Zim targets industrial resurgence with ambitious growth plan

The Government of Zimbabwe has set its sights on revitalising the manufacturing sector as a cornerstone of economic transformation, according to the 2025 National Budget Strategy Paper outlining a comprehensive masterplan to reinvigorate the sector that has seen a decline in its contribution to Gross Domestic Product over the years.

The strategy paper acknowledges that while the country has recorded robust economic growth, this has not translated into significant improvements in productivity, exports and employment creation.

“The rate of structural transformation must, therefore, match the pace and scale required to significantly improve the living standards of citizens,” it states.

Central to this transformation is the manufacturing sector, whose share of GDP has dwindled from 23 percent in the 1980s to a mere 9 percent in 2023.

The strategy paper attributes this decline to several factors, including low export competitiveness, overreliance on primary products, weak linkages within the productive sectors, and a high dependence on imported raw materials.

Despite investments in new technologies, the manufacturing sector’s capacity utilisation has been on a downward trajectory, dropping from 56,1 percent in 2022 to 53,2 percent in 2023.

“The manufacturing sector also has strong import dependence for raw materials, underlying the fact that local value chains are not in tandem with economic aspirations,” the paper notes.

A host of challenges has further hampered the sector’s growth, including unreliable power and water supplies, a complex regulatory environment, limited access to long-term finance and inefficient logistics.

To address these hurdles, the Government is banking on the Zimbabwe Industrial Reconstruction and Growth Plan (2024-2025).

The plan sets ambitious targets, aiming for a manufacturing growth rate of at least 5 percent per annum, a 3 percent annual increase in sector investment and a gradual elevation of the manufacturing value added (MVA) to 20 percent of GDP by 2030.

Exports from the manufacturing sector are also targeted for a significant boost, with a 25 percent annual growth rate. Additionally, the plan seeks to increase the share of manufacturing employment to 20 percent of total employment by 2030.

To achieve these goals, the Government will focus on upscaling the processing of raw materials, fostering innovation and research, embracing Fourth Industrial Revolution (4IR) technologies and strengthening linkages with Small and Medium Enterprises (SMEs).

“Proposed strategies in the Plan seek to achieve the following objectives: a manufacturing growth rate of at least 5 percent per annum; grow manufacturing sector investment by 3 percent per annum; increase the share of the manufacturing value added (MVA) in GDP to 20 percent by 2030; increase the manufactured exports by 25 percent per annum; increase the share of manufacturing employment to total employment to 20 percent by 2030; and increase the competitiveness, diversification and complexity of the country’s manufactured exports,” the strategy paper outlines.

Lithium value addition, solar energy, recycled waste and agro-processing have been identified as key focus areas. The plan will be complemented by initiatives to enhance value addition, improve the business environment, and boost export competitiveness, leveraging opportunities presented by the African Continental Free Trade Area (AfCFTA).

The Government also intends to establish industrial hubs in rural areas, maximising the use of local resources to create employment and improve living standards.

Successful implementation of this ambitious plan could be transformative for Zimbabwe’s economy, creating jobs, increasing exports, and boosting domestic production. However, challenges such as infrastructure deficiencies, financing constraints and skills shortages will need to be addressed to ensure the plan’s success.

With this plan, Government seeks to reverse the trend where trade and export receipts rely on a few unprocessed raw materials and low value-added products with very limited skills content.

“In this regard, diversifying the product range to such sectors as manufacturing will upscale Zimbabwe’s participation in regional and global value chains, increase trade in high value-added products, build economic resilience from shocks, provide more decent jobs, increase foreign exchange receipts and improve the quality of life of citizens,” the paper notes.

Trigrams Investment analyst, Walter Mandeya said; “Increasing the contribution to GDP of the country’s manufacturing sector including the complexity and diversity of manufactured exports is something that is already in progress as evidenced by the investment statistics produced by ZIDA and buttressed by the efforts by ZimTrade.

This momentum is, however, constrained by two major factors which are the availability of reliable energy and water, both of which are basics that have suffered from a legacy lack of under-investment.

The complexities of the challenges faced in achieving these manufacturing targets can be best exemplified by the state in which Bulawayo metropolitan province, the former manufacturing hub of the country finds itself in. These challenges are masked in other provinces because of the economic activity from farming and mining.”

Mandeya went on to say; “One of the ways these two challenges can be addressed in the short-term, especially the energy generation, is to put some financial muscle behind the problem through financing structures that unlock Independent Power Producer’s (IPPs) potential to add generation capacity to the national grid. The takeover of Government’s shareholding in Zesa’s subsidiaries by The Mutapa Investment Fund presents some interesting possibilities in this regard.”

Financial and investment analyst, Malone Gwadu, believes that while the Government’s ambitious industrialisation plan is achievable, it hinges on addressing key enablers.

“Uppermost in industry concerns is competitiveness in terms of pricing and quality of products for them to gain market acceptance,” Gwadu said.

He highlighted that while pricing is crucial; “Government intervention in addressing exchange rate vulnerabilities” limits industry’s control over it.

Gwadu also emphasised the need for “friendly and longer term financing” to enable businesses to retool and modernise their equipment.

“Electricity availability also remains an albatross for the manufacturing sector,” he added, noting that reliance on alternative power sources could undermine competitiveness, especially in light of the African Continental Free Trade Area (AfCFTA) agreement.

Gwadu concluded by stressing the importance of “policy alignment” to support the industry, including tax adjustments such as allowing the Intermediated Money Transfer Tax (IMTT) IMTT to be tax deductible.

Economic analyst and executive officer at SME Association of Zimbabwe, Farai Mutambanengwe, said there is a lot of headwinds militating against achieving the industrialisation objectives including power shortages,high cost of production, bank charges, route to market tax, currency distortions and enforcement of increasingly unviable pricing.

“Those factors not only work against existing investment, but also dissuade new investment, especially where our neighbours are going out of their way to attract manufacturing investment,” he said.

-ebsinessweekl