By Edward Muguza
Over the past decades, Zimbabwean industries faced significant economic challenges which slowed down production. Industry capacity utilisation ranged around 30 percent during the 2008-2009 period and only rose recently to the current 50 percent (CZI, 2018). This grim performance has been offset by high levels of cheaper imports from neighbouring markets, which has been a major strain on the country’s fiscus.
As the country turns a new leaf, there is an absolute agreement that the situation needs to change – there is need to bring back industries, raise production, and get Zimbabweans working again.
However, there is an open debate on the correct route to industrialisation. One school of thought is pushing for the recapitalisation of economy to bring back ailing smokestack industries while the other is advocating for an alternative route driven by smokestack less industries and new ways of production. At the Development Reimagination Group (DRG), we align with the latter believing that the days of smokestacked industries with intensive labour needs are behind us.
To quickly catch up to the industrialized world, Zimbabwe needs a new model of industrialization, different from the one adopted by the Asian tigers.
Today’s industries should be designed with a futuristic mindset to ensure issues of climate change, sustainable infrastructure, jobs of the future, open markets, and technological innovations are at the forefront.
Powered by the prevailing energy from the political rebirth, Zimbabwe has an opportunity to leapfrog certain industrialization stages and get it right from the onset. However, a flexible but robust policy environment coupled with strong leadership and political will are required to guide the country’s industrialization process in the 21st century.
We believe that there are 10 considerations (local, regional, and international) for Zimbabwe as it seeks to reindustrialise its once vibrant industries.
- Close current industrial infrastructure gap
There is no question that the current industrial infrastructure is outdated, some dating back to the colonial period when production was aimed for a small population and geared towards self-sustenance.
Post-independence, the government did not redesign the industrial infrastructure to accommodate a growing population and changes in the country’s production factors.
As the country seeks to reindustrialise, there is need to create more one stop shop borders to increase efficiency and ease inter-country movement of goods and services. There is a need to build direct railway and road links to major ports in the region, and revamp the local rail and road network to facilitate the movement of heavy goods.
The country still faces huge shortages of energy supply which is crucial for industry 24-hr operations, and expand the water supply network to service the whole industrial ecosystem.
As Zimbabwe engages various investors, it needs to weave out deals that aim to bring outdated infrastructure, which may be costly to maintain and replace, into the future as global industrial standards evolve.
It also needs to seriously consider the sustainability of the proposed infrastructure to support current and future needs of Zimbabwean industries.
- Adoption of advanced technologies to increase efficiency
Zimbabwe is currently over ten years behind with respect to technological advancements. However, by adopting futuristic technologies that enhance production processes and heavily lower production costs, the country has a unique opportunity to leapfrog certain stages of technological advancement.
There are many case studies for Zimbabwe to learn from to advance its industry technologies in ways that address current global concerns and the challenge of short-term tech system lifespans.
For example, the use of drones and underground to monitor and detect leakages in irrigation systems to improve agricultural yields in countries like Israel.
The adoption of any kind of technology to improve industry operations does not come cheap, thus, Zimbabwe needs to ensure value for money by acquiring highly modern and state of art technologies that will support industries for years to come.
- Focus on the country’s comparative advantage
Industrialisation in Zimbabwe needs to be reimagined from first principles of comparative advantage for it to produce goods that are competitive on the regional and global markets. Consequently, there needs to be a comprehensive review of the country’s input base including, and not limited to the country’s human resource capacity to justify the goods the country aims to mass-produce.
The country’s current focus on the agriculture, mining, manufacturing, tourism, and services sectors is ideal as it leverages its skilled and unskilled human resource base as well as its abundant natural resources – minerals, arable land, natural environment, and climate.
However, there is need for sector specific policies that outline the extent to which a sector is developed based on comparative advantage grounds.
For example, there is no scope for end to end car manufacturing in Zimbabwe due to the high set up costs and the complexities of developing car manufacturing value chains that produce cars at lower costs than leading car producers.
Yet, there is scope for assembling cars through partnerships with established car manufacturers. The car assembly market needs to be protected by banning the importation of second hand cars from markets like Japan and the UK as well as consolidating local demand with the government spearheading the consumption of locally assembled vehicles.
- Efficient supply chains
Development of a robust competitive industrial sector that is capable of scaling to regional and international markets is heavily dependent on the outbound and inbound supply chain system.
Across the globe, there is an argument for localised supply chains (inbound and outbound) to reduce shipping costs, shorten delivery times, and bring employment to local communities.
As Zimbabwe seeks to reindustrialise, it needs to evaluate the economic pros and cons of extending supply chains from main manufacturing plants to other local and regional markets.
Currently, the country has very inefficient supply chains due to inadequate and dilapidated infrastructure and high fuel costs, which justifies the need for localised supply chains.
However, the argument for localisation of supply chains can only be justified in the presence of robust inbound supply chains that provide direct and cheaper options for sourcing of inputs for newly established plants.
- Industrial jobs of the future
With unemployment at staggering levels, job creation through industrialisation becomes the centre of focus neglecting the quality of the type of jobs created.
The skills base of the Zimbabwe working population has gradually shifted from unskilled to semi-skilled and highly skilled as the majority of the population got educated.
This shift in skills provides Zimbabwe with an opportunity to create highly productive jobs that meaningfully grow the economy and raise the wages of general workers. In addition, the creation of semi-skilled and high skilled jobs is of paramount importance if Zimbabwe is to attract back diaspora talent.
Failure to produce high quality jobs through reindustrialisation would result in further brain drain as recent university graduates prefer to work in advanced industries abroad.
Adopting tech-driven industrial processes would result in the loss of some low skilled jobs but would also result in the creation of more skilled jobs.
The government’s challenge would be up-skilling unskilled workers through industry focused vocational training institutions, which are very few and poorly resourced at the moment.
- Incorporate regional and international scale from the onset
Adopting a tech-driven industrialization process has the ability to deliver cost-effective mass production which requires a sizeable market to absorb the produced goods.
Unfortunately, Zimbabwe’s population of circa 15M is not big enough to cater for mass production that can allow the country to harness the benefits of economies of scale.
Through the recently signed continental free trade agree (AfCFTA) and other existing regional trade agreements through SADC and COMESA, Zimbabwe can establish mutual trade agreements with other African countries in the region to grow the market for its products. However, there is need for the nation to focus production on specific goods that Zimbabwe can competitively produce than any other country in the region.
For each of the mass-produced good in Zimbabwe, there needs to be at least three countries that are ready to absorb the product.
- Develop regional and international industry value chains
Over the preceding decades, industrialization has evolved from end to end manufacturing to a strong emphasis on specific industry value chains to allow efficient allocation and use of scarce resources across the globe.
As Zimbabwe seeks to reindustrialize, it needs to identify industries to develop end to end value chains and industries to feed into regional and international value chains. Zimbabwe, for instance, is well positioned to develop an end to end value chain for food production starting from the growing of agricultural produce to the production of food products.
On the other hand, the country could feed into the regional and international vehicle value chain by focusing on the production of environmentally friendly lithium-ion batteries.
Understanding that the country cannot be good at producing everything could push the Zimbabwean government to close some industries that are not regionally and globally competitive or at the very least, restructure them to feed into other regional and international value chains.
- Research and data driven industrial development
There is no doubt that ‘data is the new oil’ and should be at the core of Zimbabwe’s industrial transformation.
New tools like data science and artificial intelligence have the ability to bring evidence to the fore to improve industry operations. Currently, the country has a dearth of such skillset to improve analytics at the industry level.
There are also vast opportunities for knowledge transfer as Zimbabwe reviews the existing industry structures and transforms them to align with international standards and market demands.
In addition, there is limited interaction between institutions of higher learning and industry, which has stifled research and innovation within Zimbabwean industries. Setting up an African Industrialization Fellows Program at one of the leading universities to facilitate knowledge exchange and transition of graduates to industry is one step towards closing this huge gap.
Evidence and robust research should guide those decisions to deliver sustainable and transformational change. Zimbabwe has vast examples to learn from such as Singapore and Rwanda to avoid industrial mishaps and define an industrialization path guided by evidence on what works for Zimbabwe.
- Green industrial development
Issues of environment protection and climate change should be at the top of the list for African policy makers due to the increasing burdens of the prevailing environmental changes – higher temperatures, frequent droughts etc.
African countries have been blamed for adding very little to the fight against climate change but this should change. According to the UN, “African countries have the chance of being front-runners to deliver green growth, climate resilience and long-term de-carbonization of their economies — if they move quickly” (UNECA, 2016).
Zimbabwe has an opportunity to move from signing agreement after agreement to actual creation of green industries focused on growing smokestack-less industries.
The argument is not about getting rid of all smokestack industries but designing a medium to long term pathway where the composition of the Zimbabwean economy gradually tilts towards more greener and environmentally friendly industrial processes to generate green growth.
For a country heavily dependent on fossil fuels for energy and natural resources for economic sustenance, this transition would be challenging but should start immediately.
- Develop the industry ecosystem by embracing informality, establishing new industry linkages, and promoting entrepreneurship
As Zimbabwean industries struggled to stay afloat over the past decades, linkages within the sector also fell apart resulting in high levels of fragmentation, duplication of efforts, and inefficiencies.
To yield sustainable growth, the industry sector should be highly connected to other key drivers of the economy. Two key players, once viewed as peripheral, that need to be closely linked to the industry sector are informal stakeholders and entrepreneurs.
- Formal industries need to embrace informality and work close with informal players as contributors to the same value chain.
Informal players have sustained the Zimbabwean economy (job creation, economic resilience etc.) even during periods of poor economic performance and should be engaged to meaningfully contribute to the economy through partnerships with formal industries. Informality comes with its negatives but the positives cannot be ignored.
- Entrepreneurs and innovators have defied the odds in developed markets to create new models of development and new industries. Similarly, African entrepreneurs have the ability to work in conjunction with industry players to define new models of African industries driven by ICT and new ways of thinking.
Unfortunately, there are limited linkages between industry players and entrepreneurs, which presents missed opportunities for collaboration and growing the economy.
If done well, Zimbabwe’s re-industrialization drive presents huge opportunities for a brighter tomorrow.
The government needs to: (1) create a conducive environment that encourages collaboration across sectors (2) support hard choices to close down or restructure non-performing industries, and (3) embrace new ways of thinking to develop new models of industrial growth.
Most importantly, there is need for political will and strong leadership to adopt an alternative pathway to industrial development.