via Sadc industrial initiative: In need of a global vision? – NewsDay Zimbabwe April 22, 2015
ZIMBABWE will be hosting an extraordinary heads of State and government Sadc summit end of April 2015.
Painona with Tapiwa Nyandoro
On agenda will be the industrialisation of the Sadc region. This follows a recent meeting on industrialisation hosted by an inter-governmental committee of experts.
As has been often the unfortunate case with Zimbabwe, evidence being the collapsed economy, the danger lies in the “experts” who “obligingly” give some of the governments what they want to hear, and not the truth.
Over-reliance on “experts”, to avoid accountability, has been the major reason for Zimbabwe’s economic undoing.
In contrast, China has charted its own indigenous strategies and these are remarkable for their action bias, their simplicity and their global thrust.
For example, China’s huge population of poor people, 30 years ago then conventionally thought of as a disadvantage, was turned into an opportunity to sell cheap labour and grow demand for itself and the rest of the world at the same time.
If the Sadc “experts” have studied the East Asian and Chinese miracles and understood them; their recommendations would likely ignite a new miracle, this time in Africa. Unfortunately, press reports after the meeting of these experts have been disappointing.
A toxic cocktail of strategies regionally focused and lacking a global vision will most likely be presented to Sadc’s 15 heads of State for endorsement. What could be behind this unfortunate position?
Terms of reference and/or objectives may need to be more specific and measurable such as:
How to grow foreign direct investment into the region by 20% or more per year over the next decade;
How to grow regional gross domestic product (GDP) annually by at least 10% annually over the period;
How to grow investment share in GDP growth by over 20% on year by year basis until it goes over 65%;
l How to install a common customs union in five years etc.
It has been noted, for example, that in 2014, South African exports to Zimbabwe reached R24,8 billion, while Zimbabwe shipped a paltry R2 billion to its southern neighbour.
The treatment proposed by Zimbabwean authorities and most probably by the experts, is erection of tariff barriers against South African imports and exhorting South African companies to set up mini manufacturing plants in Zimbabwe, and elsewhere in Sadc, to address the deficit.
Missing on the trade figures is Zimbabwe’s significant losses in human capital that has migrated to South Africa in search of jobs and the country’s significant gains in remittances that arise from the export of such labour and skills.
Crucially, also not being said is that the South African economy itself, although much larger than that of Zimbabwe or the rest of Sadc combined is, by global standards, in bad shape.
According to The Economist (March 21 2015), South African exports fall far short of imports and it finances (like its Sadc partners) its current account gaps by building up debts to foreigners.
Since these debts are in United States dollars it spells trouble for the region, as the dollar strengthens while commodity prices, affecting Sadc’s major exports, collapse.
Further more, for a South Africa that is expected to be the engine for Sadc’s economic growth, “its current account deficit is the widest of any big emerging market”.
Its government’s external debt is 40% of GDP, far above the 23% average of middle income countries.
An evidence-based industrial strategy, therefore, would seek to exploit Zimbabwe’s strength in producing high quality skills on a cost recovery plus basis for the region and the world at large.
Focus would shift to quality education, skills development and free movement of labour within the region, instead of Zimbabwe aspiring to manufacture goods like vehicle batteries and tyres that South Africa exports to Zimbabwe.
Focus too would shift on the region’s overall trade deficit with the rest of the world and China in particular.
In 1990, China produced less than 3% of global manufacturing output. Twenty-five years later, the figure has risen to nearly 25%.
According to The Economist (March 14 2015), China produces 60% of the world’s shoes, 70% of its mobile phones and 80% of its air conditioners, while its share of global exports was 43% in clothing, over 35% in electronics and over 20% in other merchandise.
Over the past 20 years the share of imported components in Chinese exports has fallen from 60% to around 35% today. China has forged supply chains that reach deep into the rest of South East Asia, making “Factory Asia” account for the production of nearly 50% of the world’s manufactured goods. Africa, for all the world cares, is not on the map.
The experts needed to have looked at the size of manufacturing firms over the years. These firms have been increasing in size to enhance economies of scale.
Between 1986 and 2010, the number of employees employed by the United States’ 100 biggest firms rose by 53%, while the equivalent figure in Britain is 43,5%. Sadc, therefore, if it is to increase its manufacturing output, needs a few big manufacturing companies to drive its exports and narrow its trade deficits.
The rest of Zimbabwe’s trade deficit with South Africa and other countries accounted for by food and energy imports, are self inflicted wounds of commission and omission.
South Africa too, has played its wicked part in decimating some Zimbabwean industries through tariff and other barriers.
Both South Africa and Zimbabwe should be net food and energy exporters. Regionally this would be more so if Angola (oil), Mozambique (gas) and Democratic Republic of Congo (hydro-electricity at Inga) are included.
Sasol’s technologies for GTL and CTL plants, if sufficiently deployed, would see Zimbabwe exporting hydro-carbon fuels, fertilizers and chemicals. Zimbabwe sits on huge high quality coal and iron ore reserves. Faced with the above narrated reality regional economic, customs, political and monetary integration should be the obvious starting point.
At the very least, African governments need to put business and commercial ties above political disputes and narrow, shallow “nationalism”.
South Africa is not the threat to Sadc manufacturing and vice-versa. South Africa incorporated is only a “seed bed”, which if well managed, could blossom to Sadc’s advantage.
Tapiwa Nyandoro can be contacted on firstname.lastname@example.org or email@example.com