SOMEWHERE on these pages, we discuss how authorities can assist local companies to take full advantage of the African Continental Free Trade Area (AfCFTA), the huge US$3,5 trillion market presented for all countries to exploit.
Opportunities aplenty, as are the risks. Without the right support, there is also the possibility that the same market could lead to the collapse of local industry if they are not in a position to compete with cheaper alternatives from other AfCFTA member States.
Zimbabwe’s manufacturing sector has fallen on hard times, afflicted by the economic crisis over the last two decades. The southern African country has gone from being a highly industrialised country in sub-Saharan Africa at independence in 1980, in fact the second most developed after neighbouring South Africa, becoming among the poorest after undergoing rapid decline because of economic meltdown.
Its low manufacturing capacity utilisation means that local industries cannot compete with regional peers from Zambia, South Africa, Angola and Namibia that have enjoyed longer periods of economic and currency stability, and policy consistency.
Zimbabwe’s post-independence growth was underpinned by agriculture, mining and manufacturing sectors that have been most hit by poor policies and political ineptitude. The manufacturing sector has almost disappeared and its potential has been largely ignored by the authorities.
According to the National Development Strategy 1, which was launched in November last year, manufacturing contributed 25% to the gross domestic product (GDP) in 1990, but has fallen to just 10,6%. The fall of the manufacturing sector has been partly blamed on the influx of cheaper finished products, mostly from South Africa and China.
But mainly, the sector has suffered from governance failures that created political instability, sporadic hyperinflation over the last two decades which also decimated consumer spending power, an unfavourable tax regime, globalisation, obsolete machinery, rolling power cuts, lack or unavailability of funding for retooling among others.
With a shrinking domestic market and economic fundamentals that continue to worsen, there has been little incentive to revive local industries.
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But the advent of the AfCFTA at the start of the year has changed the ball game, and it is time to rebuild the industrial base and exploit the new opportunities it presents.
The trade agreement presents a huge bloc that cuts across Africa’s 55 economies with a combined 1,3 billion consumers and a combined US$3,2 trillion GDP.
It compels member States to remove tariffs from 90% of goods entering their markets from the region, allowing free access to commodities, goods and services across the continent.
For Zimbabwe, AfCFTA should not just be a bloc, but an opportunity to revive its rusting industries, create employment and allow the innovativeness of its population to lift the economy out of poverty.
NDS1 is targeting to increase the contribution of the manufacturing sector to GDP from 10,6% to 15% by 2025. It also hopes to ramp up value-added exports from US$727,47 million last year to US$1,3 billion in 2025. The policy is skewed mainly towards reviving agriculture, which provides over 60% of raw materials to industry.
But government must spread the opportunities to the wider economy and country to address a disturbing trend highlighted by NDS1. As of 2019, about 46% of Zimbabwe’s manufacturing firms were located in Harare as a difficult operating environment led to some companies to either close shop or relocate to the capital.
AfCFTA presents real opportunities, it is up to government and industry to seize them or watch other countries exploit our weaknesses. Zimbabwe cannot afford to remain a net importer given its natural endowments.
The local industry requires US$2 billion to become competitive again and return to full capacity, and government needs to make that available or put in place conditions that make it possible for local firms to borrow and become competitive.
