Zimbabwe: Producers Need to Widen Value Chain

26 October 2018
editorial

ZIMBABWE and its people cannot consume their way to riches, or even to middle-income status: they have to produce to raise their standards of living and our industrialists need to start thinking about their whole production and value chain, not just the last leg with all inputs and all final packaging imported.

There are no magic wands or silver bullets. What is required is hard work directed by applied intelligence and an end to the idea that everyone is entitled to everything.

This week's liberalisation of import licences to make importing groceries easier will not make much difference since, unlike the last period of open imports, there will be no allocations from the Reserve Bank. So the final price of any new imported finished goods put on sale will be significantly higher than the same Zimbabwean processed products.

The move is more of putting in a safety valve and killing a black market than sorting out a production problem. It is useful, but does not increase our wealth nor does it create jobs.

There has been a lot of excitement over the Government's Transitional Stabilisation Programme, a far more important measure. But again people must read the title. Fiscal reform is vital to ensure that the Government can provide the essential services of a modern society without wrecking the economy. But in itself it will not create a single job or add a single dollar to national wealth. What it does do is allow the real producers, everyone from the old farmer with 5 acres to the CEO of the largest industrial conglomerate, to produce without continually wondering if they are wasting their time.

It is a necessary condition for sustained growth, but not a sufficient condition by a long way. Growth comes from production. And this requires in many cases a culture change. We can take examples.

In the 1930s, during the Great Depression, a bright Zimbabwean figured out after some experiments how to make a product using Zimbabwean oranges bought cheaply at harvest time, Zimbabwean sugar and a tiny bit of imported sulphur dioxide as a preservative and have a product he could sell 12 months of the year. Mazoe Orange was born.

When Zimbabwe was self-sufficient in cooking oil, there was a range of products. Some industrialists sold cotton-seed oil, although it does need a five-step refining process. Others had a premium sunflower oil. Others used Zimbabwean soyabean. Industrialists figured out what raw materials Zimbabwean farmers could grow and then made money processing these rather than seeking continual imports.

These days canola oil is a major product in many countries. This is made from the seeds of rape, that same vegetable found in almost every kitchen garden, but for some reason no one in Zimbabwe has gone commercial with a slightly different seed variety. We wonder why.

One company, however, has become innovative. Pure Drop has for three years signed input contracts with competent farmers to grow soya. They still need imports, but at least they have started a process that others need to join. They are not totally at the mercy of the RBZ issuing currency earned by others.

We are sure the Government would be delighted to hand over lists of farmers who have benefited from Command Agriculture successfully for private companies to sign up and so minimise risks.

It is the same with wheat. No one is stopping millers contracting farmers to grow the crop. Again the Government will be delighted to share the load and the millers, with an irrigated crop, have a near certain harvest instead of whining every week.

Tourism is now an obvious industry for quick gains. It is labour intensive as well and although many jobs are at the bottom end of wage scales they pay a lot better than selling bananas on pavements. We need to cut conference waffle and start some serious marketing and encourage serious investors into areas, such as Victoria Falls, where facilities are close to full utilisation.

The RBZ in its role as bank overseer and as the setter of monetary policies could help producers. Many banks seems more willing to lend to salaried consumers without questions as to how the money is used rather than do careful merchant banking so industrialists can buy raw materials in one swoop at harvest time from farmers for year-round processing.

The RBZ has reintroduced reserve requirements to mop up excess liquidity created by past sloppy fiscal policies.

We think it should consider variable percentages depending on loan books, with banks doing the heavy lifting in the productive sector having lower requirements than those dishing out loans for pure consumption.

Zimbabwe has come a long way from the total meltdown at the end of 2008.

But the consumer-led boom that got us back on our feet now has to give way to production-dominated growth with producers combining a lot more innovation and taking on greater responsibilities than they ever imagined. It has been done; it is possible; it must be implemented.

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