‘Zim needs economic diversification’

Source: ‘Zim needs economic diversification’ – DailyNews Live

BUSINESS WRITER      30 October 2017

HARARE – The Zimbabwe National Chamber of Commerce (ZNCC) says the country
must diversify into other sectors of the economy in order to address the
present economic crunch biting hard on the nation.

“There must be a shift from today’s silo-style focus on agriculture,
mining or industry, to a value chain, value addition model that transcends
such sector boundaries,” ZNCC chief executive officer Chris Mugaga said.

Zimbabwe’s economy has failed to grow sustainably in the past five years
due to the country’s over reliance on agriculture and mining.

The slowdown in commodity prices in the past two years and the drought
that has hit southern African country last year showed the need for
Zimbabwe to diversify from commodities into processing of primary goods.

Mugaga, who was addressing delegates at the Buy Zimbabwe Retailers and
Suppliers conference in Harare on Friday, said the country was heading in
the reverse direction following the massive de-industrialisation trend.

This comes as calls for African countries to diversify their economies are
getting louder. For the past two decades, Africa’s performance on
diversification has been poor due to lack of a strong political will.

“Whether you have a policy in place or not, whether you have
infrastructure or not, if you don’t have a strong political will to drive
it, then the impact will be limited. In Africa, governance is very weak,”
Ecobank head of economic research Gaimin Nonyane said.

In Mauritius, Africa’s shining example of diversification, such a
political will has worked well.

Seeking to attract foreign investors, the Mauritian government sought to
identify incentives to entice such investors into other labour-intensive
industries.

The island nation removed taxes on profits, dividends, capital gains,
exports and raw material imports, drawing a flood of investors from China,
Hong Kong, Singapore, Taiwan and Europe.

“Once we allowed foreign investors to tap our labour force and produce
their output for export, we gave them all the incentives,” said Kee Chong
Li Kwong Wing, chairperson of SBM Holdings, the second-largest company on
the Stock Exchange of Mauritius.

“We have been able to create so many jobs for our labour that we are now
in short supply, and have to import labour.”

These policies have also altered the country’s export structure.

Until the late 1970s, sugar accounted for up to 98 percent of exports,
according to Wing; this is now down to just five percent. The export list
now includes tourism, textiles and textile-related products, financial
services, luxury goods and other services.

On the Horn of Africa, Ethiopia is making progress as it diversifies from
agricultural products into manufacturing and services, attracting some
Chinese companies to produce shoes for export.

This success is due in part to the stability that Ethiopia enjoys and the
political will that drives it.

What, however, remains for Ethiopia is the need to open up or liberalise
some of the sectors that can attract more investment.

For its part, Botswana is diversifying along the value chain. Rather than
exporting raw diamonds, Botswana has developed diamond polishing and
marketing hubs to keep added-value work.

In East Africa, Kenya stands out for major strides in financial services,
telecom, horticulture and tourism. The government established the
Horticultural Crop Development Agency, which has become a major
foreign-exchange earner.

“This is a direct policy targeted at a sector identified to have huge
potential,” says Razaq Ahmed, chief executive officer of CowryWise, a
Lagos-based fintech.

Finance minister Ignatius Chombo said it was critical for Africa to
diversify its exports through value addition to reduce vulnerability to
commodity price shocks.

He also emphasised the importance for the continent to invest in
infrastructure development, noting that the availability of infrastructure
lowers costs, creates jobs, and supports growth and socio-economic
development.

“Yet our region suffers from a critical infrastructure deficiency
particularly regarding access to electricity, transport, information and
communication technology, water and sanitation and irrigation,” he said.

“Rail infrastructure is generally poor and continues to deteriorate, air
transport services are expensive and inefficient, and access to ICT,
though improving, remains poor. The gap is real and needs to be addressed
for industrialisation and socio-economic development,” Chombo added.