Zimbabwe must manage the boom

07 Sep, 2018 - 00:09 0 Views
Zimbabwe must manage the boom

eBusiness Weekly

Zimbabwe and Zimbabweans are going to have to start adjusting to the problems, as well as the immense benefits, of economic growth and our industrialists, investment agencies and Government are going to have to start keeping very good statistics and making accurate estimates of demand.

We have had a foretaste of what can happen in a growing economy with the present temporary shortage of cement. It puzzled users, since all the raw materials are dug out of Zimbabwean ground, and was being exploited by the usual minor actors on the periphery of society.

The reason has now been revealed. The largest cement manufacturer, PPC, had closed one of its three plants for refurbishment. Yet pulling one of the nation’s five cement factories out of production temporarily caused the shortage, so close are we to full capacity utilisation. The shortage was worsened by some semi-formal retailers queuing at wholesalers and filling pick-up trucks with 20 or so bags for resale at a black-market profit.

Demand for cement has been rising this year, as has demand for bricks and other building materials. Most of this extra demand is in the residential sector, partly with new housing projects but largely with urban dwellers turning new jobs or higher pay into homes, or farmers making a serious start on their housing after a pair of decent seasons. It all adds up, even when the average home builder might be buying just 1000 bricks and 20 bags of cement a month, if there are tens of thousands doing this.

There were suggestions that cement producers were starving the local market for exports, but PPC set that straight by noting that they exported just two percent of production, and as cement is expensive to move presumably at low margins to customers just over a border, to raise forex for spares. That is a fair enough strategy.

The cement example highlights the changes we need to make in our thinking as we move from more than a quarter century of low growth to high growth. We had become so used to industrialists complaining about poor plant utilisation that we may have missed the switch to complaints about the need for extra foreign currency to buy spares and expand plant and, in many cases, to buy some raw materials. The Government picked that up which is why a great deal of effort is now being expended by the Finance and Foreign Ministries on negotiating lines of credit with countries that do export machinery, such as China and Germany.

However, it strikes us that we also need to start accumulating very accurate statistics over just what we are producing, just how much capacity we have, the rates of growth in demand for various products and start making accurate estimates when our industrialists, or when new investors, need to commission the next extension in capacity and thus when they need to start the expansion process. To take the cement example again. It is obvious now that we will need the equivalent of a sixth factory sooner rather than later, regardless of whether this is an extension of existing factories or a totally new investment. Some feedback from existing investors as to their plans would be useful. But with accurate statistics we can also promise new investors pretty well guaranteed markets.

We are not talking about Stalin-era Soviet planning, but we do need a unit that gets data from industry, Government ministries, investment agencies, the Reserve Bank of Zimbabwe, banks and even Zimra (VAT collection measures demand) and puts it together, showing where urgent investment is needed to keep growth on course.

To take another example, steel. We need to stop talking about re-opening Zisco or renovating Zisco. The mill is a totally run-down plant using obsolete batch processing. We need to talk about a new steel mill using modern continuous flow technologies. It will probably be in the same place, for easy access to raw materials and a core pool of skilled workers who can be quickly retrained, and upstream and downstream industries are in the vicinity, but the mill will still be brand new.

But before someone starts investing billions, he will want very accurate data about how much steel we now consume and of the grades and types, and will want a fairly sober and rigorous prediction of demand over the next decade. The investor can then figure out what sort of mill is required and the prices he will need to charge. Then the investment becomes realistic.

Even with more export investments, mines and tourism sectors for example, good stats will help sell Zimbabwe. If I want to open a new platinum mine I have my predictions of global demand, supply and prices. But I would like someone in Zimbabwe to assure me that local materials, like cement, are a phone call and money transfer away. I would like to know how many mining engineers and skilled miners are in Zimbabwe and how many we train each year, since I do not want to spend a fortune on flying in ex-pats when I can hire competent local staff. I want to know that someone has planned that there is enough electricity being generated when I open my mine, and so on.

And equally obviously a Zimbabwe being open for business needs more than an empty shop. We have to be sure we are stocked with the right skills, with the power stations, with the industrial back-up and the like and that means we need to know what we have and what we need. We will get our first boost from going to full capacity utilisation and drying up the pool of technically skilled but unemployed citizens. But to continue growing a lot of people have to act in unison at the right time to the right degree to make sure resources are available. And that is why we would like to see a high-profile data unit collecting this so each set of planners can make sure Zimbabwe is not only open for business, but stays open for more business.

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