EDITORIAL COMMENT: Time to dump the UDI economic model

Minister Bimha

Minister Bimha

ZIMBABWE’s new industries cannot just be revamped failed industries or be creations of past policies, as Industry and Commerce Minister Mike Bimha so clearly stated this week.

As the minister noted, a lot of Zimbabwean industry was the result of UDI industrial policies which stressed getting around trade sanctions.

Far too many of these industries used second-hand or obsolete equipment sold by sanctions busters on the market. And then generations of managers came to the top reckoning they could cope and did not have to make reinvestment a priority, largely because import controls gave them a captive market and prevented potential Zimbabwean competitors from importing better capital equipment.

And the whole industrial policy was built around import substitution, rather than adding value to Zimbabwean resources that were already being exported.

So when the economy was opened up, a lot of built-in problems became critical. Badly managed companies found that neither Zimbabwe nor the world owed them a living.

Industries producing sub-standard products at high prices went under, deservedly so. And some smart managements, with foresighted shareholders, took advantage of the openings to modernise, upgrade, make judicious investments and move to the top of local rankings.

Sometimes rebuilding an ailing industry makes sense. If that industry was using Zimbabwean raw materials, making quality products at a proper price and only failed because of bad management or inadequate investment then it can be rebuilt, with new owners and new management if necessary as well as new equipment and new product lines. Such an industry would fall within the parameters set by Zim-Asset.

But it might be a completely new start-up doing better what was done before. For example, there is obvious room for Zimbabwean cotton to be turned into thread and fabric. Whether the correct way forward is to rebuild David Whitehead or start a whole new company is not that important. What is important is to find people who know what they are doing to invest.

Industrial policies should neither protect dinosaurs nor guarantee anyone a market. What they do need to do is make it easy to invest, make it easy to open businesses and make it easy to wind up the failures so that resources can be released to those who do know what they are doing. So long as we open more new industries and factories than we close we are moving forward and are no longer creating industries that will need special support forever.

The Industry and Commerce Ministry has a critical role to play, first by making sure that we do have sensible policies that all involved have agreed to and will implement rapidly, and secondly by making sure that we have flexibility. This has not been the case. Industrial Development Corporation general manager Mr Mike Ndudzo has noted that Government departments concerned with industry all seem to be using a different script and delays are atrocious.

The IDC itself needs to return to its original mandate of helping kick-start new industries and rescuing viable but badly managed old ones, but then selling them off once they are well established and using the money raised to start more.

It has moved into a rut where it is a long-term holder of companies, rather than being a venture-capital investor in Zimbabwean industry. The IDC knows this and wants this, but bureaucratic empires are hard to overthrow.

It is relatively easy to float successful companies on the Zimbabwe Stock Exchange. And more needs to be done using the ZSE. First the overwhelming majority of shareholders are Zimbabwean, so indigenisation policies are automatically implemented. Secondly, the ZSE rules of transparent and detailed accounts made up under international standards make it easy to spot bad management or failing policies, and finally even the smallest investor can demand answers from management, even if only once a year at the general meeting.

Start-ups are trickier to finance, and that is why the IDC and other potential big investors are needed. Even foreign investors should be encouraged, with the indigenisation rules adjusted slightly to allow successful investors to raise their expansion capital later through the ZSE and so ensure majority Zimbabwean ownership in a fixed period.

We can do all this. It just requires all relevant ministries and departments to carefully read Zim-Asset and figure out how they can play their part in implementing a sensible policy that will create wealth and jobs.

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