Reviving Zim industry
http://www.theindependent.co.zw/
November 9, 2012 in Opinion
It is widely known that one of the key areas of Zimbabwe’s embattled economy
that has become very weakened is the manufacturing sector.
Report by Eric Bloch
The decimation of industry has occurred nationwide, but has had a marked
impact upon the industrial sector of Bulawayo, which for long has been the
hub of Zimbabwean industry.
Bulawayo had far more manufacturing enterprises than other cities or towns.
Industry was not the sole contributor to Bulawayo’s economy, for the city
also benefitted extensively from tourism, the distributive sector (wholesale
and retail) and service provision. However, proportionately, other cities
and towns have suffered similar industial decimation since 2008.
Of the many causes of Zimbabwe’s industrial decline, foremost was the
hyperinflation that peaked in 2008, when prices were rising by an average of
98% per day.
It is that hyperinflation which denuded almost every manufacturing
enterprise of its essential working capital — vital to fund stock-holdings
and to fund operational, marketing, distribution, and administrative costs.
By 2009, every industrial business required trillions of dollars to maintain
operations effectively. However, access to working capital was virtually
impossible. Banks and other financial institutions had minimal resources to
fund the borrowings necessary for industry to re-establish its working
capital base.
What miniscule funding the banks could make available was for untenably
short periods, wholly unaligned to the industrial needs, and only made
available at substantially high rates of interest and allied charges.
Alternative sources of accessing working capital, being new investment into
the enterprises was rarely available.
Because of hyperinflation, domestic investors had been stripped of
investment capital, while foreign investors were deterred from investing in
Zimbabwe by the draconian, ill-conceived and structured laws of
indigenisation and economic empowerment, as well as by the overall political
and economic instability which prevailing.
The gross insufficiency of capital further impacted negatively on Zimbabwean
industry by precluding industrialists from being able to replace plant,
machinery and equipment timeously.
This failure to operate the latest, state-of-the-art technologies, adversely
affected local industry’s ability to be market-competitive against products
manufactured externally. The antiquated machinery of most Zimbabwean
industries negatively affected productivity and quality.
Another debilitating constraint on manufacturing has been, and continues to
be, the frequent non-availability, or erratic availability of essential
utilities, as electricity and water, compounded by the exceptionally high
costs of such utilities.
Not only are the advertised load-shedding schedules not adhered to, but in
addition, there are inumerably frequent supply interruptions. These cause
loss of production, and in some instances, irreparable damage to
manufacturing inputs and especially in the pharmaceutical, food processing,
and textile industries.
Another impediment to the viability of manufacturing is unfair competition
from foreign manufacturers who are able to supply like products.
On the one hand, those competitors enjoy the benefits of economies of scale,
being able (with state-of-the-art technologies) to produce substantial
quantities of products than Zimbabwean industrialists.
In addition, some countries are providing subsidies to their manufacturers
of very greater substance (generally considerably greater than prescribed by
the World Trade Organisation (WTO)), resulting in the selling prices being
immensely reduced.
Despite endless representations to Zimbabwe’s government, import tariffs are
not imposed at levels which would eliminate that unfair and unjust
competitive advantage. Concurrently, excessively great import duties are
imposed upon many essential imports of the Zimbabwean manufacturers,
including many material inputs and consumable spares, further minimising the
ability of manufacturers in Zimbabwe to be price-competitive.
Aligned to such negative and debilitating fiscal policies is absence of
export incentives, albeit such incentives should be consistent with the
provisions of Gatt. It is long overdue and necessary that Minister of
Finance and parliament ensure the provision of equitable and effective
export incentives and the re-creation of export processing zones, as well as
constructive revision of import policies and tariffs.
Industrial viability is also severely prejudiced by the never-ending delays
in clearing imports at Zimbabwe’s border posts. They are neither adequately
structured or staffed to ensure timeous clearance of imports. All too often
goods being held up for many days, and sometimes weeks, before being
cleared. This impedes industrial productivity and exacerbates cash flow
constraints.
It is also all too frequent that customs officers of the Zimbabwe Revenue
Authority (Zimra) deliberately create impediments and delays to customs
clearance in order to motivate the offering of bribes, although fortunately
this does not pertain to all Zimra personnel.
Some in government have recognised certain of the restraints confronting
industry and have taken some limited actions to address them, such as the
creation of the Distressed Industries and Marginalised Areas Fund, although
the funding thereof is grossly inadequate. The selection of recipients of
funding is not transparent and the loan conditions are unduly burdensome.
If government is genuinely intent on a substantive recovery of the economy,
and of achieving ongoing real growth, with the concomitant reduction of
nationwide poverty, creation of employment and meaningful national
well-being, all of these hindrances to the success of the manufacturing
sector must be urgently and constructively addressed.