eBusiness Weekly
Clive Mphambela
Is it easy for Zimbabwe to industrialise or re-industrialise? There is no single or simple answer really. To engage in a meaningful discourse we need to follow a particular pattern of thought that tries to rationalise a few key issues.
(1) Why and how do countries and economies industrialise?
(2) Are there key events in history that have influenced the dynamics of industrialisation?
(3) Where did we miss the boat and can we catch up? If so, how?
Industrialisation is defined as the state of social and economic change during which a social group, country or economy transforms or emerges from an agrarian society and graduates into an industrial society. This process involves an extensive re-organisation of the economy away from extractive (primary) industries to industries based on manufacturing of intermediate and finished consumer goods.
As the country industrialises, workers’ incomes rise rapidly and markets for consumer goods and services of all kinds tend to expand and provide the stimulus for further industrial development, economic growth and investment.
The main point to understand is that industrialisation is driven by two key factors.
Firstly, there must be a deliberate strategic shift from primarily extractive process activities to value adding manufacturing based processes.
Secondly, there must be room to grow own (internal) markets or develop new markets to absorb the higher levels of production. Subsumed in these two points is the fact that for a country to industrialise, there must be an increase in both productivity and incomes.
Most industrialists of our time propose that competitiveness is predicated on suppressing costs of production with a particular focus on labour. However a careful analysis of the world’s most advanced economies tends to suggest that it is productivity of labour, not just its cost that is key to driving the industrialization agenda. Productivity is an input /output relationship that should bear little on the unit cost of each input but rather the relative costs of various inputs into production processes.
To explain this simple fact one can use the example of cotton which is produced in Zimbabwe at between 30 and 40 cents per kilogram ($300 to $400 per tonne). Cotton production is a highly labour intensive and time consuming exercise.
As such, a typical household in Gokwe, Muzarabani or Chiredzi will produce between three and ten tonnes of cotton after a year’s labour. Earning the producers between $1000 and $4000 for a year’s toil. Now, let’s imagine another hypothetical country, let’s call it Futurius.
This hypothetical country on the other hand, will take the cotton and apply an industrial process to it for just a week or two, and produce textiles and garments whose value is at least 30 times the value of raw cotton.
That transformative process takes a raw commodity and earns a massive multiplier. It doesn’t end there, the manufacturing sector in Futurian textile industry not only generate more higher wage jobs for the earners but the value chains from processing cotton to fabric employ thousands upon thousands of workers all earning significantly more than the $1000 to $4000 per year as compared to the primary producers.
There is thus increased demand for other goods and services from the Futurian workers, such as banking and insurance services etc which they can actually afford. It gets better still, most of the output is actually exported to high value markets in the USA and Europe earning the Futurian economy a tidy flow of foreign currency. The point of this example is, Futurius does not produce any cotton.
We can from this simple lesson draw a few conclusions.
To even begin to industrialise Zimbabwe needs to make a series of deliberate decisions.
Firstly we need to do a careful analysis of which industries or value chains will underpin our industrialisation or re industrialization agenda.
To do this we need to take the following immediate steps.
We must first look into history and study the pathways that the current highly industrialised countries followed to reach where they are, realising of course that slavery and colonization are no longer options!!! There is no need to reinvent the wheel, we simply need to take what has worked before, refine it, customize, contextualize and implement it.
Define clear value chain strategies in terms of raw materials, intermediate goods, machinery and equipment, supportive technology and services required for a successful reindustrialisation agenda.
Define an appropriate mix of strategic industries that will hold the base for the industrilisation agenda. One of the key factors in this area is energy supply. The country will not industrialise unless a clear strategy to be self-sufficient in reliable, low cost and abundant energy is put in place. We must carefully define our energy mix in terms of renewable and non-renewable resources.
We have plenty of gas and coal to last us three hundred years and potentially limitless opportunity to harness hydroelectric and solar power. This is the time to put these opportunities on the table.
We need refine our policy making frameworks. We must discard the idea of short term plans and begin to run the economy on the basis of long term plans. For example, 20, 30, 50 and 100 year plans.
Provision of infrastructure can lead to industrialisation. Large infrastructure projects can create the basis for the development of subsectors along the value chain. A good example is the DIDG transnet NRZ recapitalization deal where a condition is inbuilt that the new concrete railway sleepers will be manufactured by local industry using local materials, technology and labour. This will create thousands and thousands of jobs.
We need to create a ubiquitous Special Economic Zone. I am not a fan of economic enclaves. I believe SEZs have worked elsewhere. Instead of creating enclaves, let’s simply take what has worked in SEZs in China, Mauritius, Singapore and Malaysia and we customize, contextualize and implement across the whole country.
We also need to harness the power of Trade blocks. We need to realise that industrialisation and economic development are a non-starter when they are left to be dependent on internal market size.
Thus interaction within and outside of the region is therefore vital. We need to look at our regional blocks both in terms of providing market access but also as a potential source of imports of raw materials and intermediate goods. Regional integration should therefore be considered as instrumental in enabling further economic development and international competitiveness. Regional integration can increase market size, even if it represents the integration of small economies.
The writer is an economist. The views expressed in this article are his personal opinions and should in no way be interpreted to represent the views of any organizations that the writer is associated with.
