Industrialization, the path to better income

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Vince musewe

There is no doubt that without a fundamental structural transformation of our economy from a dualistic enclave economy, whose economic activity is mainly driven by the production of primary products, to an industrialized economic base, we will remain unable to meet the needs. growing needs of our population and create higher sustainable incomes.

Although Zimbabwe has had a number of industrialization policies, the lack of political traction, access to long-term capital, and strong and aggressive private sector leadership have resulted in de facto deindustrialization and the proliferation of cheap imports as thousands of jobs and income have been lost.

This is evidenced by empty factories and a booming informal sector which today accounts for around 80% of economic activity and employment.

Radical economic structural transformation (Repos) is now necessary to reinvent and modernize our industrial base. In doing so, we must take into account both our history and the future.

Our new industrial policy must learn from the lessons of the past while embracing the Fourth Industrial Revolution so that we can leap forward and use technological advancements to recreate our economy.

We have to learn from our past. The industrialization of the economy under Ian Smith is such a past.

A key policy was that of vertical integration of industry which ensured that no raw material left the country as a policy, which meant that the country had to first develop the capacity to process them.

This has been achieved by investing heavily in infrastructure, particularly in the rail network, electricity and water.

Our lesson here is that we need an informed and holistic strategy on vertical industry integration that is not implemented. ad hoc, but takes into account what needs to be in place first.

In many cases, this government announces good projects without first ensuring that it has the capacity to implement them.

It also does not do enough work to ensure that the implementation does not create unintended negative consequences that derail or immunize the intended results.

We must think clearly and anticipate before acting. Inconsistent government policy clouded by hidden vested interests remains our central problem.

We must embrace the future. It is a fact that the industrial world is at the heart of an important revolution regarding the way products are manufactured mainly due to the digitalization of the manufacturing process.

The fourth industrial revolution, or simply Industry 4.0 (invented in 2011 by a German initiative of the federal government with universities and private companies), is currently taking place in the manufacturing sector.

We must therefore take note of it and anticipate its potential impact on our development plans and prepare accordingly so that we are not left behind.

Import substitution is essential and must be a deliberate and clinical strategy within a given time frame. We cannot create a new economy by importing things that can be made here. However, an import substitution strategy can only be successful if there is full cooperation between the government and the business sector.

A symbiotic relationship between government and the business sector is always a critical success factor where government facilitates and facilitates the implementation of economic projects of national interest and the private sector leads through investment and capacity building. in the targeted sectors.

Our local businesses should only import if it is proven that they cannot source locally, as this will further encourage local sourcing companies to expand.

On the issue of access to capital, we must ensure that those seeking to replace imports have access to patient capital without undue pressure and at reasonable costs. An import substitution fund, for example, with favorable repayment terms would work well.

The five key principles of rest include:

First, it is important to target support and protect economic activities that generate increasing returns.

The export of primary products to developed economies keeps poor countries in poverty and they must move away from those economic activities which create diminishing returns and move towards manufacturing and service sectors which create increasing returns.

Diminishing returns occur when the unit cost of production increases with increasing volumes, while increasing returns are those activities where unit costs decrease with increasing volumes.

Second, temporary (non-permanent) monopoly rights, patents and protection must be granted to local businesses involved in increasing return activities, including geographic exclusivity. It is necessary to provide all the necessary support and protect these economic activities from foreign competition until these sectors are able to compete globally. This allows these economic activities to develop and achieve the necessary economies of scale.

Third, establish a manufacturing sector at all costs. “It’s better to have a poorly managed manufacturing sector than not at all. The synergies or direct and indirect linkages created by the manufacturing sector are essential for development. A manufacturing sector increases value added and GDP, increases employment levels and incomes, and also resolves the balance of payments.

Fourth, provide tax breaks for targeted activities, thereby lowering the cost of doing business. Also offer cheaper credits and export incentives for value-added exports to encourage their local manufacture.

Fifth, establish export taxes on raw materials, thereby making the export of raw products unattractive and more expensive for foreign buyers. This must be combined with the promotion of import substitution and the deliberate consumption of locally produced products. It will be necessary to develop local manufacturing capacities using these raw materials.

Under Rest, it is proposed that we create industry clusters led by implementation teams led by government-backed entrepreneurs with agreed outcomes, specific outcomes, investment budget and deadlines.

These clusters will take advantage of industrial synergies and will focus on a) local production of basic goods, b) local production of light industrial goods, c) local production of heavy industrial goods and d) industrial infrastructure and services complementary and finally e) research and innovation in line with the developments of the fourth industrial revolution. Each cluster would then have a list of all the products or services that we need to produce locally with a detailed implementation plan, schedule and budget for each product.

All of this has already been done in the now industrialized countries and all we have to do is emulate what they have successfully implemented.

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