Govt, in­dus­try must strate­gise to boost man­u­fac­tur­ing

Chronicle (Zimbabwe) - - National News -

BY and large, it has taken one pol­icy in­ter­ven­tion to cause a 13 per­cent leap in in­dus­trial ca­pac­ity util­i­sa­tion in only five months. In June, the Gov­ern­ment came up with a statu­tory in­stru­ment that re­moves a range of ba­sic com­modi­ties, wood fur­ni­ture and steel prod­ucts from the Open Gen­eral Im­port Li­cence. Re­moval of a prod­uct from the li­cence im­poses re­stric­tions on the im­por­ta­tion of that prod­uct. A com­pany seek­ing to im­port them for com­mer­cial use has to ap­ply for and ob­tain a li­cence from the Gov­ern­ment for them to be able to do so.

Ac­cord­ing to the Con­fed­er­a­tion of Zim­babwe In­dus­tries (CZI) Man­u­fac­tur­ing Sec­tor Sur­vey, ca­pac­ity util­i­sa­tion has risen from 34,3 per­cent in 2015 to 47,4 per­cent, thanks to the im­port re­stric­tions oc­ca­sioned by the pol­icy.

“The gains of Statu­tory In­stru­ment 64 (SI 64) of 2016 are be­gin­ning to be re­alised (as) ca­pac­ity util­i­sa­tion has jumped sig­nif­i­cantly by 13,1 per­cent­age points from 34,3 per­cent in 2015 to 47,4 per­cent in 2016,” said CZI.

“This is a very pos­i­tive de­vel­op­ment largely re­sult­ing from the moves on the part of Gov­ern­ment to pro­tect lo­cal in­dus­try and the im­port pri­or­ity list. Fifty four re­spon­dents recorded ca­pac­ity below 50 per­cent, while seven per­cent of the re­spon­dents recorded ca­pac­ity util­i­sa­tion of 100 per­cent.”

The best per­form­ing sub-sec­tor, wood and fur­ni­ture prod­ucts, is now op­er­at­ing at 57,8 per­cent of its in­stalled ca­pac­ity, fol­lowed by non­metal­lic min­eral prod­ucts at 57,5 per­cent and food­stuffs at 56,5 per­cent. The to­bacco, drinks and bev­er­ages sub-sec­tors were op­er­at­ing at 52,4 per­cent.

On a re­gional ba­sis, firms in Harare are now run­ning at 48,3 per­cent, Mid­lands (44,3 per­cent), Man­i­ca­land (43 per­cent) and Bulawayo (33 per­cent).

The huge leap highlights the pos­i­tives that tar­geted pol­icy in­ter­ven­tions can do for our econ­omy. We hail the Gov­ern­ment for com­ing up with the re­stric­tions and hope that the re­cov­ery would be sus­tained un­til ca­pac­ity util­i­sa­tion im­proves to at least 90 per­cent.

There was no way the Gov­ern­ment was go­ing to keep our bor­ders open when our in­dus­try is down yet we have bustling economies around us no­tably South Africa, Botswana and Zam­bia. We ran the risk of turn­ing this coun­try into a re­tail econ­omy that pro­duces noth­ing and im­ports fin­ished goods for sale. That would have been un­for­tu­nate and em­bar­rass­ing for an econ­omy that has such a mas­sive man­u­fac­tur­ing base and tra­di­tion as ours.

The Gov­ern­ment is urged to con­tinue im­ple­ment­ing tar­geted poli­cies to re­vive the econ­omy un­til we reach the stage where we can open up the mar­ket to ex­ter­nal com­pe­ti­tion. In this age pro­tec­tion­ist poli­cies don’t work in the long run. Gov­ern­ments can re­sort to them, as ours did, on a short-term ba­sis when their economies are emerg­ing from crises. Our trad­ing part­ners ap­pre­ci­ate the need for our econ­omy to re­cover and con­sol­i­date it­self be­fore the Gov­ern­ment takes a de­ci­sion to open up.

How­ever, re­gional trade agree­ments de­mand that economies are opened as much as pos­si­ble for healthy com­pe­ti­tion and greater in­te­gra­tion. If we con­tinue with ar­ti­fi­cial pro­tec­tions, there is a chance that our neigh­bours might con­sider re­tal­i­at­ing, which is bad for both sides. Also, a pro­tec­tion­ist econ­omy runs the risk of pro­mot­ing in­ter­nal in­ef­fi­cien­cies which, in the end, may prove to be more dis­as­trous than open­ing up.

Ev­ery econ­omy de­vel­ops if it pro­duces enough for lo­cal con­sump­tion and ex­port. The pre­vail­ing liq­uid­ity crunch is one symp­tom of an econ­omy with a weak ex­port per­for­mance. The Gov­ern­ment is blam­ing the pre­vail­ing cash short­age on low ex­ports and re­sult­ing de­pressed for­eign cur­rency in­flows. To ad­dress this, au­thor­i­ties are im­plor­ing com­pa­nies to ag­gres­sively ex­port. But it would be hyp­o­crit­i­cal for our econ­omy to close it­self up for prod­ucts from abroad, while we are push­ing lo­cal com­pa­nies to ex­port. Who will ac­cept ex­ports from here if we have a pro­tec­tion­ist stance pre­vent­ing other coun­tries to ex­port to us?

What we are say­ing is that im­port re­stric­tions are only good in the short to medium term but are un­sus­tain­able in the long run.

The CZI is, need­less to say, aware of this, as is the Gov­ern­ment.

Be­fore the bor­ders can be freed, the Gov­ern­ment and in­dus­try it­self would have to im­ple­ment strate­gies to boost man­u­fac­tur­ing per­for­mance.

One of them can be to in­ten­sify and grow the Dis­tressed In­dus­tries and Marginalised Ar­eas Fund for com­pa­nies to ac­cess cheaper finance for work­ing cap­i­tal and re­tool­ing. As the CZI has al­ways said, some man­u­fac­tur­ing plants are more than 40 years old, thus can­not pro­duce as ef­fi­ciently as those in South Africa, for in­stance. Such plants have to be dis­man­tled com­pletely and new ones in­stalled.

We also look for­ward to the bond notes help­ing to not only en­hance ex­ports, but also to im­prove liq­uid­ity for con­sumers and busi­nesses to have enough cash with which to trans­act more ef­fi­ciently.

Strate­gies to ad­dress the ease of do­ing busi­ness have to be in­ten­si­fied for more lo­cal and for­eign in­vest­ment to pour into the econ­omy.

In the same vein, the ex­port pro­cess­ing zones drive must come to fruition as soon as pos­si­ble for the progress we have seen thanks to SI 64 to be con­sol­i­dated.

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