The ‘secret weapon’ to agro-industrialisation

The ‘secret weapon’ to agro-industrialisation

Financial Gazette

6/3/2020

Mandivamba Rukuni

THE 2019/20 season is most certainly going to contribute to further slowdown in Zim­babwe’s economic recovery agenda. It is now crucial that we have re-think both the food security and the re-industrialisation strategies in the long term.

Before I go deeper into that though let us update on the season. The Crop and Livestock Weekly Report released by the Ministry of Lands Agriculture, Water and Rural Resettlement or February 7, 2020 saw some improvement in the quality of the season. Crop production statistics however, now confirm that this season is a poorer season as compared to the last one of 2018/19 Although these estimates are from February, ex­perts point out that there is limited scope of fur­ther plantings this season as planting of all crop was tailing off in most provinces.

Our main staple — maize — is estimated to drop in area planted by a whopping 37 percent A total of about 1 025 000 ha has been planted to maize this season compared to about 1 624 000ha planted 2018/19 season. There however is an increase in areas planted to traditional crop (sorghum/mapfunde), pearl millet (mhunga) anc finger millet (rukweza/rapoko), with about 390 000ha compared to about 381 000 last season. Our main industrial crops all dropped in area Tobacco (-22 percent), Cotton (-15 percent) Groundnuts (-26 percent) and Soya (-50 per cent)! The said ministry is carrying out the national crop and livestock yield assessment.

By end of March we will have a more accurate picture of the expected yields from the planted hectarage as well as livestock on hand.

When it comes to the future, I would say Zimbabwe’s agriculture has still got the potential to drive the economy. All things being equal, Zimbabwe has the scientific capability to adapt our agriculture to climate change — if we can just be more focussed and strategic. There are ample examples of countries such as Israel, who still have a vibrant agriculture driving a powerful industrial economy — in spite of practically being a desert! Rebuilding Zimbabwe’s agriculture’s competitiveness is however directly related to crafting the industrialisation strategy. This takes us to the agro-industry value chains and their competitiveness. In rethinking re-industrialisa­tion of Zimbabwe the question is how to spear­head the sequential creation of mass markets to support mass production.

The sequencing now has to be much smarter than the colonial model inherited in 1980 whose narrow and dual-economy approach whose structural faults led to inevitable “middle income trap”.

Global experience, especially from the suc­cessful Asian Tigers, shows that the main issue is in sequencing the industrialisation of the econo­my. .Sequential creation of capacities for “mass production”, “mass manufacture”, and “mass consumption” — all within short distances — turning small towns like Mutare, Masvingo, Chinhoyi, Zvishavane etc. as well as rural growth points such as Nyika, Murambinda, Murewa, Hauna etc into proto and light-manufacturing towns. We have to think well beyond reviving yesteryear products and figure out how to innovatively re-position value-chains along the most successful pathway to industrialisation — start­ing with labour intensive proto-industries, then labour intensive mass light manufacturing before we can expect a stable heavy industrial sector.

The role of the state is crucial in this agenda because in successful industrial countries, the market is a public good, and is developed at each stage through correct government-led bottom-up industrial policies. We should not be fooled by the rhetoric that private sector and foreign invest­ment are the key re-industrialise an economy.

I would say the same goes for state-owned enterprises (SOEs). The Asian Tigers once again succeeded in “commercialising” rather than “pri­vatising” their SOEs. The real solution is arrest­ing corruption and inefficiency rather that selling state assets to a few individuals. Commercialise, don’t privatise, I would say.

The secret recipe therefore is in this three-stage process of sequential creation of mass markets to support mass production. Econom­ic development cannot be achieved by simply adopting a market system. The state with assis­tance from the business sector needs to identify the correct sequence to create markets for do­mestic firms. Incorrect market-reform policies in the late 1980s and early 1990s led to disasters and de-industrialisation of Zimbabwe. The colo­nial economy adopted in 1980 had taken a du­al-economy approach following the three stages for only a small segment of society and economy.

Consequently, the economy was headed for Middle Income Trap (MIT) due to small dual do­mestic market. We need to correct this so that we include thousands of farmers by going deep ru­ral, investing in aggregation and agro-logistical capabilities to supply factories and supermarkets.

Each stage of industrialisation creates mass demand for next stage. Just like all African countries, Zimbabwe has to escape the Low Income Trap (LIT) and when it attains middle income status again, has to escape the Middle Income Trap (MIT) on its way to High Income Status. Many countries have attempted to jump these stages and they hit the LIT or MIT be­cause premature heavy industrialisation without foundation of growing domestic market leads to economic stagnation, rising unemployment, worsening inequality and urbanisation with no jobs. As these evils worsen, society becomes po­larised, worsening economic and political unrest.

Although poor economic governance and corruption worsen economic prospects, it is the structural faults of colonial dual economies that, if not corrected by appropriately phased indus­trialisation policies, eventually lead to stagnation and deindustrialisation due to narrow domestic markets which are not mass enough to synergise a vibrant manufacturing sector.

The three-stage process has been illuminated by Japan, then employed by South Korea, Chi­na, India and today Vietnam. Adapting these ap­proaches to African circumstances, Zimbabwe will be on unstoppable rail-road to rapid and sustainable industrial upgrading along both do­mestic and global value chain of manufactured goods.

In future articles I will take Zimbabwe agro-industrial value chains and explore this 3 stage industrial strategy.

TABLE l: AREA (HA) PLANTED TO MAJOR CROPS AS OF 7 FEBRUARY 2020

Source: The Crop and Livestock Weekly Report released by the Ministry of Lands, Agriculture, Water and Rural Resettlement on 07 February 2020