Manufacturing drove the great leap of the Industrial Revolution

via Manufacturing drove the great leap of the Industrial Revolution. 21 September 2015 by Welshman Ncube

This week I am meant to write about our manufacturing industry, but how do I do that without some reference to the bizarre event of the week when our Head of State, Head of Government and Commander-in-Chief of the Defence Forces not just reads through a 30-minute speech he read a few weeks earlier, but does so without even a twitch of the skin realisation that there must be something wrong? This sort of reality surely would make Kenyan author Ngugi wa Thiong’o green with envy as a piece of satirical fiction to compete with some of his great satirical and fictional passages in works like The Devil on The Cross, The Wizard of the Crow and Petals of Blood. Our situation is tragic. Very tragic. Clearly the Commander-in-Chief cannot possibly be in charge.

Someone else is. But who? One capable of dishing out such collective humiliation of ministers from the southern region in the recent incomprehensible Cabinet musical chairs reshuffles being played right in front of an uncomprehending and bemused nation.

The humiliation of Obert Mpofu and Simon Khaya Moyo by being shunted to wholly meaningless ministries or non-ministries was perhaps “foretold” by the political demotion of Professor Jonathan Moyo to Higher and Tertiary Education. To put the icing on the cake, this week ends with the unceremonious sacking of former Sport, Arts and Culture minister Andrew Langa. We should be frightened. Look at the final outlook of the Cabinet and what it speaks to about the constitutional ideal of an equal citizenship.

But then this week I am meant to be writing about things more in the realm of production than political intrigue and the ideals of our Constitution. To the best of my knowledge, there is no country worth the cloth its flag is printed on that can survive without exporting manufactured goods. In fact, five of the most industrialised countries in the world — United States of America, China, Germany, Japan and United Kingdom — hinge their wealth and well-being on manufactured exports. Of course there are those countries who claim to be wealthy by exporting commodities – Saudi Arabia, Angola, Nigeria (oil); Botswana (diamonds), Ghana (gold) and Zimbabwe (tobacco), but such wealth is a fallacy because it is controlled by a few. In the 1970s, Zambia was “boasting” some of the most lucrative exports in copper, until the prices crashed and the country was left exposed without a manufacturing base.

I am not saying this like a grumpy middle-aged Presidential hopeful at the periphery of the political touchline, remonstrating aimlessly. I am aggrieved because people in the ruling party, Zanu PF, for several years have been lying that we do not have to worry about the dying manufacturing sector because diamonds, tobacco and platinum would “solve our poverty problems”.

Here we are. Still poor. Whole cities dying. Commodities are great, but because their prices are determined elsewhere, a country cannot solely base its developmental algorithm on them. Nations like Japan and Germany that manufacture cars for export define the ultimate price, thus they can moderate their wealth trajectory. Western Presidents like Barack Obama and Angela Merkel win (or lose) elections depending on how their manufacturing policies yield results.

That is why Obama always “sings” about bringing jobs back to America. He is aware that empty factories are breeding halls for civil discontent. For us in Bulawayo, Gweru and Masvingo, empty factories are shells for Pentecostal revivals!

It is, therefore, frightening to imagine that Zimbabwe, a country once bustling with the most sophisticated manufacturing infrastructure in Africa, now operates on a miserly 30% capacity utilisation. Statistically this means only 30 out of
100 factories are operational. Alternatively, if all factories were working, they would be utilising a mere 30% of their capacity.

The results are devastating: Almost 80% of employable adults are now in the streets while 60% of consumer products you see on supermarket shelves are imported. The Confederation of Zimbabwe Industries (CZI) carries out surveys every year, and in 2014, they observed that Zimbabweans are consuming less because of declining disposable incomes. Coupled with working capital constraints, cheap imports, old machinery, bad economic policies and infrastructure damage, our manufacturing sector is destined to die, if not already dead.

It was not always like this. Once upon a time we were top of the class in manufacturing with incentives that pushed the sector to innovate and substitute imports.

There was a time when car assembly plants, cigarette companies and iron foundries — including Risco and later
Zisco — took on the world. We had the best beef exports, high quality sugar and outstanding chrome products. Not just that, economies of large-scale production meant volumes of clothing products from large Bulawayo textile factories resulted in competitive prices. I remember as a young man attending high school in Luveve and Mzilikazi, hordes of men riding their “Perry” bicycles to and from work every day on 24-hour shifts; billows of smoke spewed out of chimneys into the blue skies.

What then happened to the large manufacturing companies quoted on the stock exchange and numerous entities churning our beverages, metal products, chemicals and petroleum products, textiles and furniture? Did we not even queue anxiously for locally-assembled cars? Were there no vibrant printing and packaging companies competing on the world stage? A usual, I will attempt to identify the problem and proffer a sustainable solution like any other objective leader of a government in waiting.

After 35 years of clueless, self-serving, corrupt Zanu PF governance, we Zimbabweans are not surprised by the state of our manufacturing sector. Industry survives when guided by a genuinely democratic participatory government. Dictatorship and authoritarian rule attracts praise singers and cronies that cannot challenge the Executive when mistakes are committed. Cabinet becomes a rubber stamp; this is why we are inundated with unending “economic blueprints” that bring nothing to the shop floor. There is no full capacity utilisation where a nation is subjected to oppression, because innovation is stifled and markets are poisoned with centralism.

If you track our manufacturing indices and GDP, they improved marginally during the 2009-2012 Government of National Unity (GNU) because we shared ideas.

After 2013, we slipped back into de facto one-man band mode that conjures up survivalist policies only to attract populist favour and retain political power. Domestic investment is important since it comes with fewer obligations for foreign remittances, but high-value capital is generally driven with offshore funds and international capital easily put off by bad governance.

That brings me to my second point: Manufacturing requires constantly updating and upscaling of not just technology, but also as I pointed out last week, FDI-driven infrastructure.

“According to the Reserve Bank of Zimbabwe, average FDI for Zimbabwe for 2002 to 2012 was US$88 million compared to US$800 million for Zambia, US$586 million for Mozambique and US$486 million for Botswana.”

President Robert Mugabe spent the greater part of 2000 and beyond telling off international financiers and boasting of his good relations with China. Of course, the East does pour in billions of dollars into Africa in infrastructure, but the Chinese have a bigger appetite for extractive investment.

They only invest in stable countries with sensible debt levels. This is important to them because they must be reassured of monies lent being paid back. Mugabe’s Zimbabwe owes billions, so we cannot qualify for billions more needed to rebuild our crumbling infrastructure. Our industries cannot grow without water, electricity, good roads and a functional railway system.

If I were President of the country, I would simply select a slim and competence-driven Cabinet of men and women who are capable of understanding successful indutrialisation models regionally and globally so we can adapt these to our situation.
How do South Africa, Kenya and Tanzania manage to keep their factories working? They have independent central banks that work closely with the private sector to encourage consumption, savings and investments using local currency to maintain a high appetite for locally produced goods. Persistent interference and price controls destroy productive capacity.

Notice that it is only now — after almost 20 years — that the Zanu PF government is waking up to the reality that stringent and bureaucratic company laws impact negatively on industry.

State-inspired bungling destroyed Ziscosteel — coupled with corruption. It is impossible to attract partners where there is corruption, uncertainty and anxiety.

Innovation is an important aspect of indutrialisation. When a nation is oppressed and depressed, our minds cannot function freely while local investors hold back resources they would otherwise spend freely on research and development. My government would offer tax concessions and credits for innovation rather than using corporate tax to sustain crony ministries.

Sometimes it is good for government even to exempt large-scale machinery and raw materials from duty in order to kickstart industrialisation. Policy “exemptions” can also be extended to labour and institutions of higher learning, because human capital must be allowed to develop and move freely.

I know that Mugabe’s government has been talking a lot about export processing zones (EPZs). Nevertheless, these are not enough if, as CZI observes, “access to trade finance, access to imported inputs at competitive prices, identifying potential markets and buyers, procedures at foreign borders and technical requirements and standards abroad” are not attended to. In simple terms, merely posturing around the EPZ gospel is insufficient without support mechanisms.

Let us remember that modern civilisation was driven by the Industrial Revolution which is nothing more than intensive and sustained manufacturing. A nation cannot be modern without manufacturing.

Let me conclude with a caution: Industrialisation comes with a cost to both the climatic and social environment. It is not the only answer to Zimbabwe’s poverty challenges. Industrialised countries suffer from pollution, waste, crowded cities, crime, stress and a whole lot of social ills associated with a ballooning middle class. Free markets have to be approached carefully because the gap between the rich and the poor widens if a sustainable social safety system is not in place.

However, I would rather be President of a country grappling with the problems of over-industrialisation and full employment (China), than one with empty factory shells owned 51% by indigenous peoples while operating at 30% with the rest being vendors!

●Welshman Ncube is MDC president