Building value chains, skills for Vision 2030

ZIMBABWE aspires to be an upper middle-income economy with a per capita income of US$3 500 by 2030.

This requires fundamental transformations and shifts in the economy. Our Transitional Stabilisation Programme (TSP) prepares for these critical shifts and transformations we envisage, and without which Vision 2030 will turn into a pipe dream.

Since my previous instalments have touched on reforms we need in the public sector, this piece takes the economic debate a step higher, but without overlooking this public sector reform agenda which some have termed fiscal consolidation. I am sure that the forthcoming Budget Statement will cover the subject substantially. For this piece, certain key facts must be recalled.

These are not new facts as they have been at the heart of the African development debate from the early days of the continent’s independence.

What may be new is the current generation of African leaders who have the resolve, the unity and opportunities to face up to these facts in order to overcome the continent’s development challenges.

This new resolve at leadership level comes by way of a number of decisions taken at the levels of the African Union (AU), its regional economic communities (RECs), and by individual African countries through national policies. For instance, the AU now has an Africa Mining Vision (AMV) which has found expression in regional mining policies of our RECs, and also in mining policies of some individual African countries.

At the heart of AMV and related policies is the question of Africa’s depletable natural resources and how best to exploit them for maximum benefits to the continent and its people. A key outcome of that debate is the notion of value chains at national, sub-regional and continental levels. This is the subject of this piece.

The notion of value chains comes from the idea of fully exploiting the continent’s resources in order to industrialise our economies so they go beyond the current level where we export primary products which do not give us much value.

The goal is to move and transform African economies up the value chain so that the continent is able to export finished goods which fetch more value in global markets. Just looking at a few key minerals like gold, platinum, diamonds and iron, the picture becomes clear: Africa ends at the mining or production stage of the value chain.

Except for South Africa, there is very little processing, let alone refining and fabrication which is done on the continent whose minerals are largely exported in raw form. Not even South Africa escapes this distortion entirely. For instance, South Africa and Zimbabwe mine nearly 80 percent of the world’s platinum. In respect of gold, South Africa mines about 12 percent of the world’s gold while the rest of African mines contribute only about one percent of the world’s gold.

In the diamond sector, Botswana mines nearly 20 percent of the world’s diamonds, with DRC hard behind it. South Africa accounts for nearly 10 percent of the production. Zimbabwe is not yet a global statistic.

On iron, South Africa accounts for about three percent of the world’s steel production. The rest of the African continent is insignificant in global terms.

Turning to value addition and beneficiation, the story becomes even more revealing. For gold, Africa accounts for less than one percent of the global market, with global leaders on gold beneficiation coming from both sides of the Atlantic, from Asia (China, India, Indonesia), and from the Middle East (Turkey).

Except for USA, Australia, Russia, Canada and Indonesia, these global leaders in gold beneficiation are hardly leaders in gold mining or production.

Some do not even have gold deposits which Africa has in abundance. For platinum, leaders in beneficiation are only found in Europe, Japan and North America, with North America being the only region where platinum deposits are found, mined and value-added.

Otherwise the rest of global leaders in platinum beneficiation get their platinum from South Africa, Russia and Zimbabwe where beneficiation is virtually nonexistent or, in the case of South Africa, partially done. Or they recover platinum from scrap!

Zimbabwe is now making a beginning on the front of beneficiating our platinum. On diamonds, only Botswana, South Africa, Angola and Namibia have made marginal gains in value addition. The real leaders on this score are India, US, Israel, Belgium and China who have no real diamond deposits to talk about. Only Russia is both a producer and a manufacturer of diamonds, even then on a small-scale in relative terms.

On iron and steel, except for South Africa, Africa is not on the value addition map. China, on the other hand, produces about 15 percent of the world’s iron, and processes up to 35 percent of the world’s iron into high value steel and steel products. Japan, which does not produce iron, accounts for more than 10 percent of the world’s steel supply!

Yet some of the above minerals are key to industrialisation. Three factors stand out from the foregoing. One, even though Africa (outside South Africa) is highly mineralised, she ranks low as a producer of minerals, relative to global demand. Her mineral wealth remains largely under the soil and thus passing for inert wealth. It thus lags behind on production even though it ranks foremost on untapped mineral resource deposits. Zimbabwe which is highly mineralised, fits this dubious description. So, too, does Southern Africa which is a world famed powerhouse on mineral deposits.

Two, where Africa has attempted to produce, it has exported its mineral resources in raw form. This means low value or low returns on exports of its depletable natural resources. Much worse, it means Africa transfers or exports jobs to other economies and regions which beneficiate its raw minerals, even though the continent registers high levels of unemployment.

And because there is no processing, refining and fabrication on the continent, it means Africa suffers suppressed industrialisation which should come by way of its minerals feed-stocking into its manufacturing sector. Zimbabwe typifies all the three grim facts which I have outlined above. Things begin to change for Zimbabwe if firstly she mined or produced more; secondly if she adds value and beneficiates more through processing and refining her minerals; and thirdly if she linked her processed and refined minerals to her manufacturing sector in order to industrialise more.

Her external trade would be driven by capital and finished goods, and not raw materials. That way, the goal of a sustainable upper middle-income economy by 2030 would be within grasp. Clearly our country needs a new growth path based on a broad beneficiation strategy. Manufacturing needs steel and alloys as feedstock.

Energy and electricity require coal, natural gas and fossil fuels as feedstock. Infrastructure requires steel, copper, cement, etecetera. Agriculture requires limestone, phosphates and potassium for fertilisers. We have deposits for most of these which are either unexploited or unprocessed to realise greater value.

Therein lies our challenge. Lest I underplay the magnitude of the problem on our continent and in our economy, I should stress that what is true in mining is also true in almost all other sectors which make up and drive our economies on the African continent.

In agriculture for instance, Zimbabwe adds value and beneficiates locally only 30 percent of the cotton she produces. The rest goes abroad as raw cotton exports. Our textile industry is not just small; it is ailing. The story of tobacco is worse, with the country only able to process about two percent out of the more than 240 million kilogrammes it produced this last season.

The rest goes out raw, with our tasty leaf being used as a blend for global brands. The story of soya and wheat is even more disheartening.

There we have some processing capacity, yet the country has not been able to produce enough of both as feedstock for this industrial capacity! We have tended to process what we cannot produce, even though we have everything necessary for that production.

Equally, we produce top-notch beef but have no leather and tanning industry to talk about. Countries like Ethiopia have a buoyant leather industry which exports to the rest of the world. In respect of minerals, we have almost all the minerals that drive world industries, but we have either not mined them, or mined them modestly.

Certainly we have not processed them at all. This is what others have called “the resource curse” of Africa, which Zimbabwe has not escaped.

What, then, is to be done? Like I said, all these facts are well known and create what is known as Africa’s development paradox. What is needed is overcoming this development paradox so we get out of the rut. Each country will have to adopt strategies suited to its peculiarities. Equally, there are areas where we have to act regionally and continentally.

And of course in yet other areas and levels, we have to build partnerships across the globe. Except the three last levels occur better when certain things are in place or happen nationally. That is my focus: those things we need to do here in, and as, Zimbabweans before we turn to the region, to the continent and to the rest of the world.

To my mind, a good starting point is to mobilise and organise available national skills so we define our resource endowments in the first place.

Following on this, we must map value chains that are possible in our circumstances. Then we must decide on strategies for operationalising those value chains.

We have done very well to educate our Nation. Every week this time of year I cap thousands upon thousands of new graduands. We have done a lot to build modern skills for what is called “Industry 4.0”, or the Fourth Industrial Revolution, which is driven by digital technologies to create industries which have low or zero carbon emissions for a green world.

Outside home efforts, our well-educated Zimbabweans in the Diaspora have augmented the national knowledge and skills stock. But this vast pool of national knowledge and skill now needs to be mobilised and organised systematically to heed a new national call. We need to mechanise and industrialise in order to leapfrog developmentally. We need clear pathways to mechanise and industrialise for strategic value chains.

Mobilisation means rallying all the knowledge and skills around this national cause, regardless of where the skills are located globally. Organising means purposefully directing the focus of the national mind and skill towards a consensual set of strategic goals that take our country forward developmentally.

I believe the State has a key role to play. While our skilled children in the Diaspora now feel loved and valued, we need to go a gear up to enthuse them to want to get involved and engaged at home so the valuable skills they have acquired are availed to their motherland.

It is about persuasion and about offering incentives and opportunities which nudge and cajole them back home. It is also about providing “a place in the sun” to skills here at home. An interplay or cross-fertilisation between skills of Zimbabweans from the Diaspora and Zimbabweans at home, should cause a “creative disruption” which breaks the current inertia and moves us forward.

A forum thus has to be found or invented for that “explosive creative encounter” to take place.

A key task for such a broad convocation should be a definition of key resources from which to map strategic value chains. Many countries which have industrialised have done the same.

Discussions must be broad enough to cover key resources, processes of value addition, linkages (backward, forward and side), and industrial clusters and infrastructures that these value chains require for support. Of course focus must also fall on broad policies which attract capital and encourage value addition and beneficiation, and which prepare Zimbabwe to trade in high value manufactures globally.

Discussions must also situate Zimbabwe within the Sadc sub-region and the African continent for possibilities of developing regional and continental value chains and infrastructures as envisaged by the AU Agenda 2063. Above all, spotlight must be on strategies for global partnerships which take advantage of opportunities for FDI, technology transfers and markets, to underpin these value chains. The bottom line is knowing that beyond capital, value chains are underpinned by tertiary skills, research, development and innovativeness (RD&I) to create and man advanced technologies.

All these have to be built, attracted and incentivised. Once the task of mapping strategic value chains is completed, the next key questions will centre on execution. Again, apart from policy and legal issues, there will be institutional and organisational factors. How do we reorganise our tertiary institutions beyond being centres of “dry” learning, to being task-focused and task-led, specialisation centres linked to given strategic national value chains?

Such that it becomes one university college assigned to a set of minerals and value chains thereof; one university linked to an agricultural sub-sector and value chains we derive from it. The Ministry of Higher and Tertiary Education, Science and Development is already moving in this direction. It needs support. My own view is that the task of mobilising and organising national knowledge and skills in order to embark on a national exercise of mapping critical value chains for our development strategy is an urgent task worth pursuing.

Could convening a Presidential Summit or Conference on Value Chains be the answer? Countries in our region, most notably South Africa, have done such an exercise. So, too, have countries in Asia which have industrialised.

The decision to embark on such a course in Sadc was taken a few years ago at an Extraordinary Summit held in Victoria Falls. We now need to isolate each mineral, and each agricultural product — one by one — in order to map out strands of value chains by which we transform our economy. Time has now come for us to make a start.