eBusiness Weekly
Zimbabwean industry appears to be split in several groups, some flourishing and some just hanging on with the fingernails, some large and some small, and a lot of the successes and failures coming from policies dating right back deep into the colonial settler era and more particularly from the UDI era.
Initially the settler regimes were not that keen on industrialisation. Godfrey Huggins, who dominated settler politics for 25 years from the Great Depression, was fairly keen on Southern Rhodesia being a primary producer, of minerals and agricultural exports, but not an enthusiast for local manufacturing.
This was possibly coloured by the depression, where primary producers like Southern Rhodesia were hit for far shorter periods than the industrial giants, and when he was trying to cope he was not facing a major unemployment problem, which in those days would be for his voters, the whites. He managed to move forward with modest public works, building the strip roads and low level bridges with 5 shilling a day unemployed whites, but no large public welfare schemes and poor white problem as South Africa was enmeshed in.
The Second World War altered his views, at least to a degree. Southern Rhodesia became a major training ground for the Royal Air Force with six air bases in Bulawayo, Gweru and Harare and a few thousand people at a time in the country on RAF pay. Shopkeepers were in clover, and a little light industry grew up, but nothing like the major effort seen in South Africa where Jan Smuts pushed substitution industrialisation.
After the war there was a flood of encouraged white immigration, but the industrial policy was not to push manufacturing that much, with farming and mining and the professions seen as more suitable for growth. Large blocks of land held by the Government, plus large blocks accumulated by speculators in the early colonial days, were broken up into “smaller” 1 200ha farms and sold on very easy terms and at quite low prices to ex servicemen, some local and a fair number of new immigrants.
This used the Land Apportionment Act and it was at this stage that the bulk of evictions of blacks from ancestral lands took place over the next 10 to 15 years. People had been able to remain on their land as tenants throughout the first 50 years or so of colonialism, when there were only a small number of working white farmers scattered along the line of rail. Most white land was not settled. e still see this in names like Centenary, established in 1953 to mark the centenary of the birth of Cecil Rhodes.
That helped provide the labour force, and meant that as the nationalist movement grew in the 1950s there were a lot of people who had personal experience of land evictions; it was not so much generation memories but very personal.
At the same time Huggins shifted on industry, but pushing hard for primary industry with a lot of Government intervention. This was when Zisco, still with private shareholders, started and cotton processing started in Chegutu with the modest help, sort of, by a British company called David Whitehead. Modern brickworks were needed to house the huge surge of white immigrants, and things like cement and furniture manufacturing on a large scale opened up.
At the same time the Government took over more and more of the agricultural processing. The GMB was an old factor, set up to protect white farmers from African competition, but things like the Cold Storage Commission grew out of the private enterprise development, and the Dairy Marketing Board bought out small producers.
The fairly low extent of post-war industrialisation can be seen in the high density suburbs. Mbare was the sole “location” in Harare, besides Rugare for the railways, and Makokoba and a tiny bit of Mzilikazi, plus a railways suburb, in Bulawayo. Even these old second-class locations were not growing fast.
The impetus for far more manufacturing came from the private sector, and especially when Federation was formed and Godfrey Huggins moved to the higher level. Garfield Todd was keener on industry as well, a lot less worried about the rise of a black middle class working in those industries and even started the rapid expansion of high density suburbs, this time to include family housing. Industrial areas were developed, but industries were still few and tended to be large.
UDI changed a lot. Now there was serious Government intervention directed almost purely at import substitution. The regime created the licensing of all imports, and allocated currency for every single thing brought into the country. So potential manufacturers had 100 percent protection as the economy open to the sterling area overnight moved into a totally closed economy, similar to Eastern Europe.
So industry grew very fast, but with short production runs to cope with a small economy. Even the bigger factories, such as the car assembly plants built shortly before UDI to assemble a small range of vehicles, had to widen their range dramatically and cope with efficiency losses as a result. At the same time manufacturers were locked into using their old machinery until well past the replacement date, not too bad at first but increasingly n efficiency problem.
The post-independence Government retained the closed economy largely intact, with import licences and currency allocations, and started facing the increasing problem of a lack of replacement of capital equipment. The wheels came off in the 1990s with ESAP, and a flood of imports that hammered the less efficient local producers, an increasing percentage of the manufacturing base.
The same Government was dubious, and increasingly dubious, about foreign investment, agreeing to some joint ventures but not foreign control. The Industrial Development Corporation set up originally as a venture capital entity, then becoming the rescue outfit when some foreign investors pulled out at UDI, became a long-term holding company, and some of the collapsing post-ESAP industry was effectively nationalised, but not recapitalised.
Hyperinflation just made everything worse, and a lot depended on who managed to get official foreign currency at the incredibly subsidised official rate to survive. Dollarisation blew manufacturing apart and largely killed the old import-substitution model. Among the big outfits those that had market could just survive, the middle tier and the primary industries such as Zisco collapsed, and manufacturing became a few large secondary industries, a plethora of small semi-service companies, and some struggling nationalised concerns working at a small fraction of their capacity.
In some ways we were back to where we were at the end of the 1950s, except there were a lot more of the smaller secondary industrial concerns. A lot of the manufacturing base had simply closed down.
The Second Republic put together some more sensible policies, including a local currency and a push for investment, although industry has a smaller percentage of this than say mining. The pricing advantage allowed agro-processing industries to reform and grow again, so a lot of products on supermarket shelves went back to local, even when the local content was putting bulk supplies into smaller bags as we see with, say, rice.
But the fragility of that industrial base was seen during Covid-19. Medical supply companies had a new lease on life, but in 2020 industrial output dropped 18 percent, and that decline was largely just stopped last year as the rest of the hammered sectors, including the hospitality industry, started recovering fast.
A lot of the future growth in manufacturing now needs to use new models. Import substitution can work, but only when the local manufacturer is efficient and has a large market. So companies like millers and oil expressers can flourish. Some niche market processors can grow, but they are small.
Hope is returning with the major foreign investment into steel and textiles, which should produce results next year, and we have missed our heavy primary industry to put it mildly. Those wishing to rebuild or recreate a lot of secondary industry can now work with something.
But that recreation of much of the industrial base has to be done in light of the new order. We no longer have a closed market, although we have advantages such a properly-priced currency for the first time in almost 60 years. And there is a pro-business Government, but that Government has made it clear, as the largest buyer in the country, that quality and price are the defining criteria. This is all to the good as consumers here, and in export markets, have the same demands.
So in one sense the massive decline allows a whole new reset, and this time we need to do it right. The past shows we need, at the very least, a pro-business Government ready for manufacturing growth, a strong private sector, decent investment from both local and foreign sources, and a willingness to compete rather than rely on protection. For the first time since UDI all the bits are now in place.
