ALIGNING THE MANUFACTURING SECTOR TO VISION 2030
THE manufacturing sector has been widely regarded as the driving force that will propel Zambia towards development. Enshrined in the Zambia Vision 2030 is the goal for the country to become a middle-income prosperous country, with the manufacturing sector playing a cardinal role by contributing 36% to the economy’s Gross Domestic Product (GDP).
On the contrary, manufacturing value added as a percentage of GDP from 2012 to 2021 has remained stunted at an average of 7%, whilst the growth of the manufacturing sector during the same period averaged 4%. Various impediments are currently inhibiting the manufacturing sector from living up to its true potential and making the Vision 2030 seem unattainable at the current growth rate. Some challenges faced by the manufacturing sector are discussed in depth below and some possible solutions that can propel the sector to the Vision 2030 targets.
Zambia currently has a regulatory framework which is stifling growth in the manufacturing sector. Not only are the licences and permits needed to operate plenty but obtaining them also takes time, which could otherwise be used productively. Compliance, particularly for micro small and medium enterprises (MSMEs) is very low that it has encouraged informality and illicit manufacturing and trading of various goods.
Furthermore, the lack of critical infrastructure in the energy and transportation section has limited manufacturers’ ability to grow in Zambia. With limited electricity generation infrastructure, the electricity demand sometimes surpasses the supply due to rapid industrialisation. In such instances, load management negatively affects manufacturers as they are unable to utilise the whole 24 hours for production and have more downtime. Transportation infrastructure also stands in a deplorable state and is unable to efficiently connect the country to domestic and international markets. It is therefore important that both energy and transport infrastructure are developed to support the growth of the manufacturing sector as enablers.
Moreover, local value chains remain largely undeveloped, and this has affected the availability of raw materials and intermediate products for value-added products. Segmented value chains imply that the backwards linkages that the manufacturing sector is supposed to have with other sectors are non-existent.
Additionally, manufacturers lack access to key domestic markets which are some of the largest buyers of goods and services in the country. Public procurement has not effectively incorporated local content and does not guarantee local manufacturers a market for their goods, despite government policies like the Public Procurement Act of 2020 promoting local content.
The preferential procurement and reservation schemes enshrined in the Act are yet to be actualised and contribute to increasing local content in public procurement. On the other hand, one of the vital spillover effects of large investments in the mining sector is that local businesses can have markets for their goods and services. As it currently stands, no policy guides local content in the mining sector and therefore the growth in mining activity does not trickle down to communities and businesses. As the Vision 2030 remains a cardinal development plan for Zambia, it is vital that the manufacturing sector returns to its peak in the 1980s and head towards becoming a middle-income prosperous country. The Government needs to ensure that the regulatory framework governing licences and permits in the manufacturing sector is revised. Licences and permits need to be harmonised where they can and those that are duplicated need to be dropped. For MSMEs, the Government can use a single licencing system which allows manufacturers to pay one payment for a licence which encompasses all the other licences and permits.
In addition, the Government need to work with the private sector to find innovative ways of developing key infrastructure in the energy and transport sectors. Public Private Partnerships (PPPs) need to be reframed to attract interest from the private sector and increase their utilisation.
There is also a need for the Government to develop local content in public procurement together with the private sector to actualise the preferential procurement and reservation schemes. The Zambia Association of Manufacturers (ZAM) is currently implementing the Proudly Zambian Campaign and can therefore provide key input in the schemes. Lastly, there is a need to enhance the mining policy to ensure that mines can procure from local manufacturers for the gains in the sector to trickle down.