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Harnessing farmers, entrepreneurs and innovation to change the structure of our economy

15 May, 2022 - 00:05 0 Views
Harnessing farmers, entrepreneurs and innovation to change the structure of our economy

The Sunday Mail

President E.D. Mnangagwa

CZI vindicates RBZ forex auction

The latest sector survey by the Confederation of Zimbabwe Industries (CZI) notes that capacity utilisation in the manufacturing sector jumped to 56,52 percent in 2021, up from 47 percent recorded the year before, in 2020.

Currently, it stands at 66,6 percent. Industry is growing. The same survey goes further: firms invested US$147 million towards new capacity, creating a capacity gain of 25,6 percent.

Because of this sterling investment activity, 57 percent of manufacturing firms registered an increase in sales, with the whole sector realising a 5,5 percent increase in exports, that is, from US$383 million in 2020, to US$404 million in 2021.

A key detail struck me from the CZI survey: much of the US$147 million invested in new capacity came from the Reserve Bank of Zimbabwe’s foreign currency auction system!

This is salutary, given negative comments we often get on the foreign exchange auction system.

Why forex auction?

We created that system to help industry retool, and to increase its access to affordable raw materials through better access to foreign exchange.

While the auction system has not always been able to disburse on time, and while we have had a few miscreants who have sought to abuse it, the overarching goals for which the facility was established are beginning to be met, with remarkable impact on the economy.

Converged Exchange Rate

Increased industrial activity will go a long way in meeting our import substitution goals; in enhancing our overall economic performance through value-added exports, and of course in creating more employment, especially for our youths.

While the auction system has created another exchange rate in the economy, thereby causing possible arbitrage, this is a matter we are looking at.

Conquering new frontiers in Agriculture

With industrial activity now well in train, we need to keep raising our sights in the direction of new targets and frontiers.

We must not be complacent; rather, we must keep moving, challenging each and all sectors to do more, and to break new ground.

One such sector we must challenge is that of Agriculture. As Government, we have sunk in huge amounts into this vital sector. Both public and private sectors have played a key role in ensuring our farmers, big and small, are supported. When we factor in related investments in water and irrigation systems, the agricultural sector has been the most preferred.

This is as it should be; we are an agricultural economy and country. Besides, our national food security and self-sufficiency is uppermost.

From raw material supply to value chains

We must now do more. We usually say agriculture is the source of raw materials for our industry. Yet it is, or should be, much more. Because of lower entry barriers and because of our farming tradition as a people, this is one sector which enlists the participation of the majority of our people.

With the Land Reform Programme, agriculture has become a key sector for capital formation for most people and families. And because of the many value chains emerging from it, this is one sector holding many possibilities for numerous start-ups.

It is thus more than a mere source of raw materials; it is itself a site of significant capital formation, much of it investible.

There is thus a yawning gap in our agricultural ecosystem, a gap we now have to plug.

Stocking grain or processing it?

Presently, we see many trucks delivering grains to our Grain Marketing Board depots and collection points.

We see many stockpiles of grain at these collection points, with bigger stocks sealed in our silos. Part of these go towards our Strategic Reserves.

That is understandable. Yet we often hold grain far in excess of our Strategic Reserve requirements. This excess grain remains stockpiled, creating a huge opportunity cost by way of value-addition opportunities we forego, including on farms which produce the grain in the first place.

Breaking the enchanted circle

The farmer has remained on the farm, wedded by both tradition and fear to primary grain production only. Fear to venture beyond production of primary agricultural commodities, into manufacturing, into value addition.

Even his or her sense of investment has hardly gone beyond buying new farm implements, and increasing his or her bank deposits.

That false circle of enchanted comfort within which the farmer circulates now has to be broken.

The fat deposits which he or she enjoys daily, forgetting the risks of money illusion, must now venture into new investment domains, preferably along agricultural value chains.

He or she must exit the traditional comfort zone as a primary producer, must migrate from the green countryside to venture into the grey and sooty zone of the industrial wheel and smoke. This is what has changed China, enabling it to move billions out of poverty through on-farm, rural industrialisation.

Story of Farmers’ Co-op

The Rhodesians did as much. Their politics were predicated on the farmer. Through a proposition called the Farmers’ Cooperative — now Farm and City — countryside capital formation and retailing efforts by white farmers found expression into towns and cities.

Initially, that countryside capital went towards factories in which farm implements were fabricated.

Capital from farming was harnessed to generate technology solutions which upgraded agriculture. With time, farm capital diversified into the manufacturing of basics for white Rhodesia, even breaking into the frontier of exports.

In the end, the Rhodesian farmer supplied raw materials to industrial propositions in which he was a shareholder, owner or both.

The farmer became the key beneficiary all the way through the agricultural value chain. That way, the structure of the economy transformed to agro-industry we talk about today.

Rural industrialisation for Devolution

We are not Rhodesians; we are Zimbabweans. Yet models have no totems or patents. Models go into the pool of human experience from which any and all can draw. Why haven’t we? We have taken a conscious decision as Government to qualitatively transform our countryside, principally our rural areas, where the majority of our people live. This is what the Policy of Devolution is about: namely to trigger and predicate economic activity in each province on resources and competitive edge which each province wields. We have gone further. We have intimated another sub-policy to buttress the main Devolution Policy. This is RURAL INDUSTRIALISATION.

Stemming rural-urban migration

By Rural Industrialisation, we simply mean starting or launching industrial activity in rural areas, based on factor endowments in each rural space. Those endowments become the definers and drivers of the industrial activity we envisage in any one area. Our objectives are multiple.

Firstly, we want to stem the baneful rural-urban migration which saps growth from the African countryside, transferring it to towns and cities.

The colonial model where the youths desert their places of birth in search of livelihoods in alien environments of towns and cities, have kept the countryside as backwaters.

That debilitating model must now give way to a Zimbabwean model where one’s place of birth is also one’s place of bread.

Factors already in place

We have made salutary head starts. Most schools are already there in our rural areas. More and more tertiary institutions, including vocational training centres, polytechnics and universities, are being sited and set up in rural areas.

Through Rural Electrification Agency, REA, the national electricity grid has penetrated many rural areas.

We already have several growth points, each of which is gradually turning into sprawling semi-urban settlements. At the back of all these, we are developing several irrigation projects from dams we continue to build in each province. All the factors and infrastructures for rural industrialisation are slowly but surely falling in place. We will do more on that front, until everything needful is in place.

Industrialisation for social justice

Secondly, we aim change and spread the geographic or spatial location of value chains and value addition activity nationally. In essence, Devolution Policy rejects town- and city-centric models of growth and development, for more geographically dispersed and geographically even models. This is much more than geography; it is social justice through evenly spread economic activity that leaves no one, no community and no demography behind. The colonial models where Harare, Bulawayo, Gweru, Masvingo, Mutare and to a lesser extent Chinhoyi, Bindura, Marondera, Gwanda and Beitbridge were sole nodes of economic activity, all set against vast hinterlands of rural paralysis, should now be a thing of the past. We now need a new and just nexus connecting country and city.

Tackling the Economic core

Thirdly and critically, our economic measures have tinkered with peripheral issues. We now need to tackle the core of the national economy.

Clearly, there are structural issues governing and constraining us as a people, issues that have consigned us to the margins of the national economy. We now need to tackle the real economy: that vital strategic space where goods and services are made for markets.

That space where laws of supply and demand should rule; indeed that space where the seller meets the consumer on equal, mutually checking terms. Both the current mayhem in global supply chains, and the volatility we have experienced in our economy, must spur us to do the urgent and needful in the deep economy.

The bane of monopolies

Our economy reveals multi-layered, structural disequilibria both at real and financial levels.

This is what spawns repeated cycles of instability and volatilities, whatever the state of our fundamentals.

Indeed, this is what makes us a comparatively better earning economy yet one that suffers repeated bouts of imbalances.

There is wanton indiscipline and defiance bred by the unchallenged sway which some corporates, both in the real economy and the financial sector, have on the market.

That sway comes with entrenched monopolies and monopolistic malpractices. It doesn’t matter which sector you look at: we are a one-enterprise, all-key-commodities producing monopolies dictating to the national markets.

This imperfect market has now gone mad, as laws of supply and demand are flagrantly suspended by a few producers who act singly or in concert, often with the blessings of our banks.

They now dominate entire value chains, reducing the rest of us to hapless price-takers. They even wield veto power on monetary policy and choices of currency for daily trade.

Those of us holding elective office watch with alarm as these few, all-powerful corporates flout national laws, sneering at decisions of regulatory national institutions, and even try their hand on national politics. This we cannot allow.

Sponsoring competition in the Economy

The time has now come to initiate and promote competition in our economy.

This requires a combination of laws and certain investment instruments and decisions which are State-led.

We must now show readiness to fully support investments aimed at breaking monopolistic tendencies in this economy.

That means growing many producers of key commodities; that means multiplying actors in any one sector and sub-sector, for genuine competition which benefits the consumer.

Therein comes our farmers, young entrepreneurs and others already in business who might want to diversify their portfolios.

In all this new thrust, we must show a partiality for rural industrial investments, particularly at growth points which support core primary activities in any one province.

Before long, we should see wisps of industrial smoke in the countryside, including on farms where raw materials are produced.

Last week, I saw this at Nyabira where a bioceutical plant has been built, with the assistance of Swiss investors.

This is just one example, but one pointing to immense industrialisation possibilities we have in the countryside, closer to sources of raw materials and other inputs.

What then is to be done?

FIRST, the Ministry of Industry and Commerce must speedily work together with all Ministers of State, ZIDA and ZIMTRADE to map value chains province by province for consideration by Government as a matter of urgency.

SECOND, preferably in the Mid-Term Budget Review, the Ministry of Finance and Economic Development must work on operationalising the much-stalled Sovereign Wealth Fund, setting up Venture Capital Fund and, in consultation with Ministries of Industry and Commerce and that of Labour and Social Welfare, advise Government on instruments and agencies already in place which require refocusing and realignment in readiness for funding and implementation of rural industrialisation.

THIRD, together with the Ministry of Foreign Affairs and International Trade and related agencies, Ministry of Finance and Economic Development to develop incentives for both local and foreign investors who elect to invest in value chains for rural areas, and in sectors manufacturing basic commodities, to bring about the much-needed competition.

FOURTH, the Ministry of Women’s Affairs, Community, Small and Medium Enterprises Development must work with both Finance and Economic Development and Industry and Commerce to locate SMEs within mapped rural value chains and strategic areas manufacturing basics for the national market.

FIFTH, Ministry of Higher and Tertiary Education, Science and Technology Development must conduct skills needs analyses to underpin mapped value chains for training, technology development through innovation hubs, as well as the identification of supply markets for appropriate machinery to power rural industrialisation.

Ministries of Finance and Industry should facilitate acquisition of capital goods required for mapped value chains, using resources from the Venture Capital Fund and other instruments.

SIXTH, The Ministry of Lands, Agriculture, Fisheries, Water and Rural Development must participate in all these activity areas, including triggering agricultural activities which support mapped value chains.

SEVENTH AND LAST, in this new thrust which aims to grow our production base both for national and export markets, partnerships which empower Zimbabweans, principally our farmers, our youths, graduates and our women, must be encouraged.

Challenging reigning orthodoxy

All in all, training in entrepreneurship, as well as venture capital partnerships in start-ups, must be intensified.

The facilities we have put in place, or envisage must go beyond reinforcing imperfections in the current economic set-up; they must challenge the reigning business orthodoxy to create new realities. Whatever challenges we face, whether from global shocks or from local imbalances, must now draw the best out of us as a people, indeed spur us to new horizons where we become the investors we have been waiting for.

Yes, where we become the jobs we have been hunting for!

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