‘Old tech­nol­ogy blights value chain drive’

Chronicle (Zimbabwe) - - Business Chronicle - Busi­ness Editor

ZIM­BAB­WEAN com­pa­nies need ur­gent re-tool­ing if the coun­try is to de­rive in­creased earn­ings through a value chain eco­nomic model.

With the rise of mer­chan­dise im­ports in the past few years and more con­cen­tra­tion on min­er­als and met­als ex­ports as well as im­por­ta­tion of ser­vices, the coun­try’s value chain link has been weak­ened.

This calls for co­or­di­nated pol­icy in­ter­ven­tions that will fa­cil­i­tate the cre­ation of vi­brant value chains in the econ­omy, Na­tional Rail­ways of Zim­babwe (NRZ) gen­eral man­ager En­gi­neer Louise Muk­wada said.

“One of the things we are look­ing at as the rail­ways is im­port sub­sti­tu­tion in light of strength­en­ing value chains. I think this is now crit­i­cal in Zim­babwe given chal­lenges of cap­i­tal flight through im­por­ta­tion,” he said.

While value ad­di­tion is an in­te­gral ap­proach in line with the coun­try’s blue­print, Zim-As­set, Eng Muk­wada says re­plac­ing im­ports through lo­cal sup­ply and in­creased pro­duc­tion is still a chal­lenge due to a num­ber of hur­dles.

One ma­jor chal­lenge is age­ing equip­ment that is still used by lo­cal firms. This, to­gether with labour, wa­ter, power, tax­a­tion and fi­nance costs, con­tinue to weigh down on in­dus­try ef­fi­ciency.

“We have faced cer­tain chal­lenges. One ex­am­ple was that we en­gaged a lo­cal com­pany to try and pro­duce brake blocks that are used on lo­co­mo­tives and wag­ons to brake the train.

“These are like brake pads of a ve­hi­cle but are much big­ger and we im­port these. We en­gaged a lo­cal com­pany to pro­duce them lo­cally,” said Eng Muk­wada.

“Our en­gi­neers and those from the com­pany we en­gaged worked to­gether and we were able to come up with a prod­uct but they were pro­duc­ing it at thrice the price of the im­ported prod­uct.

“The chal­lenge was the equip­ment that they were us­ing. It was just not ap­pro­pri­ate.”

He said NRZ has also been strug­gling to get lo­cal sup­pli­ers of crit­i­cal com­po­nents to sus­tain the op­er­a­tions of the gi­ant paras­tatal due to ca­pac­ity con­straints fac­ing lo­cal firms.

“The sec­ond ex­am­ple was on tim­ber slip­pers. Our rail­way line rests on tim­ber slip­pers. These were put in the 1960s to 1970s and a lot of them are rot­ten and we need to re­place about a mil­lion of them. We en­gaged Sawmills and other com­pa­nies to pro­duce so that we can do tri­als,” said Eng Muk­wada.

He said al­though lo­cal com­pa­nies were able to make sat­is­fac­tory sam­ples, they could not pro­duce the re­quired vol­umes be­cause of lim­ited ca­pac­ity.

Said Eng Muk­wada: “This again is re­lated to the equip­ment they used. It was good enough to pro­duce a sin­gle or two sam­ples but to pro­duce vol­umes they now needed to re-equip”.

He made ref­er­ence to a third sce­nario in which NRZ en­gaged an­other lo­cal firm for sup­plies in a deal that later col­lapsed be­cause of ca­pac­ity is­sues.

“There is a lo­cal com­pany that was pro­duc­ing some pads. These are syn­thetic ma­te­rial pads that we use on the rail. We used to im­port quan­ti­ties of these.

“This com­pany went into tri­als with us and we even­tu­ally man­aged to per­fect the pads that we wanted and for a cou­ple of years they were sup­ply­ing us but even­tu­ally they faced cap­i­tal chal­lenges and went un­der­ground,” said Eng Muk­wada.

“So, my point is that per­haps we need co­or­di­nated pol­icy in­ter­ven­tions. The SMEs sec­tor for ex­am­ple, I have heard from time to time, fa­cil­i­ties be­ing given to com­pa­nies to sup­port SMEs.

“Per­haps . . . this could be more tar­geted so that those that can add value in a par­tic­u­lar value chain, like in our case, we are look­ing at the main­te­nance of the track and we have iden­ti­fied com­pa­nies who can par­tic­i­pate in that value chain. The busi­ness there is guar­an­teed. So, if there is in­ter­ven­tion to sup­port the rail or even work­ing cap­i­tal then we can sub­sti­tute the im­ports and then save on our cur­rency.”

Eng Muk­wada re­vealed this dur­ing the re­cent Con­fed­er­a­tion of Zim­babwe In­dus­tries (CZI) congress in Bu­l­awayo where he made a pre­sen­ta­tion fo­cus­ing on cost com­pet­i­tive­ness in re­la­tion to ex­port per­for­mance.

Dur­ing the dis­cus­sion, CZI deputy pres­i­dent Mr Sife­lani Ja­bangwe said his or­gan­i­sa­tion was keen to en­gage NRZ on how to in­crease busi­ness vol­umes in bulk trans­porta­tion.

He stressed the need to fine tune the cost struc­ture to en­sure sym­bi­otic ben­e­fits to par­ties in­volved for pur­poses of com­pet­i­tive­ness. — @Pros­perNdlovu

En­gi­neer Louise Muk­wada

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