HARARE – Zimbabwe must change its economic policies if the country is to halt heightening de-industrialisation, economists say.
Most of the country’s companies — which were heavily battered by years of hyperinflation, obsolete machinery and massive power outages — have found it tough to operate in the illiquid dollarised economy.
Since 2009, numerous firms have closed shop with more than 200 000 workers losing jobs, despite government’s efforts to bail out struggling companies.
John Robertson, a leading independent economist, said the de-industrialisation has been exacerbated by policies that are not investor friendly.
“Labour policies in this country make it very costly to retrench, so when companies are not performing well the only option they have is to shut down,” Robertson said.
“Regulations in the country also make it difficult to register a company. The process can take up to months before anyone can get a company license. Investors do not want to face such hurdles and they end up taking their money elsewhere,” he said.
Robertson said without off shore financial support, it will be difficult for most companies in the country to recapitalise and procure new technologies.
“However, we are making it difficult for foreign investors to bring their money and expertise here. Unless the indigenisation policy is reversed, Zimbabwe will continue to de-industrialise,” he said.
Zimbabwe’s Indigenisation Act compels all foreign-owned companies operating in the country to cede at least 51 percent shareholding to locals.
The African Development Bank (AfDB) has also noted that although the de-industrialisation of Bulawayo has generated a lot of attention, it appeared the pattern was the same across many cities outside Harare.
“The imminent closure of Karina Textiles, which was the sole manufacturer of carpets and hand-knitting yarn in Zimbabwe, is one example of de-industrialisation of Mutare. Other companies based in Mutare that have also closed shop include PG Plate Glass, Zimboard, Mutare Board & Paper Mills, Hunyani Papers, and Cairns Food,” said AfDB.
Bulawayo, Zimbabwe’s second largest city, has been deserted by industrial firms due to a number of factors, key among them a lethargic approach to the growth of the city by politicians and acute water shortages.
The city was once considered key to the economic scheme of things due to its proximity to key markets, notably South Africa, Botswana, Namibia and Zambia.
AfDB said that the relocation of companies from other towns to Harare was a clear signal that distance from the capital city is proving to be a significant determinant of production costs, while the closure of monopolies is puzzling.
“Given that demand is almost assured, the companies could have survived with re-tooling and modern technology after overhauling the dilapidated plants and equipment.
Thus, the closure of the two monopolies has left a void that any serious investor can easily fill after investing in cost-cutting technology,” said AfDB.
Last year, the Confederation of Zimbabwe Industries (CZI) warned that Zimbabwe’s manufacturing industry was in crisis with capacity utilisation down 13 percent and firms under-performing due to erratic power supplies and lack of capital. – John Kachembere