Re-inventing Zimbabwe industrial base

THERE is no doubt in my mind that Zimbabwe is on a new economic trajectory which must be underpinned by key principles which have, throughout history, led to the emergence of successful economies.

These include continuous leadership renewal and accountability, meritocracy, rule of law and protection of private property, institutional renewal and delivery, economic freedom and inclusivity, agriculture and industrial revival, human capital preservation and development, effective and efficient resource management, infrastructure rehabilitation and development the promoting foreign direct investment and, lastly, citizen empowerment, food security and poverty alleviation.

In my opinion, rapid re-industrialisation will be one of the cornerstones upon which we can build a new democratic inclusive economy.

The re-industrialisation of Zimbabwe will, indeed, determine our ability to achieve the objectives of Vision 2030, which are: to become an upper middle income economy and more. However, it is important that our policies and strategies borrow from those countries which have travelled the same road. We must emulate countries who have become industrialised by adopting the same principles and practices which have made them rich. The recently announced Transitional Stabilisation Programme (TSP) seeks to implement productive sector reforms in order to revive industry.

Among other things, it will "institute measures that address underlying causes of high cost of doing business, including inputs supply across various value chains, access to enabling public utilities, domestic cost of finance, and introduction of flexibility in Zimbabwe's labour laws".

Under "Resuscitating Industry and Industry Development", the Transitional Stabilisation Programme will prioritise increased investment in the manufacturing sector, with emphasis on value addition and beneficiation of agricultural produce and minerals, to increase job creation and export earnings. It will also focus on supporting sustainable micro, small and medium enterprises growth and development through business linkages, market access, cluster development, business incubation and support services.

The most critical issues are to increase investment inflows into our industrial sector and to support and encourage free enterprise. The private sector must lead the new growth trajectory. The idea of an industrialisation venture capital fund as suggested by the Finance Minister will therefore be key.

In his book titled How Rich Countries Got Rich and Why Poor Countries Stay Poor, Professor Erik Reinert explains to us here is Africa that it is only when we industrialise through manufacturing that we can begin to achieve increasing marginal returns to create sustainable higher incomes. We should therefore deliberately move away from resource-based economies dependent on the export of primary raw products because they give diminishing marginal returns. Everyone now understands this.

Rich countries became rich through industrialisation and the promotion of a vibrant local business class while protecting their industries from foreign competition to allow themselves to build the necessary momentum and capacity to compete.

In addition, they secured markets in colonies by any means necessary and even prohibited the manufacture of specific goods there to ensure that value from the colonies was transferred and retained within their economies.

In one of his appendices in the book, Reinert includes Phillip von Hornigk's Nine Points on How to Emulate Rich Countries, written in 1684, well before Adam Smith in 1930. Hornigk is the author of a book which outlined Austria's strategy in 1684, which resulted in the greatest increase in Austria's wealth over 100 years.

I quote: "All commodities found in the country, which cannot be used in their natural state should be worked up within the country, since payment for manufacturing generally exceeds the value of raw materials by two, three, 10, 20 or even hundred-fold and the neglect of this is an abomination to prudent management.

"In carrying out the above, there will be need for people to cultivate the raw materials and to work them. The inhabitants of the country should make every effort to get along with their domestic products to confine their luxuries to these alone and to do without foreign products as far as possible and if necessary such foreign products should be exchanged for other wares and not for gold or silver."

The above is not new. Many of my age and older will remember the industrial base we inherited from Rhodesia. Rhodesia faced serious sanctions, but the country rapidly developed its industrial base notwithstanding. We must learn from that.

I want here to force our minds to appreciate how Southern Rhodeisa's prime minister Ian Smith reacted to sanctions and why he was successful in developing the productive capacity of a country isolated by the international community, but continued to have a strong currency and was a net exporter of food.

There is a published paper titled Zimbabwe Economic Policy - A study of Strategic Trade and Industrial Policies, co-authored by Benson Zwizwai, Admore Kambudzi and Bonface Mauwa, which is very interesting.

I want borrow from it and the following are extracts from that paper: "A key issue during the Smith era was that there was a national consensus among major stakeholders - policymakers industrialists and labour unions - with regard to industrialisation development strategies and the appropriate policies to achieve them. Internal self-sufficiency was the principle pursued.

"The industrial policy, which began in the 1950s, focussed on meeting internal local input needs - agricultural implements fertilizers, pesticides, agro chemicals, as well as basic consumer goods such as soap, bread mealie-meal, edible oil, flour and beer. This was followed by heavy industry including iron and steel, structural engineering, agricultural machinery and sugar milling. Then we had light industry which produced the production of components and spares.

"The Smith government took an interventionist approach after UDI (Unilateral Declaration of Independence) in 1965, covering industry, agriculture, mining and services. It also put restrictions on imports and administered foreign exchange allocation system, in addition to investment controls which were all aimed at import substitution.

"The IDC was also established to venture into green field projects which were considered too risky for the private sector but critical for economic self-reliance. Such projects were then later sold to private sector players once they became viable and the revenues generated used to start other new ventures.

"Key objectives were to create less dependence on imports and to expand manufacturing output. (Which is exactly what we need now). Domestic producers were incentivised to replace imports and industrialists were protected from foreign competition although this later had an impact on quality. Added to the above, appropriate infrastructures, roads, rail, serviced industrial land, and were deliberately developed to promote industrialisation.

"Of particular interest was that imports, which competed with locally-produced goods were not allowed and new investment by entrepreneurs in already existing industry was also discouraged. Out of this grew a diversified industrial base and agriculture mining and forestry export processing activities."

The main problem with this model is that it was not inclusive and it created a dual enclave economy. It was also rather isolated from the global economy, something we cannot afford to do. We can certainly emulate it, but learn from the mistakes and lessons of history despite who the actors might have been. We therefore need an all-stakeholders industrialisation advisory panel, which collaborates with government in coming up with an industrialisation policy. We need to take the same approach as Smith, which was meeting internal local input needs - agricultural implements fertilizers, pesticides, agro chemicals, as well as basic consumer goods such as soap, bread, mealie meal, edible oil, flour and others, followed by reviving heavy industry including iron and steel, structural engineering, agricultural machinery among others.

Then we can move to light industry to produce production components and spares. It has been done before and we will not be starting from scratch as the framework is still in place.

A rapid industrialisation strategy is the sure way to create sustainable growth, new jobs and sustainable high incomes in Zimbabwe, as we all work together to contribute to the achievement of Vision 2030.

Zimbabwe will rise!

Vince Musewe is an economic development policy advisor and co-founder of the Zimbabwe Transformation Project. Contact: vtmusewe@gmail.com. These weekly New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society. - kadenge.zes@gmail.com and cell +263 772 382 852.