It is not unusual to go the Bulawayo industrial sites and see machines that were acquired in the 1940s still being used in production in 2021
By Laurence I. Sithole
There is no economy in the world that has ever grown and advanced without industrialisation. The manufacturing sector of an economy must grow in significance for economic growth to occur.
The virtues of industrialisation are widespread. Zimbabwe cannot fully appropriate the full value of its resources because the country produces raw and basic materials with little value addition.
Everything that we produce as a nation is sold on to the export or global markets in its raw form with little or no value addition.
Gold is dug out of the belly of earth and sold on raw, it is not even refined into bullion here. Diamonds are also dug out of the earth but are not cut or polished in the country simply because there are no such facilities in the country.
Tobacco is produced here, and the variety is one of the best in the world and yet it is sold to the world markets unprocessed beyond curing.
There is a large amount of unrealized value simply because our country does not have the capability to firstly add value to raw products and secondly to add value in a manner that leaves the same products competitive on world markets.
This because there hasn’t been any meaningful investment in capital formation in this sector of the economy as compared to the nations that we trade with.
The net effect of this has been that goods produced locally will tend to be more expensive than those produced in other countries.
It is not unusual to go the Bulawayo industrial sites and see machines that were acquired in the 1940s still being used in production in 2021.
How can Zimbabwe’s industrial capability stack up to and compete with its neighbouring countries which enjoy regular investment into their industries?
Industrial competitiveness for Zimbabwe will be difficult to attain currently if not impossible unless there is an immediate and drastic change.
For Zimbabwe to get back on track requires looking carefully at where the world is going. The world is in the middle of the third industrial revolution driven by technology and services. These two comprise what is now known as the knowledge economy and represent a clear departure from the significance of the primary/extractive and secondary industries.
Technology and services are where the greatest value can be appropriated, and it is in technology and services where the key to exponential growth in productivity lies.
The most obvious sector that can lead an economic turnaround because it has successfully converged technology, knowledge and services is the financial sector. The critical question to ask is why Zimbabwe cannot become like Switzerland, Panama, Bahamas, Cayman Islands, Isle of Man, Shanghai, Guernsey, Dubai and even Botswana all of which are countries known for being world financial centres?
The world has changed, the world is changing, and the world will continue to change. There are countries in the world like India which have experienced and continue to experience rapid economic growth and as such demand international financial services.
This is not the only rapidly growing economy that makes widespread use of such services and is a potential boon for an economy hard pressed for investment and foreign capital flows like Zimbabwe.
The top four centres in the Global Financial Centres Index, New York, London, Hong Kong, and Singapore are all great examples of generating significant revenue through financial services.
The square mile of the City of London is reckoned to contribute $50 billion to the UK economy and helps the finance industry in many other locations around the UK.
This amount US$50 billion was contributed to the national economy in the single year 2017. To put that in perspective in terms of the country of Zimbabwe, the financial services sector of the United Kingdom contributes to the national economy a quantum of money that is two and a half times the size of Zimbabwe’s economy.
This benefit alone should cause the gate keepers of the country of Zimbabwe to give careful thought to the advancement of the financial sector as it can lead the way back to economic wellbeing.
The financial services industry often generates the talent and investment needed for innovation. Access to external currency markets; financial centres encourage trading of financial assets.
These assets include domestic and foreign currencies.
Strong international financial centres create and strengthen access to international currency markets and lastly greater external influence; where a stronger economy, with greater international networking, and an enhanced reputation for innovation, gives a centre and its host nation, greater influence and bargaining power in international relations.
By developing the financial sector to world-class standards could potentially give Zimbabwe greater influence in world geopolitics!
Can we truly afford to ignore this?
This the third part in a series that Sithole is writing in The Sunday Express. Watch this space for the next instalments.
Laurence I. Sithole, B.Com (Hons) Banking & Investment Management, National University of Science & Technology Zimbabwe. Sithole is an independent economist who writes in his personal capacity. The views expressed are his own and do not represent the views of any other organisation.
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