Eco­nomic en­gine re­quires ur­gent over­haul

The Sunday Mail (Zimbabwe) - - ANALYSIS & OPINION - Cle­mence Machadu

HOWDY folks!

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.

Later folks!

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