eBusiness Weekly
Clifford Shambare
In this last instalment of our subject: “Stabilising the Zimbabwe dollar through manufacturing”, I am going to proceed along the lines of my original argument that manufacturing holds the key to that objective through the resuscitation of this industry. This is a strategy that will also hopefully, set the economy on a stable growth path — itself a necessary condition for the sustainability of same.
In order for Zimbabwe to succeed in achieving such an objective, she needs to address the issue of raw materials, especially those that form the base and anchor of the economy, the agricultural sector. Even though most of its revenues from the export of finished goods may eventually come from other industries, it is only after developing the agricultural industry to a reliable and stable state that the country can hope to succeed in this respect through the export of the former category of products. And as far as the export of finished products other than those made from agricultural raw materials is concerned, the country will need to industrialise first in order to be proficient in the production of same.
So at this juncture, let us address the production of the country’s agricultural raw materials first. Within this industrial sector, the top spot is occupied by the food manufacturing industries, below which are the textile and cigarette manufacturing industries, among a few others.
So at this point, let us focus our attention on the food manufacturing industry since this acts as the anchor of the economy. Moreover, this industry is currently the most problematic in terms of raw material supply consistency and reliability. Given our current capital limitations, we need to decide which specific area of this industry to tackle first.
Here I have in mind the vegetable oil and confectionery industry. This is an industry which happens to also supply other important downstream industries such as those manufacturing soaps, (bread) spreads, and stock feeds — with raw materials.
As a starting point, in order to make any meaningful progress here, the country needs to do some backward integration first, in which case there is a need to gravitate right down to the farm level. In applying this approach, we find that the funding system for the agricultural industry at the moment is very weak to say the least. So where should the funds come from — is the major question?
There are several models to follow here but to my mind, three of them stand out. One is state assisted funding through several channels of which Agribank and the Command Agriculture Programme — are the major ones at the moment. The other vehicle is private funding by specific companies needing specific products. That said, donor funding as well as that from some private sector organisations such as Econet and a few others, that are new entries to the country’s agriculture industry, cannot be ignored.
But so far, the last category aside, none of these three seems to be working well, why? My own observation is that state funding could have done well but for the challenge of what I want to call “resource (or input) mismatch”.
And what do I mean by this term? Like in any manufacturing business, one needs to first consider machinery, then the other inputs that (in this case) comprise seed, fertilisers and chemicals. The supply and /or availability of these four needs to be synchronised for success.
But in this case the assumption is that, as a starting point, water is available for the purpose of crop and to a lesser extent — animal production. So let us begin our analysis by looking at this input. This is an item that can come from two sources, the first one of which is natural rain, then artificially delivered (irrigation) water.
Without going into details of the matter, we know that no water, no farming, no crops, no life. In the current circumstances in Zimbabwe, rain water is no longer as reliable as it used to be, so irrigation systems with all the attendant equipment, have assumed a new criticality in the matter of farming.
Sadly, in the current circumstances, the level of talk on this subject is not being matched with action on the ground. There are several reasons for this state of affairs, the most of which is lack of adequate capital followed by lack of practical technological know-how for this function in the country.
Here the strategy that the Government is applying — that of trying to implement irrigation schemes directly as government — does not work in practice since this is not a government function; it needs private enterprise.
But we know of course, that the underlying cause of the current challenges arises from the misunderstandings that emanate from the land reform programme. So under the current conditions, the government has to find a way round the problem quickly enough to avoid economic disaster!
As far as the overall agricultural mechanization programme is concerned, let us look at the recent history of farming in the country where we find that sometime around 2007, government implemented (this programme) but somehow, it did not work well either.
Again, my own observation is that the programme — though well meant — ended up being abused through corruption by those in the top echelons of power. And if current trends are anything to go by, the Command Agriculture Programme seems to be headed in the same direction!
Let us now look at private funding. Here the results have been a mixed bag. Some companies such as Delta, National Foods and Dairibord, seem to be running well funded programmes.
However, of these three, only Delta seems to have run a well-grounded and successful programme so far. I say this because of the remaining two, there is still a serious shortage on the supermarket shelves — of those products they manufacture.
My general impression of this matter is that some companies are taking the low risk route, preferring that the farmer foots the rest of those risks.
For example, some of them insist on lending soya bean cropping funds only to those with existing irrigation facilities. On the other hand, the attitude of the new farmer seems to be one of treating soya beans as a Cinderella crop. And since most (reservoir) water is currently being reserved for winter wheat production, supplementary irrigation for the summer soya bean crop continues to suffer.
That said, one cannot help observing that the whole matter of crop production in the country is locked in a stubborn paradox. When looked at cursorily, it seems easy enough for the country to produce adequate crops for both consumption and industrial use.
To begin with, Zimbabweans are some of the best farmers on the continent. Secondly, the country possesses adequate amounts of fertile land suitable for crop production. Thirdly, if well managed overall, the amount of available water in our reservoirs should be enough to enable us to grow adequate crops for local requirements of both sectors — that is for consumption and industrial uses.
But somehow, on the ground, the results are the opposite of what is expected, why? As far as funding is concerned, (dysfunctional) politics and the banks are playing a no mean role in this negativity.
Due to its nature, politics does not need to explain its reasons for playing such a negative role. On the other hand, the banks can always cite a number of risks as their major reason for being investment shy in the agricultural industry.
The other major challenge here arises from the attitudes of black Zimbabweans who seem to be confused where land and farming issues are concerned.
I say this because soon after the land reform the programme was launched, most of them condemned it; now a good nineteen years later, some of them are slowly creeping to the farms looking for land!
That said, it is important to note that the manufacture of non-agricultural based products is just as, if not more critical, than that for the manufacture of the agriculture based ones. The former is an area where the potential of generating income to deal with our overall economic challenges, is vast.
Following this strategy one makes the observation that even a modest manipulation of our natural resources, particularly minerals, would make a huge difference to our current (economic) predicament — that of a struggling and (almost) stagnant economy.
However, this is an area where the country still lags behind the developed and emerging economies. In order to move forward in this respect, we need to industrialise.
Now, let us go on to the aspect of product quality; without meeting product quality standards, the export strategy will not succeed.
As far as this attribute is concerned, this country has the Standards Association of Zimbabwe (SAZ) to take care of this aspect. But in spite of the presence of this organization in the country, we still meet with some challenges in this regard.
For example, sometime in 2017, tests were done on locally packaged water and were found to be contaminated with harmful micro organism some of which cause typhoid and cholera! All of these water samples from all local brands, had a SAZ sticker on them.
In this case one does not want to jump to conclusions and start blaming SAZ but here are warning signs of danger, especially as human life, as well as the reputation of the country on the international scene, are concerned.
However, in spite of these challenges, the country currently exports some finished products but they are few in number and low in volumes.
Naturally, one assumes that such products currently meet international quality standards. The products concerned are furniture, leather goods, as well as food products such as fruit juices and beverages — specifically Mazoe Orange Crush — cereals, tomato pastes, peanut butter, tinned beans, packaged tea and processed coffee, among a few others.
As far as the marketing aspect goes, the country still has some homework to do. That said, starting with the African market is a logical approach given our current learning curve status and the relatively high requirements of developed economies which should be our final target because of their capacity for large volumes and high prices. This is notwithstanding the need to trade with our African compatriots.
Currently, the country has the capacity to produce soft manufactured goods, these being tea, tobacco, and cement among a few others. It also has the capacity for producing semi-durable goods such as leather and wood products, among others.
As far as markets go, there are regional markets to consider. This aspect of the matter is being addressed through African trade groups such as COMESA, ECOWAS, EAC and the SADC. As can be expected, there are some challenges that need to be addressed in this case. Some of the main ones include trade barriers such as customs and tariffs; product quality, and in some cases — language.
Ultimately, as far as the African continent is concerned, the main challenge is to do with the level of wealth of the whole continent and therefore, its states’ capacity for trading in substantial volumes of products to achieve economies of scale.
Such a state, if achieved, should enable these states to break the trend of negative trade balances as well as achieving a state of economic growth and development.
Overall, these are challenges that emanate from the low level of industrialisation of the whole continent.
These are challenges that may need to be addressed in higher level forums of the continent such as the trade organ of the AU. That said, this matter is already being addressed in the right forums, but as in most of the Africans’ endeavours, the pace is too slow for our own good!
At this juncture, I hope I have provoked enough brains to start thinking seriously about this matter — a matter that the African economies as a whole, cannot continue to ignore.
