Zimbabwe’s economic problems are well-documented, and need no repeating.
Broad strategies for their resolution have also been mooted, and there is general consensus that exports, import substitution and value addition or beneficiation of primary production are the key steps to be taken. Unfortunately, from there it appears that the process somehow falls apart, and what we see happening on the ground is people acting in basic survival mode, chasing whatever activity brings in the dollar.
This is more so when one considers that up to now, the thrust of government activity, and even the private sector is to see how the currently-existing formal set-up can be saved from collapse.
Credit facilities being chased and activities like the Buy Zimbabwe campaign are aimed at propping up the faltering large companies. Only token attention is given to the promotion of new industries, with facilities such as the famous Youth Funds and similar SME-targeted facilities being mere window-dressing attempts aimed at averting the glare of the militant Indigenisation, Youth and Economic Empowerment ministry.
While the area of exports can be addressed by the currently-existing large companies, import substitution and value addition/beneficiation can only be done by new enterprises, or by promoting small enterprises to enable them to produce at a large-enough scale.
The fact that certain goods or services are being imported implies that there is no local large firm producing them, or producing them at a competitive cost. The same applies to the export of raw materials or primary goods; there will be no capacity for local value addition.
Large, established organisations are generally highly unlikely to branch off into downstream or unrelated activities. This is more so when what they consider to be their primary activity is faltering. Expecting that they will address the issue of value addition or import substitution therefore borders on wishful thinking. The only entities that will address this will be new companies that come in to take up identified opportunities.
If the country is to seriously address the issues of import substitution and value addition, it stands to reason that it has to create an environment conducive to the establishment of such industries. More attention needs to be put towards encouraging enterprise formation, and encouraging the growth of small and medium-sized businesses that can actually deliver on the said objectives.
It was recently reported that government was looking at declaring Bulawayo a Special Economic Zone, a status that would come with concessions and incentives for businesses operating there.
While Bulawayo undoubtedly has special needs emanating from historical disadvantages, current circumstances would dictate that the whole country become a Special Economic Zone. Incentives need to be provided for greater enterprise formation not only to solve the issues above, but also to address the out-of-control unemployment problem.
Not only should we target enterprise formation, but relevant enterprise formation. Entities that use local resources and expertise should have preference. Those that go on to export should have added advantage. We can also encourage the return of Zimbabweans within the diaspora under such an initiative.
One easy way to make a direct hit on the import substitution problem is to scrutinise the list of our imports, and assess which ones we can address readily. Already, the Green Fuel ethanol project, despite the hurdles it has encountered, is one project which directly addresses our high fuel import bill. While it may be more difficult to tackle other large line items such as car and technology imports, there are a number of items which we can strike off the import bill, particularly when it comes to raw material imports and imports of groceries.
By coming up with such an analysis, we can even start to market specific opportunities for investment to locals and our diaspora, having identified a ready market. This analysis can also help us in ascertaining the cost to the economy of things like the erratic power supply situation, which results in the use of generators, gas and fuels to generate power and to cook. Setting up industries for such areas will not only cut the import bill, but will generate much-needed employment, which in turn results in a bigger market for the country.
Setting up structured linkages programmes is another way of addressing our economic problems. The issue of linkages is one that has been discussed time and again, and although small networks have been established here and there, we are yet to see a large-scale implementation of this idea. Linkages save the economy costs by removing the need for huge marketing costs for the manufacturer or producer, and enabling them to focus solely on the production process. This saves the economy through specialisation and process streamlining.
Linkages are of particular importance to the small and medium enterprise sector, as they allow small production quantities to be aggregated in order to meet large local or foreign orders. Technical assistance can also be more effectively provided within such a large network set-up. Without coordination of these small entities, however, the structure soon collapses and the SMEs revert to counter-productive individual efforts, which are costly and far less effective.
Previously, large scale farmers and companies within the horticultural sector provided such aggregation services. Most of these fell by the wayside during the hyperinflationary era and the period of restructuring of the agricultural sector. The result has been a limitation of our markets to the Zimbabwean context as well as wastage in some cases, as perishable agricultural produce that is not sold immediately will sometimes rot when it could be canned, dried or otherwise preserved and sold at even higher prices.
Mining is another such area, where beneficiation opportunities abound. Currently, chrome miners are in a quandary as to what to do with their ore, which they are no longer able to export. Setting up a refinery is bound to be hugely profitable, yet we have now gone a few years without such an initiative being pursued. Surely we have enough qualified and experienced engineers to give such a project a go?
Another big step towards saving the country would be to start harnessing the diaspora in terms of large projects which are often parceled out to large foreign companies. More often than not, such companies, especially the South African ones, have Zimbabweans being the main drivers behind project delivery.
When such projects are undertaken by foreign entities, profits are repatriated to that company’s country of origin. If, however we looked at setting up delivery teams comprising of our own nationals working in such foreign entities, not only would profits be retained in Zimbabwe, but we would improve the chances of such citizens coming back to contribute further towards our economic recovery.In short, practical and directed efforts need to be made towards ensuring that whatever money is in the country stays here.
Greater interactions and initiatives amongst the country’s various stakeholders will enable us to realise the growth we so desperately seek. In fact, it is only through such strategies that our overall costs of production can be cut, and our economy become streamlined enough to compete with other countries’ production.
The writer is the founding chairperson of the SME Association of Zimbabwe, and managing director of Adway Financial Services (Pvt) Ltd.
Source Article from http://allafrica.com/stories/201205050210.html
