‘We need to rethink our business models’

THE Business Council of Southern Africa (BCSA), a regional grouping of business membership organisations, will convene a one-day conference in Harare on April 27 in order to further the organisation’s goal of influencing regional economic policy discourse.

The conference, which will coincide with the SADC Extraordinary Summit, comes at a time when the region is grappling with de-industrialisation and a biting lack of competitiveness in the manufacturing sector. It is believed that the Summit avails an opportunity for Business Council of Southern Africa (BCSA), the Association of SADC Chambers of Commerce and Industry (ASCCI) and NEPAD Business Foundation to convene concurrently a regional business conference around the same time.

The public sector has mainly been influential in crafting and pronouncing policy initiatives for the SADC region, but the private sector now believes that it can also add its voice over the future of the regional bloc. Our business reporter Enacy Mapakame (EM) caught up with the BCSA chairman and president of the Association of Chambers of Commerce and Industry, Mr Oswell Binha (OB), for an interview on the challenges the region faces with regards to intra-regional trade and manufacturing.

EM: What role can the private sector play in advancing SADC’s common goal on industrialisation, resource beneficiation and competitiveness?

OB: There is one critical thing that (the) SADC public sector has to understand: Private sector are the players; public sector provide the platform which the private players would partake on any business activity. As private sector, it follows therefore that we ensure public sector gets the resources. As for beneficiation, it is a new mantra that is coming to SADC. Previously the SADC agenda has been predominantly political. But Zimbabwe has come through with a very practical, non-political agenda to the SADC discourse, which is beneficiation of the region’s resources. As private sector, we see a key opportunity unfolding as we proceed in engaging regional economic activities.

EM: The SADC economy is dominated by South Africa (SA). This has tended to affect trade dynamics in the region, with countries such as Zimbabwe being net importers of various goods from South Africa. How can such imbalances be addressed?

OB: Indeed, that is a correct observation. It is both an advantage and a disadvantage to the whole region. The region has got the potential to leverage its industrial growth strategy on SA, but this requires consensus and coherent policies in the region. It also requires a paradigm shift to move from being a region of trade in commodities to trade in manufactured goods.

On the negative side, South Africa’s dominance can, in real terms, effect or crowd out industrial growth opportunities in other countries, but this can be ameliorated by building credible regional value chains. You must also understand that doing business is not charity. South Africa is creating an economic advantage around the capacity it has developed. It must also follow that other regional economies find their niche within that particular playing field to be able to create their own comparative and competitive advantage. In any regional discussions, SA is being driven by its interests and (in) 90 percent of the discussions they will be pushing towards what meets SA interests most than regional interests. But we continue to engage in the context of regional interest to ensure that we get a position that benefits SADC.

EM: There is concern that SADC economies have become virtual dumping grounds of cheap sub-standard products from emerging economies such as China and the UAE (United Arab Emirates), which have killed industrial competitiveness across the region. As the BCSA, what do you believe to be the best strategy in combating cheap imports and promoting manufacturing across SADC?

OB: Again this is symptomatic of the industrial underdevelopment of the region. The starting point would be to cause deliberate policy shocks that will bar or limit the coming in of these unworthy products into the region. Then this should be augmented by attracting meaningful investments to build our productive capacities such that we develop our manufacturing base and build economies of scale.

Personally, I have been to China several times, they can produce quality products and services. Through a policy direction, we should determine a standard and quality that can come through the borders. If we don’t do that, we are going to be exposed to these second-class goods.

On another note, obviously China’s position in the global dynamics is to get on top, and the more they come into Africa the better they are positioned because Africa is the future. Every continent looks to Africa for anything and I don’t see China drag their feet and want to play second fiddle in Africa to other continents like America and Europe. There is serious competition to get a significant market share in Africa.

EM: According to the Confederation of Zimbabwe Industries (CZI) 2014 manufacturing sector survey report, capacity utilisation is at 36 percent. What can Zimbabwean companies do to upscale production in a competitive way?

OB: One of the weaknesses we have had as a country is we have pursued sectoral interest to the detriment of the national interest. What’s important is to look at issues leading to the 36 percent capacity. They are very clear; one of them is serious supply side constraints which are impacting production lines. Secondly, lack of investment: There is no money in the market; when available, it is expensive. Then there is serious infrastructure deficiency.

We need to rethink our business models. For example, Air Zimbabwe, in my view, would not make money on its own but through other sectors – by becoming a facilitation of investment. They can facilitate movement of goods in and out as much as they are breaking even.

Traditionally we have business models driven by inter-linkages that existed between primary, secondary and tertiary industries. Over the past decade, we have gone on to dissipate that linkage because agriculture also has serious capacity issues, so is manufacturing. If you follow that value chain, you see inefficiencies that are compounding along the value chain; so, we need to go back to the drawing board and deal with that.

EM: Industry has accused some SADC member countries of abusing the SADC protocol on rules of origin. How does this protocol work, and in what way has it been abused? How can this be corrected?

OB: The function of rules of origin has been debated for too long. I can confirm it’s an area we need to engage as a region, especially with regards to cooking oil and textiles repackaged in SA. Primarily, we have to detect SA products from non-SA products. Then compliance by other member countries on their adherence to set rules and procedures has to be checked at all levels of movement of products. This, thus, requires the country and the region to invest in building economic intelligence. Secondly, if the region is losing out, as in actual effect, we are giving preference to goods from outside, instead of giving ourselves impetus to produce locally.

What it means is we are producing what we do not consume, and consuming what we do not produce.

EM: In view of the upcoming SADC Council of Ministers meeting, what can Zimbabwe and the region expect?

OB: There are multi-layers of engagement within the SADC. We have sector meetings, say ministers of finance or industry. If the region creates economic blueprints and commits to ensure they are followed, the council of ministers must ensure that those blueprints are domesticated at national level. We have the Regional Indicative Strategic Plan, but how many member state have domesticated the aspirations of that plan, 15 years down the line? Reviews show very low uptake and implementation because it has not been domesticated. We have the Regional Infrastructure Development Master Plan, which has key proposals even to national budgets, but how many of them have been taken up? So, the council of ministers must pick these up and put them into implementation. There have been serious discussions on infrastructure sharing in the region, on how we can develop a corridor from Durban to Cairo. The region has to make a properly credible process to ensure private money comes in and that it gets the value of investing in such infrastructure.

This is probably the first time in the history of SADC when industrialisation and resource beneficiation have been at the centre stage of discussion and agenda. The primary positive is the reflection of the focus on real issues that can transform the regional economy. The council of ministers is primarily the recipient and custodian of the policy matters for onward communication to the heads of state, hence, engaging them adequately would ensure that the private sector agenda is included.

EM: Where lies the greatest potential for rapid industrialisation of SADC economies?

OB: The region is richly endowed with natural resources that include a wide variety of minerals. And I see this as one of the greatest sector for industrialisation. Secondly, agriculture needs to be re-energised such that our agricultural exports are beneficiated. We have a human capital demographic dividend that we could take advantage of. All we need is to create a common dashboard and see how we take advantage of these opportunities as a region. The platinum market is dominated by SADC, that is Zimbabwe and SA. We also play a critical role in the diamond market. These are areas of opportunities and comparative advantage. We need to create regional policy framework that speaks to our political discussions and get political commitment to be able to foster them.

EM: SADC countries consist of several economies with different national priorities. Some have bilateral agreements with non-SADC countries that may not necessarily reflect common regionals, for example, the Economic Partnership Agreements with the European Union. How can these various competing national priorities be harmonised into a single common economic SADC target, with what success?

OB: EU has a big weakness – lack of raw materials, and their propensity is to take advantage of those from Africa. Intra-African trade is between 10 percent and 12 percent. Sadly, intra-regional trade is possibly under 5 percent. But look at other regions – around 60 percent for intra-EU trade. What we need to do as Africa is accelerate trade among ourselves, simplify trade regimes and facilitate the movement of goods and people within the region. Once we do that, we would have created capacity that we are supposed to have to engage on bilateral or multilateral agreements.

Right now the biggest threats to continental free trade area are these bilateral agreements with the EU. We have this multiplicity of agreements that are impacting local initiatives in Africa. Our suggestion as private sector is member states must move out of these commitments and probably prioritise intra-regional trade. Zimbabwe has reached out to SA, our biggest trade partner, although there is a trade imbalance. These are supposed to be discussed throughout the continent.

Once we do that, any other agreements outside the continent will come as a second priority.