Industry targets too low for upper middle-income society

19 Jan, 2024 - 00:01 0 Views
Industry targets too low for upper middle-income society Liabilities on the RBZ Balance Sheet — end August 2023 (US$ millions)

eBusiness Weekly

Michael Tome

ANALYSTS and industry stakeholders say Zimbabwe will not attain the upper middle-income society status by 2030 if the manufacturing growth rate continues at a rate below 10 percent per annum.

These sentiments were aired during the Zimbabwe National Industrial Development Policy (ZNIDP) consultative workshop hosted by the Ministry of Industry and Commerce on Tuesday.

Draft ZNIDP (2024-2030) has set a target to grow the manufacturing sector by at least 2 percent per annum going to 2030.

It also intends to 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 manufactured exports by 10 percent per annum, and increase the share of manufacturing employment to total to 20 percent by 2030.

However, analysts think that Zimbabwe is setting below-par standards and regressing from what it could have been doing.

According to a situational analysis by one academic, Zimbabwe’s share of manufacturing in Gross Domestic Product (GDP) has declined from about 25 percent in the 1980s to about 12 percent, which they state is movement in the wrong direction.

Participants at the workshop decried Zimbabwe’s pace of industrialisation saying the country has not fared well in that regard.

A survey by the Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU) Ministry of Finance, Economic Development And Investment Promotion and the Reserve Bank of Zimbabwe (RBZ) shows that Zimbabwe’s number of products with comparative advantage has declined from 488 in 2002 to 160 presently. Meaning the country is losing comparative advantage, which analysts consider a step in the wrong direction.

In 1995 Zimbabwe had 2 840 export products with comparative advantage which have since came down to 1 353 products.

“We need a growth of maybe 10 percent a year in industry. I’m afraid that a 2 percent rate of growth in manufacturing is not going to lead us toward Vision 2030. Two percent is an unacceptable target.

“We have to think out of the box, we have to think differently as to how we are going to achieve it. We need to move in a more radical direction where manufacturing growth is not 2 percent, but 10 percent.

“If we are to achieve Vision 2030, we need much higher rates of growth in the economy” said economist Professor Ashok Chakravati while addressing participants at the workshop.

He said Zimbabwe needs to industrialise more if it is to realise more manufacturing growth.

“Industrialisation is key to the attainment of Vision 2030, and attaining an upper middle-income society implies higher levels of growth rate and productivity which can only come from more industrialisation.”

Chakravati juxtaposed Zimbabwe’s industrial performance with that of the United Arab Emirates (UAE) which in 1991 exported 158 products with a comparative advantage. 84 percent of the products were mainly primary products but the products had increased to 4 300 by 2020.

UAE’s total exports increased during the same period to US$390 billion from US$486 million.

“We are losing comparative advantage and moving in the wrong direction compared to countries like UAE. We are reducing the number of products that we are manufacturing and exporting from the country, which are based on the comparative advantage of our country,” he said.

He said Zimbabwe needs to take advantage of comparative advantage saying industry should have more products with local origin and more value chains have to be developed from that.

According to experts, Zimbabwe has a comparative advantage in products like edible fruits and nuts, wood and furniture, coffee, tea, spices and processing, leather, tobacco processing, and cotton processing.

Nickel and other mattes, chrome processing, ferrochrome, platinum processing, lithium processing, iron and steel products.

ZNIDP 2019-2023 posted mixed results during its implementation period as the manufacturing sector performance was below set target of 2 percent per annum, Gross domestic savings were below the target of 30 percent while manufacturing value added generally performed below the target of 16 percent.

The share of manufactured exports in total merchandise exports rose slightly in 2019 and thereafter continued the declining trend while the manufacturing sector accounted for 10 percent of total employment by 2023.

Confederation of Zimbabwe Industries (CZI) chief executive officer, Sekai Kuvarika said there required a shift of targets and input to realise the national vision.

She said the industry representative body was calling for a truly transformative industrial policy, particularly in this last leg towards Vision 2030.

“We are in a crucial period that requires accelerated growth and the current policy is not really expressing that level of acceleration.

“We have done an analysis in terms of targets to reach Vision 2030, as an economy, a GDP growth rate of over 10 percent is needed, manufacturing value added (MVA) growth rate of about 16 percent per annum. Merchandise exports growth rate of 20 percent per annum and a GDP contribution of about 25 percent per annum is what we probably need to achieve an upper-middle-income society by 2030.

“We are here to work with the ministry to support in whatever way we can so that we can also achieve higher targets of growth in our economy to industrial upgrading and transformation, industrial excellence to industrial upgrading and transformation,” said Kuvarika.

She also proposed that the Government should have a shift on targets from revenue collection to driving more production intentionally.

“If you look at the past national policy, the growth rate was 2 percent per annum. If you look at this year, the current policy is also proposing 2 percent per annum growth. We do not believe that is a shift towards an upper-middle-income society.

She said the local industry’s goal was to operate in a favourable economic condition that would allow them to capture domestic and regional markets.

Adding the country needed a balanced orientation towards competitiveness which could be achieved through a stable and competitive local currency.

“We still need a domestic market capture as well as regional market capture, export diversification and integration in the regional and global value chains. We believe that these are key.”

Addressing the delegates Professor Mandivamba Rukuni said the Government needed mass industrial integration of Small Family Farms and SMEs into more inclusive and manufacturing industries proposing that the Government should find a way to incorporate the small-scale enterprises into the major economy.

He said the Government should maximise on the comparative advantage that has been brought by lithium.

“We need the economy to transition from low productivity and labour-intensive economic activities to higher productivity and skill-intensive activities. We have lithium in abundance, we need to move and have maximum returns from the mineral.

“Currently we cannot make batteries that is too far away from us, the goal is that we make lithium carbonate concentrate,” he said.

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