De-industrialisation trend worrying: CZI

THE Confederation of Zimbabwe Industries (CZI) says the de-industrialisation trend the country has continued to experience is worrisome and casts a dark cloud on transforming the economy to the envisioned upper middle economy status by 2030.

Speaking at the three-day CZI annual congress, which ends today in Harare, the Business Membership Organisation’s president Kurai Matsheza yesterday said the de-industrialisation trend was reflective in other economic sectors such as agriculture, hunting, fishing, and forestry; mining; wholesale and retail trade; repair of motor vehicles and motorcycles as well as financial and insurance activities.

“It would be okay if those other sectors were really growing and we are at the same level. When we did the numbers it also says in actual output there has been a decline.

“The trend downwards in the manufacturing sector is worrying and it implies de-industrialisation at a time when we are pursuing industrial transformation as a goal and where we are aiming to move the economy up the value chain where we can produce high-value goods.

“With this trend, it is worrying; this performance indicates that there is a gap between policy measures and the expected goals that we set in NDS 1,” he said.

Matsheza said the de-industrialisation trend is also worrying because it was making the manufacturing sector a primary sector-driven economy contrary to the industrialisation agenda.

The centrality of the manufacturing sector to the industrialisation goal cannot be overemphasized noting that there is no country that has prospered without being highly industrialised.

“The manufacturing sector is an employment multiplier and in other jurisdictions when they do the numbers, for every job that you create in manufacturing, creates three to 10 more downstream and upstream combined, but in our case it is not happening like that.”

To reverse the above trend, Matsheza said there is a need for a very strong collaboration between Government and the private sector. There is also a need for collaboration across different ministries that are critical to industrialisation.

The ministries in the value chains and in the economic enablers as well as the fiscal and monetary authorities need to collaborate to ensure that there are deliberate policies to accelerate the industrialisation and stop the deindustrialisation trend that we are beginning to see.

He said it is also imperative to address infrastructure gaps particularly in the energy sector with more emphasis on electricity while the fuel sector has been de-regulated and is presently working well.

“But we have got serious challenges in the electricity sector. One of the key challenges industry has faced over the years is the intermittent supply of power crippling operations with businesses resorting to diesel generators, again multiplying the cost of doing business or manufacturing.

“If we are to deliver an upper middle-income industry and economy, we need to collaborate with the electricity sector and quantify the electricity we need to power industrialisation as well as identifying the gaps.

“When we look at where we are, we have got a total installed capacity for the whole country at 2 200MW at the growth rates which we are talking about to achieve an upper middle income economy we would need nearly 10 000MW.

“And we need a credible plan to deliver on that capacity.

“Unfortunately, with electricity, it doesn’t wake up being there in a year, it’s not possible you have to work on it and to deliver that megawatt, it will require maybe five years, but the journey has to start today,” he said.

The CZI president added that there is a need to also allow the private sector to provide the lead in defining what would make a truly transformative industrial policy.

He said 2030 was around the corner while the task ahead towards an upper middle-income society is huge considering a myriad of challenges that need to be addressed.

“NDS 1 speaks to an upper empowered prosperous upper middle-income economy society which is powered by a structurally transformed economy that is private sector-led.

“The private-sector-led economy acknowledges that business activity is going to deliver the economic growth that would deliver an upper middle-income economy…our request to be given an opportunity to submit to the ministry’s industrial transformation proposal for the next industrial policy which is supposed to deliver an upper middle-income industry and economy,” said Matsheza.

Import dependency was also worrying across different sub-sectors within the manufacturing industry.
For example, he pointed out that the sub-sector that deals with the manufacture of electronic motors, and telecommunications is nearly 100 percent import-dependent.

“If we look at the manufacture of foodstuff, it’s at about over 60 percent and if we look at the manufacturer of textile it’s over 75 percent import dependence, none of the sub-sectors within the manufacturing industry is below 38 percent, the minimum is the manufacture of non-metallic minerals which is at 38 percent.

“So, it shows a high dependence on imported input into our processes, this is not a sustainable situation,” he said, adding that the import-dependence ratio is way too high and this is not sustainable for an economy.

The manufacturing industry whose processes are highly import-dependent includes the manufacture of textiles, iron and steel, chemical production, and manufacture of transport equipment.

Officially opening the CZI annual congress, Industry and Commerce Minister Dr Sithembiso Nyoni said to drive structural transformation, the Government is reviewing the Zimbabwe National Industrial Development Policy.

“The successor policy is premised upon the deliberate decision taken by the Government to open the country for business, modernise, industrialise and promote investment, with the ultimate goal of attaining broad-based economic empowerment, inclusive economic growth and employment creation.

“Therefore, the country’s economic recovery will be underpinned by structural transformation towards industrialisation which is critical for sustained economic growth and development.

“In this regard, the Government’s thrust is to develop and implement policies, strategies and interventions which are conducive for industrial development so as to set the sector on a sustained growth trajectory,” she said.

The draft Zimbabwe National Industrial Development Policy (ZNIDP) (2024-2030) is aligned to Vision 2030.

“In this regard, the ZNDIP is seeking to grow and strengthen the manufacturing sector in order to tap into opportunities presented within the region, on the continent and beyond.

“Government has availed appropriate fiscal incentives, access to foreign currency and is undertaking efforts in the provision of sufficient energy through the rehabilitation of power stations in order to have an enabling environment for industrialisation,” said Nyoni.

-ebusinessweekly