INDUSTRY minister Welshman Ncube says Zimbabwe should go for devolution of power and economic activity in order to save industry in areas outside Harare from imminent collapse.
Ncube told businessdigest in an interview this week devolution, which would decentralise decision-making and economic activity, allows for better distribution of buying power and other resources across the country to support industry.
"The bulk of businesses find most of their customers are in Harare and lines of credit are mostly available in Harare," he said.
"Decision-making is also done in Harare."
"Apart from devolution, most importantly you need foreign direct investment to boost liquidity and confidence among investors," Ncube added. "For the past two years, we have been talking about elections and people, even local investors, say let's wait and see what will come out of the elections first. The moment we talk of elections investors become jittery, but if we were a normal country elections would not be a peculiar risk."
His remarks come after regional bank, the African Development Bank (AfDB), said Zimbabwe's economy was on a de-industrialisation path for cities outside Harare as companies succumb to huge operational costs due to huge distances from the capital.
The regional bank said in its December Zimbabwe Monthly Economic Review, shops were also relocating from other towns to Harare, a clear signal that distance from the capital city was proving to be a significant determinant of production costs.
Companies in Bulawayo continue closing shop, while recently companies have also been shutting down in Mutare.
Mutare-based Karina Textiles (Karina), which is the sole manufacturer of carpets and hand-knitting yarn in Zimbabwe, recently shut down to join other Mutare-based companies like PG Plate Glass, Zimboard, Mutare Board & Paper Mills (MBPM), Hunyani Papers and Cairns Food that succumbed to a myriad of operational challenges.
AfDB said companies with production systems requiring constant updating in line with technological developments are failing to limit production costs to levels below imports due to run-down infrastructure and under-investment during the hyperinflation era.
The bank said the closure of the monopolies like Karina and MBPM has left a void that any serious investor can easily fill after investing in cost-cutting technology.
The bank said: "There has been an increase in the number of licensed newspapers since dollarisation, yet the sole producer of newsprint in the country had to close shop in the face of increased demand for newsprint. Mutare Board & Paper Mills was also strategically located in the part of the country where access to pulp and paper was guaranteed from forestry and plantations."