How to ensure Zim re-industrialisation

via How to ensure Zim re-industrialisation – The Zimbabwe Independent August 29, 2014

When President Mugabe was vested with the chairmanship of Sadc 12 days ago, he very correctly addressed the need for Sadc to ensure its economic development and growth in such ways that benefit the economies of all the countries that constitute the Sadc.

Amongst the issues that he identified was that Sadc should be strongly pursuant to industrialisation, thereby achieving job creation, minimising imports, and maximising exports.

He said that the diverse countries in Sadc should reciprocally aid and assist each other in the pursuit and attainment of substantive industrialisation.

He also validly contended that a key component of the much need industrialisation is value-addition to the countries’ primary products, be they agricultural, mineral, or otherwise, instead of the greater volume of such products being exported without any value-enhancement.

In pursuing these well-founded, and substantially well-advised, representations to the Sadc delegates, he placed especial emphasis on the need for the industrialisation collaboration being primarily pursued by five of the most southerly Sadc States, which are South Africa, Botswana, Zimbabwe, Zambia, and Malawi, and especially that South Africa should be aiding the industrialisation of Zimbabwe.

With respectful contradiction, surely each of the countries pursuant of industrialisation development and growth should foremost be focused upon addressing their own needs, instead of relying upon those of their neighbours (albeit that doing so does not preclude aiding and assisting their fellow-Sadc countries, as long as so doing they do not create untenable competition against their own industries).

However, in addressing the needs for regional industrialisation growth, to all intents and purposes he only focused upon each country assisting others, and especially on South Africa (as the region’s most industrially advanced country) being supportive and facilitative of extensive industrialisation of Sadc, in general, and particularly so of Zimbabwe.

In so doing he failed to address any of the principles, policies and actions which need effective pursuit and implementation by those countries wishing to achieve industrialisation growth in general, and value-addition in particular.

Amongst many issues that need to be focused on and which need to be addressed is that substantive industrialisation requires considerable investment. Even though some of the Sadc countries, and Zimbabwe in particular, have a fairly great number of vacant industrial properties, substantial funding is needed for the renovation and upgrading of those properties.

Of even greater need are the generally considerable monies to acquire state-of-the-art plant, machinery and equipment, and to fund an adequacy of stockholdings of manufacturing inputs, finished products, workshop spares, and the like.

Many also require significant funding necessary for the viability of operations of value-addition industrial enterprises (although the compensating feature is that if such enterprises are properly and fully-capitalised, and effectively managed and controlled, very significant profits can be realised, more than justifying the considerable funding requirements from the investors, pending progressive accumulation of profits).

However, Mugabe, did not make any reference to investment not being forthcoming to any meaningful extent. Very few investors, be they domestic or foreign, are willing to invest in an environment which does not guarantee that their investment will be secure.

Whilst, to a limited extent, investors are comfortable with the degree of investment security in most of the countries of Sadc (and especially in South Africa, Botswana, Zambia, Swaziland, Lesotho, Malawi, and Mozambique), almost all potential investors, domestic and foreign, have extremely great reservations as to investment security in Zimbabwe. Although there are circumstances which preclude investor confidence in Zimbabwe, there are a few key ones, being:

Zimbabwe’s indigenous policies and indigenisation laws. Although many investors are supportive of the principles of indigenisation, that support is not to the extent of providing 100% of the venture’s capital, transfer to the venture of technologies, and usage of patents and trademarks, at best being reduced to a 49% ownership status, without any awareness as to if and when the 51% of the investment will be refunded to the investor, and frequently also being barred from selection of the indigenous partner or partners, such being determined upon by government, often including entities such as the National Youth Development Fund. These indigenisation laws and authoritarian policies are so abhorrent to (potential) investors that they are not prepared to invest in Zimbabwe, but instead look for investments elsewhere (including Botswana, Namibia, Zambia, Mozambique and Mauritius).

The pronounced inadequacy of utility service delivery in Zimbabwe. Very few investment projects can succeed unless they have assured, reliable availability of electricity and water supply, refuse removal, rail transport services, telecommunications and internet services, and the like.

Absence of a stable, constructive, political environment, wholly compliant with the national constitution;

Excessive direct, and indirect taxation, almost wholly devoid of meaningful business operational incentives;

Ill-considered legislation in general, and especially including labour legislation and laws upon the exports of diverse primary products (such as chrome), the State’s motivation being to stimulate the establishment of processing, value-addition,
operations, but that motivation rarely, or inadequately, succeeds, for many of the primary products exceed current, and probably future market demand, with consequential significant containment of price; Somewhat excessively business and investment oppressive exchange controls;

Failure by government to facilitate, and incentivise, exports;

A grievous absence of protection of local production from competition by imports which are massively, and excessively, sponsored and subsidised by the governments of the countries from which the imports emanate, and

Considerable restrictions and constraints upon the grant of rights of permanent residence to persons that Zimbabwean industries wish to employ permanently, being persons with extensive and diverse industrial skills which would greatly enhance the industrial sectors’ technological resources, and hence could boost production of quality goods which have value-added to Zimbabwe’s very considerable array of high calibre primary products.