue to hinder Zimbabwe’s economic advancement.

6. BIBLIOGRAPHY

Aquilano, N., & Chase, R. (1991). Fundamentals of Operations Management: International Student Edition. Homewood, Illinois: Irwin.
Brunton, H. J., (1998), A reconsideration of Import Substitution, Journal of Economic Literature Volume 34, pp 903 – 936.
Hurungo, J. (2010). An inquiry into how Rhodesia managed to survive under economic sanctions: Lessons for the Zimbabwe Government. Harare: Trade and Development Studies Centre.
Tow, L. (1960). The Manufacturing Economy of Southern Rhodesia: Problems and Perspectives. Washington, D.C: National Academy of Sciences - National Research Council.

THE MANUFACTURING ECONOMY OF ZIMBABWE
A stochastic approach to revival and sustainability planning

This project has been motivated by the need for real economic development in Zimbabwe and the realisation that the contribution of manufacturing to the economy is the single greatest influence, of all sectors of the economy, which can bring about sustainable growth and development.
This paper is presented for the purpose of stimulating interest in the promotion of manufacturing as the most important productive sector of Zimbabwe’s economy and garnering the support of industry and policy makers alike for the development of sustainable industrial policies which are crafted on the back of well collated, accurate and precise metrics.
The revival of Zimbabwe’s manufacturing economy will prepare Zimbabwe for the reintroduction of a local currency, and will improve the livelihoods of Zimbabweans across all sectors of the economy through the provision of goods and services (in non-productive sectors), as well as the creation of jobs.

SEPTEMBER 2011
ADDI MAVENGERE AMIMECHE MCIPS
P O BOX 44 | HWANGE | ZIMBABWE
+263 77 2269737 OR +263 73 5048400
addi@suisse.com addi@cityofkings.co.zw addimav@aim.com

Manufacturing Economy of Zimbabwe: Introduction

2011-06-27T08:33:00.002+02:00

The manufacturing economy of Zimbabwe was in 1980 inherited from Rhodesia; which economy was designed to favour European settlement around the country and developments across Southern Africa, with the railway line from Cape Town to Harare being a key infrastructural development that influenced the distribution of industries and thus labour and settlements along the central, Highveld regions of Zimbabwe.
Established to support developments in mining and agriculture, manufacturing developed in the early 1940s to become a bigger contributor to the gross value of output than both agriculture and mining combined. These post-World War two years saw a rapid growth in the Southern Rhodesia’s manufacturing sector, with considerable investment from South Africa and the United Kingdom into manufacturing.
In the decades that would follow, a series of political and economic systems, coupled with the influence of foreign nations, particularly in the form of embargoes and sanctions, changed and significantly affected, both positively then latterly negatively, the manufacturing economy of Rhodesia and Zimbabwe respectively.
Present day Zimbabwe, having, 30 years ago, inherited a stable manufacturing economy, which was however predominated by a minority, reals in a situation of turmoil, with productive capacity utilisation hovering well below 50% and the cost of production being so high that imports offer a more cost effective source than locally produced goods.
Several attempts, through policies such as the Economic Structural Adjustment Program, ESAP, Zimprest, Short Term Economic Revival Program, STERP, etc, have, since 1980, been put into effect to get Zimbabwe’s economy on track, with success only ever being to the effect of stabilising the economy in the short-term, if at all.
Reflecting on the productive sector of Southern Rhodesia and Zimbabwe, concerted effort and purposeful planning is required to ensure the revival of Zimbabwe’s manufacturing economy; which spurred the country into the position of the breadbasket of Southern Africa, and supported the once thriving mining industry.
Present day Zimbabwe’s economy stands on a much more diversified foundation, with tourism and other service industries, which rely less on manufacturing, contributing significantly to the Gross Domestic Product of the nation. Nevertheless, manufacturing is still a very important factor in the equation of Zimbabwe and for that reason, effort is placed on studying and developing recommendations for the revival of Zimbabwe’s manufacturing economy.

Historic perspective
As with many countries around the world, Southern Rhodesia experienced a significant boom following World war two. This era is widely credited for its contributions to technological innovation, and Southern Rhodesia benefitted its fair share from this.
The occupation of the territory
The occupation of the territory between the Limpopo and Zambezi in the 1890s spurred by prospects of rich gold finds, and subsequent establishment of gold and coal mines around the country stimulated modern industry which progressed from mining to manufacturing and finally services. The colonisation of this territory resulted from the prospect of vast gold reserves in Zimbabwe, a premise which was largely exaggerated by myths. When the settler column came to realise that the gold deposits in the territory fell far short of expectation, attention soon turned to other economic elements to help Rhodes and the BSAC recover their investments. Nonetheless, mining took place and the labour that was required to undertake this lead to a growth in demand for food, starting the agricultural economy of Southern Rhodesia. With the increased demand for food, and increasing output in the mines, manufacturing became necessary to supply the implements to sustain both mining and agriculture. In the early days, and for the better part of the colonial days, the major part of manufacturing’s raw materials came from the mining and agricultural sectors, setting Rhodesia up to be an independent economy. Having developed infrastructure in the extractive and agricultural sectors for the consistent supply of raw materials , as well as in manufacturing for the processing and production of end-user goods, as well as the setup of banking and other support institutions placed Rhodesia in a position to sustain the onslaught of economic sanctions and embargoes that would be placed on the settled regime, as well as the impact of the protracted war of liberation that brought about the birth of Zimbabwe in 1980.
While manufacturing was the fastest growing productive sector in Southern Rhodesia in the years that followed World War Two, the contribution of manufacturing’s value add to the overall economy stood at only 20% (1949 – 1957). The period after World War Two was however very important to the economy of Southern Rhodesia in that the growth of the manufacturing sector which exceeded output in both the extractive and agricultural sectors served to better balance the economy and make the economy less susceptible to environmental forces at play in the economy.
What follows seeks to assess the viability of the manufacturing economy of Zimbabwe and to determine its importance in safeguarding the integrity/ sovereignty/ independence of Zimbabwe.

The Way Forward 10/10

2010-10-22T15:19:00.000+02:00

Over the past year the political and economic scene in Zimbabwe has changed dramatically and the wealth of hope that characterized 2009 has since withered away like the jacaranda blossoms in mid-October. While things seem to be drifting into the abyss, all hope is not lost and as we move into the highly charged election season, hope is about to be restored that Zimbabwe's economy may see lasting development.

Will the last quarter of 2010 take us a step closer to Abundant Zimbabwe?

Discression and Sensitivity.... PLEASE!

2010-03-29T15:58:00.001+02:00

During the last week, a couple of very politically charged art exhibitions have come under extreme scrutiny from the keepers of peace and silencers of opposition. Having been privy to the contents of both exhibitions and following very closely the developments in either instance, I find it only prudent to let the public know that a medium as powerful as the visual arts is not something that is to be toyed with. Zimright opened a steamy exhibition of photographs dating back to the Presidential and general elections in 2008. the pictures, rather uncalled for, demonstrate the results of political violence and obviously have a bias towards one party. the exhibition which opened in the amphitheatre of the Delta Gallery in Harare came under the spotlight on Wednesday morning when it was confiscated just hours before the launch of the show.
the second, an exhibition of paintings and installations when up on Thursday at the National Gallery of Zimbabwe in Bulawayo. A highly charged exhibition titled Gukurahundi, the exhibition sought to address the happenings in the Midlands and Matabeleland regions of Zimbabwe in the early 1980s. the artist behind the show, Owen Maseko, was arrested the following morning and has been charged with three counts of POSA (details available).
while it is respected that freedom of expression is a right, discretion and sensitivity are critical is addressing issues of such gravitas. the nation is currently in a state of growth and political settling. the last thing that the nation of Zimbabwe needs is politically charged statements such as these which serve no less than to open wounds of events gone by.
While I am of the firm belief that closure is required for both issues but such indiscretion and lack of sensitivity is by no means the way to go about it.
Gukurahuni and 2008 did happen, we all know, but this is not the way to go about addressing the sensitive issues... And you wonder why freedom and other civil liberties are often stifled?
Understanding for one another is the way to go if we are to eat the fruits of Abundant Zimbabwe.

Fast track to the top

2010-03-24T15:46:00.000+02:00

the past decade has arguably been the most difficult in Zimbabwe's history, and perhaps the world over. Inflation reached world record highs, GDP dropped so drastically the economy was considered to be on the verge of collapse for at least two years.
With the stabilisation of the economy and other socio-economic parameters, Zimbabwe has become a good destination for the patient career-maker. the brain-drain that has seen a large number of professionals leave the country has created a large vacuum, particularly in non-service industries. the result is a plethora of opportunities for the diligent young professional, particularly graduates, to enter various industries at Middle and Senior management and jump-start their careers. the down side to it though is that the compensation is not commensurate with the work; albeit at this particular point in time.
patience is a virtue as it were, and a couple years of hard work without a fancy salary could see Zimbabwe grooming a breed of business leaders who will make a serious impact on the world, and become the youngest business leaders in the world, with the average age of this generation of leaders being perhaps 28 years.
Patience and foresight, the key to Abundant Zimbabwe!

Change came; swept up under us!

2010-03-24T10:04:00.000+02:00

Zimbabweans being very naive and focusing so much on politics have failed to realize that the change that was being pushed for came a long time around and life is now somewhat 'Rosy".
Looking at today's paper I couldn't help but smile at a headline titled inflation rises to -0.7%. Now is that not change? Compared to the 360 Million percent inflation we knew not long ago, no one can claim that change has not come.
The form that change has taken is not so obvious for a couple of reasons, firstly the economy had over the years become highly segmented and informalised that business performance can not be assessed the way it could in the past where a few multinational organizations were the benchmark and trendsetters.
secondly, political wrangling has tended to overshadow certain sectors of the economy.

In any case, the moral of the story is that Abundant Zimbabwe is coming to life!

The metaphor of business and water

2010-02-25T11:57:00.001+02:00

The same time two years ago Zimbabwe was what many can attest to have been unliveable. With inflation reaching its peak and the black market having become the only market, things in Zimbabwe we beyond amiss. During this time in the nation’s history, many Zimbabwean nationals took to their feet and made way for South Africa and other countries where things would at least have some indication of a future.
Zimbabwe has since gotten back on its feet and though we may lament that the Government of national Unity has not been effective, we should all appreciate that great strides have been taken by the people of Zimbabwe to bring Zimbabwe back to a state that we can take pride in; albeit, considering the quagmire we have just gotten out of.
And who will give any credit to the politicians? No one perhaps. In as far as the political situation nothing has really changed from 2008, the politicians still blow hot air and no really policy changes of note have been implemented. It is a surprise then that the economy has gotten on its feet, or is it?
In recent times business has learnt to become fluid, like water perhaps, filling and taking the shape of the container it is in. what other means would business survive by if not this? The world is a commercial space and Zimbabweans, at least some of us, have come to the realisation that no one is coming along to dig us out of the deep hole that Heaven knows who dug for us to fall into.
So it goes in life, the world owes you nothing and much as you may rant and rave about how our distinguished president, who recently celebrated the 86th anniversary of his birth, has brought us to a life of paupers, and how the Prime Minister keeps begging the west for continued economic sanction, the reality of the matter is you are just fooling yourself. Get with the program, go with the flow, be personally responsible and make things happen in your nick of the woods.
Many a time I have been asked why I have not upped and made tracks to South Africa where I could quite easily, that is relative, get a good engineering job, and it’s not rare for my answer to mention how easily it is to make it to the very top in business in Zimbabwe and how many opportunities exist for Zimbabwean in Zimbabwe. Not blowing the horn of those who advocate Affirmative Action, but until you realise that you have more clout on home turf, you might as well be in Siberia or in the middle of the Sahara.
Like water, fill the space and take its shape. Abundant Zimbabwe is bearing fruit.

Time to change our ways

2009-11-25T12:03:00.001+02:00

The annual ZANU PF congress was a couple of weeks ago postponed and this is perhaps the greatest sign that things in Zimbabwe really need emergency attention. Much as we may deny the state of affairs in Zimbabwe and on the other end, exaggerate them, it is things of this nature that show the true state of affairs.
In the time that I have followed politics the ZANU PF congress is something that has always been about the excess of Zimbabwe and flexing of political muscle. In 2009 the congress was postponed, or is it cancelled. This I presume is the result of the party’s inability to raise funds for the major feast.
In any case, the congress is not the subject of the message; change is what this is all about. The signs are in black and white, things are bad in Zimbabwe. If there are still people in Zimbabwe who do not realize that then they are perhaps not in their full faculty.
Given this scenario is it prudent as citizens of this abundant nation to sit back and wait for the politicians of this country to wrangle for power and try to develop a solution to the social and economic challenges in the spare time they have between looting and plundering? Before you even think about answering that rhetoric question, the answer is NO, NO, it is not prudent to let this go on and hope miracles happen. Only a fool does the same thing over and over again and expects a different result each time. Having said that, I submit that Zimbabwe is a nation of 14 million fools. That may be a harsh comment but until we accept that we have not changed the way we have been doing things for the past decade or two we will never do anything productive.
Is it not for each individual to ‘pick up their cross and walk the path’ to make things better. We all have a place in the economy of things and if we do not effectively play our part it is silly, to say the least, to think someone else will play theirs.
It’s no challenge, it’s merely the responsibility you have ignored.
Play your part and together we will see the fruits of Abundant Zimbabwe.

The way forward

2009-11-04T12:22:00.000+02:00

For long the people of Zimbabwe have put the blame on politicians for the demise of the economy and Zimbabwean society. Much as the leaders play a great role in determining the way the rest of the country goes.
For too long Zimbabwe has sat back and put the burden if its ills on the shoulders of men and women like Robert Mugabe, Morgen Tsvangirai and Joyce Mujuru, and for too long Zimbabwe has been a pawn in the wranglings of these and other leaders.
Abundant as Zimbabwe is, it makes me wonder if the high literacy rate of Zimbabweans actually means anything in terms of leadership capacity and responsibility.
This is our abundant Zimbabwe and unless we take the initiative to make things go the right way, the only thing that will abound in Zimbabwe is problems.
Abundant Zimbabwe, will we see it rise?

President's productive move

2009-10-09T09:03:00.000+02:00

In perhaps an unprecedented move, "The Solution" announced the phased ban of used car imports. While some may view this as a counterproductive move in the short term, it is initiatives of this nature that promote local industry.
One day WMMI and Quest might actually get back to optimum production.
As with my previous post where I spoke highly about Prof. Moyo, it goes without saying that every man has good intentions somewhere inside and this is but one of the signs that our long-serving president, though much resented in some spheres actually has the country at heart.
This is the way to benefit from the abundance of Zimbabwe!

The right man for the job

2009-10-05T08:22:00.000+02:00

One year on with the inclusive government not much positive development has come to Zimbabwe and the crux of Abundant Zimbabwe is ever so glaring.
Since the 15th of September 2008 no real signs of true political maturity have been shown by all, but one of Zimbabwe's politicians: Jonathan Moyo! Strange as this may sound, the decision by the good professor to rejoin ZANU PF was perhaps the most productive thing one could have done for Zimbabwe, albeit, Abundant Zimbabwe. Many will remember Moyo for AIPPA and the jingles that become half hour markers on state television and radio. It only takes an independent mind to realize that people like Moyo who do their job and do it well are the kind of people who can get this country on its feet again. And so you will say that he destroyed the state run media and made it an efficient propaganda machine, and if it wasn't for him ZANU PF would be long gone, well that is exactly what I am getting at. No one in the history of Zimbabwe has been able to achieve such political results and live to tell the story. Now think about this for a moment; tasked to lure investment into Zimbabwe and revive the economy through tourism promotion and all those other things, who better to hire than the most distinguished Professor Jonathan Moyo.
At this point you will probably beg to differ and it is at that point that I will refer to the constituency of Tsholotsho North, a place that at some point may have been termed the Siberia of Zimbabwe. During his first term as MP for this place a lot of development took place including the introduction of the first commercial bank to the area.
I couldn't help but notice how one contributor to The Independent of 2 - 8 October tried to put Moyo down by quoting some of his statements, all I can say in response is that move was the most naive! If you have followed Moyo from the early 1990's you will notice that he has a was of telling the future and somehow fitting himself in to win the day. In a 1992 publication he predicted the formation of a political party from the Labor and so today MDC... While there is so much to say for Moyo that is not what Abundant Zimbabwe is about. Back to the topic of discussion.
Since September of last year a lot of talk has been made and people pulling in all different directions. In all this has anyone spared a moment to think about real development; the methane gas deposits in Lupane, Uranium in the Zambezi valley, Platinum along the Great Dyke, Matopo, Victoria Falls, Great Zimbabwe, the highest literacy rates on the sub-continent.
It is at this juncture that I submit that Jonathan Moyo should be hailed for his bold move and supported in his efforts to get this country going; and I know deep down that he is a man with a heart and this is something he aspires to achieve.
Abundant Zimbabwe!

Protectionism?

2009-09-21T07:59:00.000+02:00

Given the challenge that Zimbabwean industries face due to stiff competition from South Africa and China, is protectionism a good idea to promote local. The abundance of Zimbabwe can never be explored unless production and trade are promoted and given that the majority of the products that line Zimbabwean supermarket shelves and street markets emerge from these two powerful economies (mainly), should we not protect our own producers through protectionism?

Another crux for abundant Zimbabwe!

A CASE FOR THE IMPORT SUBSTITUTION AND VALUE ADDITION PROGRAM

2009-09-19T10:32:00.003+02:00

For the past four years or so the government of Zimbabwe has embarked on a policy to promote substitution of imports with locally produced products, as well as to add greater value to products locally for both local and foreign markets.
The government’s policy on import substitution and value addition has mainly centred on manufacture of industrial components and spaces, a rather narrow portfolio given that the demand for some of the materials coming out of Zimbabwe is quiet high.
The following is a justification for the government’s continued focus on the import substitution and value addition program, with perhaps the added emphasis on export promotion.
Import substitution
Import substitution is simply the local provision of goods and services to achieve the same ends as products that are brought into the country. While promoting this policy the country fist of all stands to benefit from reduced deficit in balance of payments. With the continued failing of Zimbabwe’s economy and reliance on other countries to meet local demand through imports, the country’s foreign currency reserves have been continuously eroded. As the country seeks economic resurgence, the accumulation of foreign currency is high on the monetary policy agenda. As less is imported by virtue of local products being used to meet demand, the country has a few less foreign currency consumers to think about.
The following are the main benefits that are derived from the import substitution initiative.
1. Employment creation.
Through import substitution activities employment is created in various sectors of the economy. The most significant are of job creation is in the manufacturing sector where a combination of skilled and unskilled jobs are created. Given the high rate of unemployment that prevails in Zimbabwe, the initiative, if well funded, has the potential of having a significant contribution towards alleviating this challenge. Zimbabwe boasts of a highly educated population but due to the prevailing economic challenges, large numbers of highly skilled individuals are currently unemployed meaning that the country is losing potential revenue from their inactivity, and does not benefit from the investment into their education and training.
Employment and the resulting earnings on an individual level is the greatest contributor to market activity. Through the promotion of increased spending on the local market by the creation of more jobs and eventually higher earnings through the benefits of economies of scale, the employment creating ability of import substitution can significantly contribute to economic resurgence.
2. Reduction of balance of payments burden.
In international trade the imbalance in imports and exports affects the country’s foreign currency reserve situation. In situations where the country imports more than it exports, the country’s foreign currency reserves are depleted. This is the prevailing situation in Zimbabwe and over the past decade of so the situation has resulted in the country’s foreign currency reserves being depleted to the extent that basis and critical services cannot be procured.
By reducing imports through local production of goods that are currently being bought externally, the burden on the foreign currency that is currently being generated is reduced. Given that not many local industries that export are operating at full capacity, and that the critical agricultural and mining industries that bring in a significant amount of the country’s foreign currency, are under-resourced to produce at optimum capacity, the country already faces the challenge of generating sufficient foreign currency for its day to day requirements.
Import substitution, particularly in the areas of consumer goods and parts and spares for the manufacturing, transport, mining and agricultural sectors would significantly reduce the country’s imports as these industries are not sufficiently serviced locally and the bulk of products for these sectors are imported from neighbouring countries.
The successful management of the import substitution program may in the long-term result in the country producing excess high quality goods that can compete with the products that are currently being imported. At this point, the country will be able to generate extra foreign currency through the export of new products and services.
3. Products and services to meet the requirements of all segments of the local market.
At present, through the country’s look east policy, as well as trading relations with South Africa, products to meet basic requirements for both industrial and domestic consumption are made locally available. In some instances however, the quality of the products does not adequately meet the requirements of the market, as is the case with some clothing imported from Asia. While products are now locally available, certain segments of both the domestic and industrial markets are not adequately services.
With the promotion of import substitution, the exact requirements of local markets can be addressed at reasonable prices, which is currently not the case. This initiative will reduce the need for imports from countries that do not deal favourably with Zimbabwe, which inadvertently increases the cost of imports from these countries.
At present the markets most affected by the present import regime are:
- Domestic electronics,
- Tyres for light vehicles.
4. Avoid foreign policy risk: embargoes and sanctions.
For over a decade the country has been subject to economic and political sanctions from a number of European countries, the United States of America, Australia and other significant economic powerhouses. The results of these sanctions have been far-reaching in both areas of import and export.
The country has had, for the better part, been forced to seek other markets for the supply of machinery and spares for equipment procured from there and other hostile countries. Areas that have been affected significantly include the transport sector, where for example, US procured locomotives have had to be serviced locally due to the suppliers’ unwillingness to continue dealing with the country. This scenario has been seen in several areas that cover domestic goods as well as military equipment.
The continued political instability of Zimbabwe has meant that despite the institution of a multi-party government, some countries have continued to enforce trade restrictions on the country, depriving the nation of critical services and supplies.
Through the promotion of locally produced goods to perform the same functions as those that were traditionally brought in from countries that are now hostile to Zimbabwe, critical industries such as the health delivery sector, manufacturing, and defence, will not grind to a hold.
Since the inception of this program by the government of Zimbabwe, several companies have shown that the country has the capability, but perhaps lacks sufficient capacity, to produce products and services that can parallel the quality of what has traditionally been imported.
the country’s abundant natural resources, which are well sought-out by many of the countries we call hostile, puts Zimbabwe in a good position to become an economic powerhouse. Through research and development to achieve comparable technology in the areas of defence, food production and manufacturing,
Value addition
Value addition is in essence the processing of products to a greater extent than the current level. There are several reasons why value addition is beneficial to the local economy, and financial benefit could by far be the greatest benefit. Zimbabwe’s mining sector is one area that could yield great benefits to the country if value addition was introduced and fervently practiced.
1. Greater contribution to Gross Domestic Product.
Value addition takes several forms depending on the product that is being transformed. Whatever the case may be, this involves as process that increases the investment into the finished product, and hence its value. Packaging is a typical vale addition process that is used for foodstuffs. This significantly increases the market value of the sold product, resulting in each unit of product having greater contribution to Gross Domestic Product than a comparable semi-finished product.
Through value addition process, more man-hours are put into developing the final product, and it is likely in the case of manufactured products that more material is added to produce the final product. These activities directly increase aggregate disposable income as well as result in greater earning down the supply chain.
In effect value addition is comparable to the creation of a new line of products and new industries. The advantage however of building the value addition process into traditional products and processes is that there is less capital required for the setup of production facilities, and these activities can be effectively executed through process redesign, which is a process Zimbabwean industries will inevitably have to undergo to reduce costs and have their products become cost competitive.
2. Promotion of infrastructure development.
As the drift towards adding value to products proceeds, industry at large will undertake to develop its facilities to cater for new product lines and improved manufacturing processes. In line with this development, both local and central government will be forced to contribute to infrastructural development particularly in the area of transport, wherein road and rail networks will undergo upgrading to cater for increased load.
The sustainability of the developed industries will afford the cost of these infrastructural developments
3. Greater indigenous participation in local economy.
The government of Zimbabwe has made efforts to promote indigenisation of various sectors of industry; through the enforcement of shareholding quotas and other mechanisms. Through the value addition program, native Zimbabweans have the opportunity to enter previously undeveloped sectors of the economy, leading to their economic empowerment.
Foreign organisations and nationals, prompted by their national legislation at time, have avoided setting up enterprises that ensure only a finished product emanates for countries they invest in. For this reason many of the products that leave developing countries are semi-finished or subassemblies. This has created a void which indigenous business people can tap into without having to encounter much competition from foreign owned businesses.
Export promotion
The defining metric for the success of the import substitution and value addition program is the increase in the country’s exports.
The successful implementation of the program will inevitably result in the country’s exports of both traditional and new products to trading partners. The trend is likely to begin with the exploration of new markets in the developing world and expand to markets in the developed world. Given this profile, the country would likely achieve great success if it was to promote the production of low cost products for primary industries as these are the main economic activities of a great number of developing countries, Zimbabwe included.
The need for export promotion cannot be overemphasised as this is the keystone of the import substitution and value addition program.
While it is good for the country to promote local production for local consumption, it is only through exports that local industry can influence monetary policy and provide a solid basis for the reintroduction of the Zimbabwean currency.
Conclusion
The present successes of the import substitution and value addition program indicate great potential for the program’s contribution to the country’s all-round economic turnaround.
The effective management of the program is critical for the purpose of identifying critical sectors to prioritise and which have the greatest economic impact.

Along tribal lines

2009-09-10T07:23:00.000+02:00

What is most disconcerting is that while the country grapples with very serious economic challenges that are perhaps not totally beyond us, the greatest battle we fight day to day is tribalism. It occurred to me a couple of days ago that while we talk of sanctions and the inequities of this world, as Shona people in Zimbabwe we are not prepared to support any policy that will even slightly promote economic development in the southern and western parts of the country; even for capitalist reasons. This is the saddest situation given that the southern and western parts of Zimbabwe have the greatest potential for economic contribution per capita; Bulawayo in particular.
While the prevailing political arrangement seems to bring together a couple of political rivals and one opportunist together in a marriage of convenience, some of the fundamental issues in Zimbabwean politics are largely ignored, namely tribalism. While “effort” was made in the past to have a tribally balanced presidium this was largely cosmetic and did nothing in real terms to address the conflict that Shona and Ndebele have always had in Zimbabwe. The current government has totally ignored this factor but then again there was never any difference.
My concern though, nothing to do with the structure of the presidium, pertains to the economic implication of tribalism. It is common knowledge that Bulawayo is the most viable location from large-scale manufacturing operations and this is the reason why the Trade Fair and other similar infrastructure were erected in this city. As I mooted the idea of setting up a manufacturing plant with the aid of some foreign investors Bulawayo was my logical choice. Little did I know the response I would get from the man with the greatest influence in this project would make reference to the fact that the pair of us are Shona and that will never change. Rather disconcerting but a fact of the tribal war that we have been fighting for years.
What puzzles me most is that Zimbabweans are more prepared to prolong the suffering of the entire nation while they sit on the means to bring about real change with minimal international intervention.
Another crux of abundant Zimbabwe is thus; what is going to happen to all the resources that lie in the southern and eastern parts of Zimbabwe if we continue to place tribe before nation.
Two rules I learnt well about becoming rich that I would like to share with you, one of which applies here, are as follows:
1. You can only be rich if you live within your means.
2. Money has no colour, tribe or creed.
While the tribalism people of this nation focus on developing their nick of the woods, the opportunist will venture out of their tribal space to create the greatest empires in “other peoples’” space.
As an afterthought though, what is the real meaning of rebranding, as championed by the opportunistic Deputy Prime Minister, and National Healing, when attention is not placed on the core issues of difference from where a lot of the challenges emanate.

Setting a basis for economic planning

2009-09-05T11:31:00.000+02:00

Zimbabwe has embarked on the Short Term Economic Recovery Plan (STERP), which is underpinned by the manufacturing sector. STERP is consistent, in character, with previous economic policies coined after independence in Zimbabwe. What is most disconcerting about this policy and its predecessors is that it is not based on an accurate understanding of the country’s ability to manufacture or develop its mining and agricultural bases at that. The global credit crunch of 2008-2009 has highlighted the weakness of ‘assumed fundamentals’ that are characteristic of free market and command economies. The time has come to take stock and give an accurate assessment of what the country can realistically produce for the purpose of achieving real success in economic development.
Effective strategic planning can only be achieved when information that is accurate and precise is readily available. Industrial planning for economic growth requires intricate knowledge of various human and machine capabilities and the supply of raw materials. In essence industry needs to be studied by engineers just the same way biologists study ecosystems, measuring the factors of production and balancing demand and supply from sources of raw materials right up to the level of consumption and to ensuring that the aggregate industry is sustainable and continues to develop as opposed to being stagnant as Zimbabwe’s industry has been for so long.
Key variables that need to be taken into consideration are the capability of industry to produce a range of products and secondly the capacity of output that industry can produce.
The technical capability of an industry to produce quality goods is dependent on a number of factors particularly the available raw materials, available processes and processing plant and equipment, and available expertise. A number of other factors come into play by virtue of their effect on these. Without a clear understanding of these factors of production no strategies formulated to develop a manufacturing economy can be even marginally successful.
During Rhodesian days, regular audits would be carried out to determine the state of various sectors of the economy and the results of these would serve as governments’ basis for the development of policies for economic development; projecting employment trends, and economic output among other things, for fifteen to twenty years. At present there is no accurate data that relates to Zimbabwe’s industrial technical capability and capacity.
The least that could be done is for government to get an appreciation of what can be produced and where, the cost of production, how to develop the country’s production technology, and the skills that are available locally.
Without this basic knowledge all efforts to stimulate economic growth are directed blindly as there are no actual metrics available to determine where resources should be directed for greatest benefit.
A comprehensive survey of industries across the country would be instrumental in gathering this information and give a basis for the formulation of real policies with any real potential of success. The result of this exercise will give a basis for answering the question about the abundance of Zimbabwe; what sector should Zimbabwe’s economy be based on. Much as this question on the surface may seem quite trivial, its implications in so far as infrastructural development and in fact everything from academic curricular to the length of the working week is quite dependent upon this.

Full report available upon request.

Investing in Zimbabwe

2009-09-04T12:00:00.000+02:00

The greatest challenge to the development of Zimbabwe today is perhaps the inability of the government to effectively communicate its policies. In April 2009 the Ministry of Industry and Commerce published a communique titled Investing in Zimbabwe. I have been privileged to land a copy of this document in my hands. Its interesting just what policies the government has put in place to promote development, I'm sure you would be impressed, that is if you knew what I knew.

A copy of this document can be made available upon request.

A new dispensation

2009-08-24T16:54:00.005+02:00

The future of our beloved country lies in our ability to think logically, act strategically and put aside tribal, racial and other differences. This is the new dispensation that will see Zimbabwe take off and become the economy it rightfully should be.

Overshadowed by tribalism and greed, a number of the decisions that the governments of Zimbabwe have taken since independence have been the downfall of this great nation. The message is clear and the logic undisputable, what Zimbabweans need to accept is the writing on this wall and move forward in the New Dispensation.

Abundant nation

2009-08-19T11:54:00.000+02:00

Zimbabwe is abound with natural and human resources that only few countries can compare with. Over the past decade Zimbabwe has seen the worst of economic downturn. The worst is now over and the nation is preparing to get back on its feet.
The question we should all pose is what is needed to get back to the glory Zimbabwe once had and where will each of us be when Zimbabwe becomes the fastest growing economy in the world.