Procurement can create new industries

23 Nov, 2018 - 00:11 0 Views

eBusiness Weekly

The Government is easily the largest procurement entity in Zimbabwe, buying more goods and services than any private body and thus can do a lot to advance local industry.

This is known and policies have been announced on several occasions, but little has been done. Local content has largely been limited to selecting the local agent for imported goods and services and about the only value added is the fee that this agent pockets for processing the paperwork, hardly a major input into industrialising Zimbabwe, creating employment or adding to the pool of local skills.

Yet with a little forethought, probably putting in place multi-year contracts, and far better co-ordination between ministries and parastatals than we have yet seen and Zimbabwe could benefit a good deal from a well thought out and implemented policy.

To take a big example, vehicles. There are two vehicle assembly plants in Zimbabwe, both underused, and despite policies to use them more for Government procurement they are not the leading suppliers of Government and parastatal vehicles.

Local assembly requires good volumes to be cost-effective. With orders for small batches of vehicles, each largely different than the previous batch or the next batch, there is little leverage on global vehicle companies to set up local assembly lines and even see what can be made or finished in Zimbabwe.

This was not the case in the past. In the 1960s the police operated just two models: the big Austin Westminster A99 sedan as a patrol car for urban areas and the highways and the old short wheelbase Land-Rover, before it was tarted up as a rich man’s Defender, for rural roads and riot control.

The Westminsters, assembled in Mutare, ran for 1,6 million km with an engine overhaul every 160 000km. The Land-Rovers were identical to the models used by district administration, national parks, the army, the agriculture ministry and every other Government department that needed a tough four-wheel drive vehicle.

In those days Government vehicles were expected to last a decade, and they did. Standardisation made maintenance and servicing simple and cheap.

We can do the same now. The Office of the President and Cabinet working with the Treasury could assemble a master list of vehicle requirements for the next five years from all ministries, departments and parastatals.

The list would be based on function, without specifying make or model. A technical and financial team would then combine specifications and come up with a list of around five or six vehicle types on two or three platforms. A platform is the vehicle without the body; a single cab pick-up, double cab and SUV might all be the same vehicle with just some body panels changed. Manufacturers could be approached with a probable five-year order and told to bid with local assembly and preferably some local manufacture of things like radiators, petrol tanks and tyres. Once you start talking about an order for a few thousand vehicles interest rises.

We could encourage badge engineering as well. Those old police Westminsters were sold in a civilian version. But there was also the same car, called a Wolseley, with a different radiator grill, small trim changes and a significantly more luxurious interior. This was a popular executive car and, if demand had been there, the Mutare plant could have assembled the same car in a Princess version, with an interior coming close to Rolls Royce standards.

With lower forex components and a missing middleman’s fee, the private sector would probably be interested in adding its orders and the combined volume might well make design changes, such as a higher ground clearance, a serious possibility. And suddenly Zimbabwe has a motor industry with several hundred men and women moving into skilled employment building, painting and finishing most of our cars.

The Government could do the same for something as simple and mundane as bond paper, all imported in boxes of five reams. With a Government multi-year order on offer, it would probably be worthwhile for some Zimbabwean industrialist to bring in the precision cutting and packing machines and then import reels of bond.

Again with local value added and lower forex costs the private sector would probably jump on board with its orders, simply to save money.

There are many other products where the potential Government order is so substantial that local inputs become financially viable, so cutting costs as well as creating jobs and industries.

But it requires in many cases for the combined Government order to be available for bidding on and for the tender process to include extra points for adding value in Zimbabwe.

Ideally some input from the Zimbabwean private sector on its requirements would help give potential bidders, basically investors at this stage, a better idea of the potential market if they managed to get quality and price right.

All of this would give Zimbabwean taxpayers a bit more for their dollars, such as creating jobs for their unemployed relatives and freeing up some foreign currency for other uses, plus of course creating new taxpayers to help spread the load. That is known as a virtuous cycle.

All that is required is better Government co-ordination in what it buys and how it buys it; some form of multi-year procurement budgeting; and a willingness by the political and financial centres in the Government to create and enforce a sound and systematic policy.

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