Economic engine requires urgent overhaul
The manufacturing sector is often referred to as Zimbabwe’s engine of economic growth. Sadly, the numbers used to interpret economic performance seem to betray that assertion.
From double-digit growth of 13,8 percent in 2011, growth has been moderating, with dips experienced in 2013 and 2014.
Growth of the sector is projected at 0,1 percent this year, which is virtually no growth at all.
Folks, if the manufacturing sector is indeed the engine of economic growth, then can we really expect any meaningful movement in the economy when the engine is mal-performing like this?
I am sure any mechanic worth his salt will recommend that the engine of such a vehicle needs an overhaul.
Our economic engine certainly needs this overhaul; unless the saying that the sector is the engine of the economy is just rhetoric. Is it, Mr Policymaker? Folks, the contribution of manufacturing to GDP, reveal that the sector’s value has been waning over the years.
Its share of GDP has now declined to about 12 percent from levels as high as 23 percent in the 1980s.
The sector’s contribution to exports is also hardly noticeable, as mining revenue takes the lion’s share, with commodities such as gold, nickel, chromium ores and concentrates, ferro-chromium and platinum dominating on export receipts.
The simple message to the powers that be is: please take care of the engine.
While capacity utilisation has increased for the first time in years, last year; that may not call for quick celebration yet as the sustainability of that increase is yet to be understood. Against the above background, the expectation is for government to show more commitment towards sustainable industrialisation.
One might argue that the government has been implementing various measures such as Statutory Instrument 64 of 2016 and other protective instruments, export incentives, special economic zones inter alia.
But a closer look at these measures will show that some of them either need to work within the framework of a long term industrial policy or really do not confront the fundamental challenges being faced by manufacturers.
Take the issue of the export incentive programme, for instance — do you think it is the best solution for the ailing industry?
How do you reconcile it with this statement by the immediate past president of the Confederation of Zimbabwe Industries: “The governor has given us massive incentives but we can’t reach that incentive because our costs are so high.”
Wouldn’t it be better to have an incentive programme that addresses costs first, so that manufacturers are then able to export products that are competitive?
You see, all this points to the need for a policy that houses all the instruments of industrialisation, after concrete and deep consultations with the captains of industry. Whither industrial policy, folks? You see, it is now six months since the expiry of the five-year Industrialisation Development Policy and no successor policy has been launched yet.
This leaves industry on auto-pilot, or with ad hoc measures being implemented to guide the direction of the industry.
For months now, the jury has been out, carrying out consultations and telling us that the policy is being crafted; but when is it going to be launched so that it can start guiding resource allocation?
In the absence of an industrial policy, how do key policies such as the National Budget and Monetary Policy come up with strategies to support the manufacturing sector? What informs such strategies? Right now, Government is busy preparing the Mid-term Fiscal Policy Review. Does it know the imperatives necessary to sustain and promote growth in the manufacturing sector or what priorities sectors to focus on?
Or they will just shoot in the dark? Piecemeal measures cannot fix this big engine.
What is required is a comprehensive industrial policy with dynamic instruments that can lift manufacturing firms to the zenith of their potential and promote more value addition.
You see, one of the primary challenges facing industrial policymakers in Zimbabwe is the constant bombardment of economic advice which simply replicates past development failures.
Why is it that the country’s industrial policies have all been posting failures? Can more wrongs make a right?
It is hoped that the new industrial policy will be different from the previous ones, as we hear that a consultant has been roped in to help craft it.
The indication so far shows is that we might be having a hard industrial policy, which is normally a cocktail of instruments such as tariffs, tax breaks for foreign investors, subsidies to specific sectors and domestic content requirements.
Elements of a soft industrial policy are also being roped in, with the launch of special economic zones, rehabilitation of main roads such as the Harare-Beitbridge Highway. However, there should be a more aggressive approach towards a softer industrial policy.
For instance, instead of just anchoring the policy on tariffs, more focus can be placed on programs that build systems, create networks, develop institutions and align strategic priorities, as well as unveil trade credit.
Folks, we need government to move with speed and expedite the launch of the industrial policy.
Such a policy should also seek to promote inclusive growth, increased foreign investment, sustainable development, while paying attention to avoiding mistakes from the past. We need to make the engine work again.