Nds1 Zeroes in On Value Chains

The National Development Strategy (NDS1), the Government’s new economic policy through to 2025, is targeting rebuilding Zimbabwe’s once vibrant industrial base, after decade long economic challenges that caused many firms to fold, with the majority of those that survived relocating to Harare.

Prior to year 2000, the NDS1 document says, the country had successfully engineered fundamental shifts in the structure of the economy from low to high productivity sectors, creating significant number of jobs.

This saw an increased contribution of secondary sectors to gross domestic product (GDP) and employment, which rose to 25 percent and 16,5 percent against 22 and 32,6 percent by the primary sector.

But Zimbabwe’s almost decade long economic challenges (2000-2008) and short economic recovery during dollarisation, resulted in significant deindustrialisation and informalisation of the economy.

The turbulent macro-economic environment that ensued after 2 000 was characterised by high inflation, exchange rate volatility, runaway inflation and a high cost of doing business, disrupting value chains.

Amid the weak primary, secondary and tertiary sectors and low productivity and depleted value chains, the disintegration led to high absorption of imports and semi-finished products, especially upon dollarisation in 2009.

“Consequently, the contribution of primary and secondary activities to GDP declined from 22 and 25 percent to 17 and 10,6 percent respectively. The contribution of services, however, increased from 48 to 66 percent driven mainly by distribution of imported products,” NDS1 says.

The policy document says by September 2020, primary commodities, mainly minerals, accounted for 62 percent of total exports, a dependence that exposes the economy to vagaries of global commodity prices.

The new policy framework thus says the regression in economic activity did not only manifest in the composition of economic activity only, but the geographical spread of industrial activity, which caused many firms to fold or relocate to the capital, Harare.

“This has contributed to the situation where most firms are now located in Harare. As of 2019, about 46 percent of the total manufacturing firms were domiciled in Harare.

“Consequently, there has been high deindustrialisation and under development in other towns and rural areas, despite having natural endowments that form critical throughput in the processing industries.”

Government contends that the process of structural transformation is central to sustained growth envisaged under NDS1, which is inclusive and enables people to benefit from higher productivity.

“During the NDS1 period, the objective is to rebalance the economy and reserve the structural regression. The goal is to gradually improve the contribution of the secondary sector to GDP from 10,6 percent in 2020 to 15 percent by 2025,” NDS1 says.

NDS1’s objectives tally with the Confederation of Zimbabwe Industries (CZI) short to medium plans. CZI says its ultimate goal is to double share of manufacturing value added in GDP to 20 percent by 2030 from the current 8,9 percent.

This, the policy strategy says, will also result in the contribution valued added exports to total exports from US$727,47 million in 2020 to about US$1,337 billion in 2025 and the key link to this transformation is value addition and beneficiation.

Priority will be to develop and strengthen already existing value chains, beneficiation of minerals and in the process foster linkages between large corporates and small to medium enterprises.

Further, the strategy will prioritise decentralisation of industrial initiatives in line with the policy thrust of devolution and decentralization. Value addition and beneficiation will be located in specific provinces and districts where endowments are located.

This will be premised on a stable macro-economic environment, characterised by a stable exchange rate and low inflation, availability of key enablers like transport, energy and water, as well as a consistent stable environment.

And so, during NDS1, one of the major outcomes is to improve the performance of the manufacturing sector through value addition. NDS1 will prioritise quick win value chains namely agro-processing, pharmaceuticals, bus and truck assembly, iron and steel, engineering and plastic waste.

Under the agro value chains, focus will be on soya bean, fertilisers, cotton, sugar cane, dairy sector and leather, leveraging on existing, but creating additional and new capacity.

The steel value chain will entail fresh investment, reviving steel foundries, processing scrap metal, control metal scrap exports, increasing coal and coke supply and rebooting machine tools and accessories sub-sector.

For pharmaceuticals, strategies include local procurement, monitoring sourcing of locally produced medicines, recapitalising the sector, enhancing competitiveness of associations and members and facilitating academia and indigenous knowledge systems.

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