SA riots wake-up call for industry
VIOLENT demonstrations that unfolded in South Africa over the last two weeks, which resulted in the death of more than 200 people while businesses were torched, looted, attacked and properties destroyed, amplify calls and need for expedited development and strengthening of domestic value chains.
Zimbabwean industries get majority of their key raw materials used in manufacturing and production from South Africa, but also Europe, The United Arab Emirates, China, Zambia, Kenya, Turkey and the Middle East.
Normalcy may have returned to most of South Africa, Zimbabwe’s single largest trading partner, but the events of the last fortnight left the country with so much to ponder in terms of the state of its value chains, especially relating to production of key raw materials.
Trade between countries is good, but in essence it must only be to the extent of covering each other’s needs or deficiencies in order to promote and advance economic growth and development in individual jurisdictions.
While trade channels have reopened after relative calm returned to South Africa that, however, is still counting the extensive cost of the damage to domestic businesses and its economy, economic observers say the impact on Zimbabwe will linger for a while.
Admittedly, trade is a global phenomenon, but the interdependence should not cripple other markets when the other part sneezes.
Instead, trade should be anchored in mutual exchanges that support sustainable development of industries and economies.
The reality of the need to develop strong domestic value chains for raw materials and other basic goods has also been exposed by disruptions to trade and global supply chains necessitated by the outbreak of the Covid-19 pandemic, which forced economies across the world to shut down in order to contain the virus.
The International Monetary Fund (IMF) estimated that Zimbabwe may have been forced into a 4 percent contraction last year due to Covid-19, after drought and Cyclone Idai induced a 6 percent recession in 2019.
The long shadow of Covid-19 remains regardless, Finance and Economic Development Professor Minister Mthuli believes that Zimbabwe will still be able to realise its growth target of 7,4 percent this year.
Minister Ncube cited the bumper harvest the country achieved this year, following a good rainy season, anticipated commodity super-cycle, investments in power and booming construction among the reasons. Zimbabwe will do more good to shield its fledgling recovery from exogenous shocks after nearly two decades of economic down spiral, only punctuated by brief intermittent growth; it developed its value chains, for both raw materials and finished products.
The good thing is the country already has a well-crafted development path, the Zimbabwe National Industrialisation Development Policy, which also proposes development of a local content policy.
The Zimbabwe National Industrial Development Policy (ZNIDP) (2019-2023) is a blueprint for industrialisation which derives from Vision 2030, and is tailored to assist the economy to achieve the above objectives.
The policy is premised upon the deliberate decision taken by the Government to open the country for business, modernise, industrialise and promote investment, with the ultimate goal attaining broad based economic empowerment, inclusive economic growth and employment creation.
Notably, Zimbabwe already possesses the expertise and history of what it takes to build vibrant productive sectors, as one of sub-Sahara’s (outside South Africa) most industrialised economy post independence from Britain in 1980.
Zimbabwe’s captains of industries are well aware of the need to develop domestic supply capacity, which the Confederation of Zimbabwe Industries (CZI) highlighted in its trade dimensions of Covid-19 on Zimbabwe Industry, released in May last year.
“The economy needs to achieve some measure of self-reliance in view of Covid19 and its restrictions to trade and movement. Moreover, raw materials that can be produced locally should be produced in the country to improve competitiveness of local products on the international market,” CZI said.
CZI said this calls for aggressive resuscitation of local value chains and heightened value addition and beneficiation initiatives. “These initiatives will ensure that jobs are not exported and value added products will fetch more value on the export market,” CZI noted.
Worryingly, exporters also highlighted that inability to access raw material from source countries affected their ability to sustain export demand, leading to significant loss of export revenue and potential loss of market share for exports.
For instance, the report produced by CZI highlighted that 80 percent of Zimbabwean firms in the agriculture and horticultural sectors relied on South Africa for 73 percent of the raw materials they require.
For the horticultural industry, one of the country’s major export earners, CZI said imported raw materials included agro chemicals, stock feed, breeder parents, incubators, parts, vaccines, seeds and plant material. Raw materials imported by the drink, tobacco and beverages sector span across PET packaging, beverage bases, maize and wrapping material, with South Africa being the exclusive source market.
For the chemical and the petroleum industry, 73 percent of the raw materials are imported, including titanium dioxide, chemicals, group two base oils, soap noodles, packaging tubes and bottles, potash and agro-chemicals.
The foot and clothing sector imports 63 percent of its raw materials covering polymers and plastic based, dye stuffs and auxiliaries chemicals are sourced from Turkey, polyester, Cloth material, buttons, elastic, zips, thread, wool, PVC, polypropylene and HDPE (High Density Polyethylene).