The Sunday Mail
Trade Focus
Allan Majuru
ONGOING efforts by the Second Republic to structurally transform the economy from an exporter of predominantly primary commodities to value-added products will unlock the country’s export potential.
The National Development Strategy 1, launched by President Mnangagwa in 2021, is aimed at developing and domesticating local value chains.
This way, the country will be able to add more value to its export offerings, while, at the same time, improving local industries, creating more jobs and substituting imports.
Developing local value chains will also maximise revenue and provide a cushion against global shocks experienced in primary commodities.
The development of local value chains on the back of abundant natural resources should be easily achieved if all stakeholders play their part.
While domesticating local value chains is important, it is also crucial for the local industry to participate in regional value chains, underpinned by a strong industrialisation drive.
Compared to other countries in the region, Zimbabwe has enabling infrastructure that will make it easy for local industries to play an important part in regional value chains.
But why does this matter?
Entering or participating in regional and global value chains has become a key strategy for developing countries to increase their trade and attract investment from developed countries.
This emanates from the fact that it may be complex to produce a whole unit — for example, electric cars — but easier to focus on a component that is used to make the unit.
Regional value chains refer to regional production sharing. This is a phenomenon where production is broken into various stages carried out in different countries.
Companies are increasingly creating linkages, from design of the product, manufacturing of components to assembly, marketing and international production chains. By so doing, they are creating regional or global value chains.
Value chains potential
The Action Plan for the SADC Industrialisation Strategy and Roadmap (2015-2063), approved in 2017, identifies Zimbabwe as having potential for value chain enhancement in agro-processing, minerals and beneficiation, as well as pharmaceutical products.
It also notes potential for manufacturing, machinery and equipment, as well as the services sector.
In agro-processing, local companies can participate in horticulture, sugar, meat, fish, horticulture and soya value chains.
Here, there are vast options spanning from the supply of agricultural inputs and implements, provision of related services and also processed foods.
The strong linkages between the local agricultural production sector and the processed foods sector makes Zimbabwe an ideal hub for agricultural production and processing.
In minerals and beneficiation, local companies can participate in value chains related to energy minerals (coal), iron and steel, base metals, diamonds, fertilisers, platinum and cement.
Currently, minerals and alloys account for the largest share of exports.
While most of these minerals and alloy products are exported as raw materials, there is potential for the sector to contribute more to exports and economic development through value addition and beneficiation.
In terms of the pharmaceutical products value chain, the Action Plan for the SADC Industrialisation Strategy and Roadmap identifies Zimbabwe as having potential in antiretroviral (ARV) and anti-tuberculosis (TB) drugs.
In the manufacturing sector, Zimbabwe is identified as having potential in leather and leather products, as well as clothing and textiles. There are further opportunities in vehicle products in the capital goods sector, including service sectors such as tourism, financial services and information and communication technologies.
For local companies planning to take part in these sectors, emphasis should be on understanding the entire value chain and what is required to take full advantage of export opportunities it presents.
Opportunities
With opportunities available under the African Continental Free Trade Area (AfCFTA), Southern African Development Community (SADC) and Common Market for Eastern and Southern Africa (COMESA), Zimbabwe will also benefit more due to its land-linked status.
Zimbabwe’s trade is mainly concentrated in SADC, hence value-chain strategies will act as a catalyst to assist the country in expanding its industrial base, diversifying its export product range and pursuing unexplored African markets.
Local companies that can find a way to enter already existing value chains may be able to benefit under the Made in Africa concept, which has gained traction through the AfCFTA rules of origin.
Private businesses should take advantage of regional value chains because they are better placed to efficiently choose entry and exit points in value chains.
For example, the country has potential to be a leading player in the leather and leather products value chain through the production of finished leather.
With support, local tanneries can process leather coming from countries such as Botswana and Namibia into high-end finished leather, which can be exported to feed into the leather manufacturing sector across the region.
Although Zimbabwean companies may not be producing electric cars as other players in the region, the country has vast deposits of lithium, which is used to manufacture batteries used in electric cars.
The Government recently banned the export of raw lithium.
Instead of exporting raw lithium, local industries can build competencies in the sector and produce high-efficient batteries used in the vehicles, thus playing an important role in the production process of the cars. Our vast lithium deposits can also make us a regional hub for producing solar batteries as well.
Service sector
Discussions on participation in value chains cannot be limited to the manufacturing sector as there are also huge opportunities for the services sector.
Local players could build competencies in available human capital.
For example, there is room for some local businesses to expand into regional markets by offering marketing and communication services such as operating a regional call centre for companies across the continent.
With faster internet in all parts of the country, a company operating in towns such as Zvishavane, Mutare, Gweru, Bindura or Chinhoyi will be able to offer services without moving its staff across the region.
There are also opportunities in the education sector. There could be exportation of study programmes and online learning targeting foreign students.
This can be benchmarked and modelled around existing frameworks used by leading online institutions such as the University of South Africa, which services over 130 countries. Zimbabwe already has a decent pool of qualified professionals.
For example, our country has an opportunity to export teaching services to regional markets, particularly in subjects such as English, Mathematics and Science.
Markets such as Angola, Mozambique and Namibia have a high demand for English teachers.
Going forward
To improve the participation of local companies in regional value chains, they need to identify their entry points based on resource endowments, capabilities, capacities and skills.
The private sector should participate in areas where it can easily attain best value based on comparative and competitive advantages. There is also need for further support to private sector players through infrastructure upgrades and retooling to improve current manufacturing capacities and enhance competitiveness.
Reinforcing the institutional support infrastructure and strengthening research and innovation will also go a long way in improving the country’s participation in regional value chains.
Allan Majuru is the ZimTrade’s chief executive officer
