eBusiness Weekly
Clifford Shambare
I spent the juvenile part of my life during the end of colonial Rhodesia. As black people, we were used to a tough life then. But ironically, we were lucky to observe how a government could successfully deal with adversity.
In this respect, the Rhodesians were innovative and excellent at import substitution, a strategy which they adopted in order to deal with the economic sanctions that the British had imposed on the country because of Unilateral Declaration of Independence (UDI.)
By 1978 almost over 90 percent of the products traded in the country were made locally. The drop in quality was palpable but since there was no room for quibbling, everybody had to go along with what was available in every sphere of their life.
After political independence, the country was opened up to virtually the whole world. At that time, it got a lot of sympathy from the West, starting with Britain herself. Over time, a lot of foreign manufactured products started coming into the country. It was during this period that some Zimbabweans – those who considered themselves well heeled economically – started to develop an unquenchable taste for imported products.
Sadly, instead of gradually dying off, these tastes have only grown to what I feel is an uncontrollable level today. It is under these conditions that Zimbabwe is now importing an untenably high proportion of finished (consumable) products from outside the country, particularly from South Africa. Unfortunately for us, these goods have to be purchased with foreign currency.
Because of this state of affairs, the country is now short of foreign currency, specifically the US dollar. This shortage of foreign currency is in turn, leading to a failure to import enough of the same finished products with which to stock the country’s retail outlets.
Meanwhile, the exchange rate continues to fall, thus making these goods too expensive for the local consumer to afford. Concomitant with this negative trend is the said scarcity of foreign currency – a condition which makes the exchange rate continue falling through the currency demand, supply and price relationships.
The black market activities and the exorbitant EcoCash service charges are only worsening the situation.
In the March 20-25, 2020 issue of this paper, Luke Ngwerume, the chairman of Axia, a company that imports grocery products for the major retail outlets in the country – that is, OK’s, Pick n Pay, and others – revealed that they were now going to substitute imports with locally manufactured products.
Now here is where the matter becomes interesting, though sad. And the obvious questions to ask here is this; what had caused the directors to adopt the strategy of importation and not that of producing the said goods locally, in the first place?
This question is partly, but not completely, answered by Ngwerume himself, who explains that the imported products are cheaper than the local ones.
So the next logical question to ask here is this; what are the reasons for this situation? To me, there are a number of them; here they are:
l The high price of foreign currency on the black market.
l The importation of raw materials with the same expensive foreign currency.
l More efficient production processes and economies of scale in South African manufacturing plants, where most of these imports are coming from – than in the local ones.
Moreover, in some cases the South African manufacturers may be selling the same products at below cost (of production) prices to displace Zimbabwean manufactured goods from Zimbabwean supermarket shelves – a practice they indulge in with the goods they export to foreign countries . (I got to know this fact during my business school days there).
At this stage, we come to the Fox Trilogy question. Among these factors, which ones are within our sphere of control, and which ones are not?
I believe this question has no straightforward answer. However, in a certain sense, all these factors are within our sphere of control, but not all at the same time.
For example, with enough willpower, and consensus among the stakeholders, we can deal with the black market challenge almost immediately. However, this is easier said than done since the underlying cause is the depressed economy with a very low employment rate-a situation which makes people depend to a large extent, on such activities. This is one strong cause of the vicious cycle, anyway.
As far as raw materials are concerned, there are some that we could easily produce locally. Most of these are in the agriculture and mining industries.
The last reason regarding plant efficiency will be more difficult to deal with – at least in the short to medium term. Be that as it may, currently, according to the industrialists, we are not using the full capacity of our manufacturing plants.
So this situation implies a number of things. It either means there is a shortage of raw materials, or working capital, or skills, or all three.
On the other hand, we are always being told that our machinery is now old and in most cases, this is a fact. However, this is not the whole story, so let us go deeper into the issue here.
You see, even though we are fond of carelessly referring to this economy as ‘ours’, our situation is not as straightforward as some of us would want us to believe.
In this respect, remember what I said about the Caucasian element that is embedded in this economy. These are still the de facto owners of the same economy. And they fall into several categories.
Some have either locked up their plants and left the country, and in the meantime, are waiting for the return of better times – times which have been rendered almost surreal by the effluxion of time since during this same period – a whole generation – some of them have reached retirement age, or have died.
And unfortunately for us, among the majority of those who have left the country were the artisans – the life blood of any economy.
At this juncture, let us look critically into an area that I feel is a very critical aspect of our case – an area that we have, for some strange reason, tended to gloss over.
As the indigenes of this country, the types of businesses we were allowed to – or were able to run, were in the retail and transport sectors, operating mainly in the rural and high density areas of the urban centres, then referred to as locations or townships.
Sadly, after racial segregation was removed in the country – we did not take this opportunity to seriously become involved in the manufacturing sector by forming our own viable manufacturing firms. And now we are virtual dead ducks in our own country.
This is a country where we are now ironically, even questioning our status of freedom because of hunger and poverty. This is the same country where we are pining for the return of the colonists in the form of FDI. This is a painful fact that one cannot deny with a straight face.
At this point, I know you may now be asking, so what? We must stand up and start to be seriously involved in running this economy; but how to do this is the crucial question?
To my mind, if one is in such a predicament as ours, they have to bite the bullet. They have to start doing certain things that they may have been avoiding in the past. Practically, this means thrift in all aspects of their life, starting from food, to the type of vehicle one drives to work or for pleasure. This practice should be by everyone without exception!
I know that some of us might try to avoid taking this action but the Japanese set us a good example when they insisted that the senior government officials be the first to drive the Daihatsu – a small car that enabled them to enter the motor manufacturing industry!
From there we should then prioritise the use of our foreign reserves to bring in only those raw materials that we cannot produce locally. And since most of these items are in the agricultural industry, we must seriously consider funding that industry. This is where the matter becomes interesting, though sad.
In the current era, we are showing considerable confusion regarding this matter. But why and how, you may be asking?
You see, some of us want this economy to fail, no doubt about that! Their reasons for wanting this outcome are varied. Some are political, while the others border on the ‘grapes are sour’, as well as the ‘I told you so’ attitudes.
The overall results of this state of affairs are as follows: Firstly, we shoot ourselves in the foot, as the adage goes. This means doing those things that we think will hurt the next person but end up hurting us the most (Remember Ndibvisei Ziso article).
Secondly, we fail to adopt relatively straightforward strategies to enable to us resuscitate this economy. Here let us refer back to the agricultural industry.
You see, it should not be impossible to resuscitate this industry since most of the major ingredients are there already. These are relatively fertile soils, adequate water reservoirs, farming skills and farm equipment. I know that the level of the latter is currently not adequate but there is enough to start the ball rolling.
However, the procurement of working capital and the other inputs is currently a challenge, but still, this is not an impossible feat to achieve under the current circumstances.
In order to better appreciate this line of argument, let us do a crude analysis of the agricultural system of this country.
There is a total usable area of some 33 million hectares, of which 3.9 million hectares are arable, the rest being suitable for ranching and game farming.
My rough calculations inform me that we can produce enough with US$3.9 billion dollars, excluding capital costs. According to available information, in 2018, the Zimbabwe government spent US$ 238 million on crop production through its Command Agriculture programme.
This amount is obviously, far short of our requirement, even before factoring in capital and depreciation costs. This situation shows clearly, where our challenges lie as far as the resuscitation of the agricultural industry, and ultimately, our economy – are concerned.
It definitely means that if we upped our agricultural funding level by an amount even well below 100 percent, we would be on our way towards the full resuscitation of our economy. But alas, this cannot be under current circumstances!
Judging from this elucidation so far, it becomes reasonably clear that a good part of our challenge is attitudinal here. As proof of this argument, refer to my last article in this paper, ‘Of partnerships, ownership and control’.
But still, this elucidation so far, does not provide us with a complete answer to our challenges. So here I want to make some suggestions.
To begin with, there is a serious need for government to negotiate with the private sector and revisit our private contract farming model(s) to see if the funding levels can be raised from that direction.
Secondly, our pension funds such as NSSA, must be made to invest more in the industry. These are organisations that now want to invest outside the country, of all places! Incidentally, these same entities currently handle a lot of public funds.
Sadly, the same entities have a history of mismanaging these funds through theft by management and politicians as well as investing in redundant companies.
Thirdly, Agribank needs to be resuscitated, but with better management than has been the case to date. And fourthly, CBZ’s management of the Command Agriculture programme needs fine tuning to plug the loopholes through which funds are currently being lost.
Fifthly, a way of curbing the side marketing activities that are slowly and subtly bleeding the agricultural industry, needs to be formulated and implemented without delay.
So, with enough insight and willpower, we can do it, cant we!
Clifford Shambare is an agriculturist cum economist and is reachable on 0774960937.
