The Sunday Mail
Talking Success
Sifelani Jabangwe
Zimbabwe is in the process of implementing the Zimbabwe National Industrial Development Policy (2019-2023), and as part of this policy, the Local Content Strategy was adopted in 2019.
The strategy is a tool that is used in industrial policies to stimulate industrial activity and or employment creation.
Local content refers to the extent of use of local factors of production in goods and services consumed or utilised in the country.
Globally, local content policies started off in the extractive sector as a way to implement resource-based industrialisation.
Norway is often referred to as an example of this approach, where it was used, after the discovery of oil, to create local capacities for drilling and refining oil.
Use of local content strategies ensures that more benefits accrue to countries that host a mine or resource.
They are also tools for implementing import substitution for economic growth.
The approval of this strategy by Government means this is now the accepted philosophy of doing business in Zimbabwe.
It is, thus, important for all Zimbabweans to get to speed with the policy as it has a bearing on all stakeholders, particularly those procuring for and heading State and related institutions that should be at the forefront of implementing Government policies.
It also has a bearing on potential beneficiaries in that they have to fight and push for local content implementation so that they actually benefit; it will not just come to them as they sit.
This is not Government policy, but a strategy for all.
It was formulated by the Government in partnership with the private sector as a tool for economic development.
Its main objective is to use our current national consumption to stimulate increased activity in existing companies, create new companies and jobs, and save foreign currency in fulfilment of the objectives of the industrial development policy.
These objectives are also in line with the Transitional Stabilisation Programme, which prioritises stimulating economic growth, employment creation and macro-economic stability.
Of course, the overarching objective is “Vision 2030”, which is to make Zimbabwe an upper middle-income economy by 2030.
Local content strategies are based on the principle that the goods we are currently consuming as a nation have been manufactured by someone in a factory somewhere, hence that factory can be here in Zimbabwe, and so should be here in Zimbabwe so that locals benefit from their consumption.
Otherwise when we build or when we eat or when we buy mining equipment or buy chemicals or buy medicines which are imported, our money will go to create jobs somewhere else, when we do not have jobs to sustain ourselves and our economy.
Local consumption can have great economic impact through multiplier effects and linkages.
These linkages can be both forward and backward.
The manufacturers (lead firms) of the goods we consume (lead products) require inputs from other suppliers; these are the backward linkages.
These suppliers employ people, creating further multipliers.
If, alternatively, the consumed goods are imported, as is the case now, rather than locally produced, then these main local suppliers (lead firms) collapse together with the rest of their supply chains.
If lead products with longer supply chains are prioritised for local content, then the impact is greater, creating more jobs for the youth, opportunities for student attachment and opportunities for small and medium enterprises (SMEs), and other entrepreneurs.
Different products have different linkages or different lengths of supply chains.
Some products have longer supply chains (high number of linkages) and some products have few linkages or short supply chains.
So obviously products with longer supply chains are desirable.
For example, a car as a product has between 10 000 to 20 000 parts.
So you can imagine the number of sub-suppliers for parts.
This is why car manufacturing is one of the major key sectors in most developed economies.
The jobs in car assemblies pay very well and induce other jobs elsewhere; thus, the multiplier effect of a single job created in the motor industry creates up to 10 jobs elsewhere in the economy.
Thus, when we import cars, the benefit of the linkages of these 10 000 to 20 000 parts accrue to the country where the car was assembled.
Similarly, if an engineering company is set up in a town to serve a mine which is in the locality, the impact can be far-reaching.
An engineer employed by this company will go and employ a barber when he gets a shave, he will employ a chef and waiter when he goes to eat out, he or she will employ a doctor and a nurse when he goes to private hospital and so on.
Essentially, the main business model of the mine is not changed, but the impact on the community will be huge due to local procurement.
This is how the multiplier chain reaction occurs.
Our consumption as a country can be leveraged to create jobs for locals.
As an economy, we are importing goods valued between US$6 billion to US$8 billion annually.
Yet we are poor, we have no jobs and our economy is under-performing.
We are creating millionaires and billionaires elsewhere in the world.
Instructively, maize and sugar — and their value chains — are two examples where our local consumption has created jobs for us.
If we consumed imported maize-meal, then all members of the maize supply chain would collapse, starting with the milling companies together with their suppliers of packaging and other services.
Farmers and grain bag manufacturers, including seed and fertiliser suppliers, would also be affected.
Thus, maize-meal has many backward linkages or a big/long supply chain which employs a lot of people.
It actually takes the whole country to grow maize that we require annually.
The imported rice that we consume does not offer any of these linkages and jobs and other spillovers.
Impliedly, the adverse impact of switching from maize-meal to rice can be easily inferred.
Again, if we consume imported sugar, then the 20 000 people directly employed in the Lowveld would lose their jobs and hundreds of outgrowers supplying main firms such as Tongaat Hulett would collapse.
Also up to 100 000 people indirectly benefitting from supplying the sugar industry would lose out.
The losers would include service providers and those providing logistics such as road and rail.
So does it not make sense to direct this consumption to create jobs for our children and create business opportunities for our people?
Food for thought.
To be continued next week . . .
Sifelani Jabangwe is the immediate-past president of the Confederation of Zimbabwe Industries. He currently chairs the Local Content Committee.
