The architect of de-industrialisation

via The architect of de-industrialisation – The Zimbabwe Independent May 1, 2015

SADC leaders met in Harare this week to discuss a regional industrialisation strategy and roadmap at a time when Zimbabwe is undergoing massive de-industrialisation, amid company closures and job losses due to economic failure.

The economy, decimated by poor leadership, bad policies and extractive institutions, is going through structural regression, with rapid de-industrialisation, unemployment and poverty.

Between 2011 and 2015, more than 4 610 companies closed, throwing over 55 000 workers into the streets. By now and in reality the figures should be much higher than that.

Ironically, President Robert Mugabe, who presided over the damage of the country’s relatively strong industrial base and in the process devastation of the economy, chaired the meeting. An architect of alarming de-industrialisation not just chairing such a meeting but also pontificating and championing industrialisation!

Besides that, this is a 91-year-old and frail president showing signs of dotage and health complications, who despite having studied for seven university degrees — including economics — has inexplicably proved over the past 35 years to be economically illiterate as shown by the current state of an economy shattered by extractive politics as well as associated policies and institutions.

According to the Confederation of Zimbabwe Industries 2014 manufacturing survey report — which provides compelling analysis of the business operating environment focusing on manufacturing — the sector is undergoing serious de-industrialisation which has reached “catastrophic levels, with dire consequences to the state of the economy”.

The survey warned arresting the problem will not be an easy task. Both private and public sectors must take action to tackle the spectre of economic decline, it said, indicating in 2014 average capacity utilisation continued to plunge, shedding 3,3% points to 36,3%. Quite telling were the prolonged effects of power cuts, heavy cost structures, liquidity crunch, low aggregate demand and many other problems buffeting the economy.

Mugabe in 1980 inherited the most industrialised country in sub-Saharan African outside South Africa, the regional economic giant. Zimbabwe had the most developed industrial sector in Africa south of the Sahara apart from South Africa because of the modest development of mining and agriculture. It also had a diversified economy.

By contrast, countries like Zambia and Ghana, for instance, depended on one primary product, copper and cocoa respectively.

That was the situation in most countries in Africa at independence. Botswana did not even have an economy to talk about, yet it’s now an African success story together with Mauritius.

Instead of coming up with a coherent economic and industrialisation strategy after taking over the siege economy in 1980, Mugabe embraced command and populist policies which would eventually prove disastrous.

By the end of the first decade of independence, mismanagement and corruption had set in. The advent of the liberalisation era after 1991 brought its own challenges. When the IMF/World Bank-inspired reforms did not yield desired results due to a combination of factors, the situation could only get worse.

A succession of poor policy choices and decisions, including huge unbudgeted for war veterans’ payouts, the DRC war and heightened campaign for land reform during the late 1990s, triggered a precipitous economic decline.

This was accelerated by chaotic land invasions after 2000, which dismantled the economic base, agriculture and downstream industries. Persistent threats of company seizures worsened the crisis.

Since that time de-industrialisation took root as companies relocated, downsized and closed down. The suicidal indigenisation policy exacerbated the situation.
In short, Mugabe presided over Zimbabwe’s de-industrialisation.

So how can he seriously be a champion of industrialisation or re-industrialisation with that sort of record?

Industrialisation is a political project with an economic strategy. It is about making correct policy choices, creating the necessary institutions and incentives, as well as summoning the political will to seriously provide leadership and direction.

Mugabe is simply unable or unwilling to provide that.

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