manufacturing
Zambia ’s Poverty Reduction Strategy Paper (PRSP) emphasizes Manufacturing as one of the four key economic activities that will impact positively on poverty alleviation through enhanced production and job creation.
Zambia is signatory to the COMESA Free Trade Area (FTA) and boasts of a liberalized economy.
So far, less than half of the COMESA countries have signed the FTA and the SADC Trade Protocols affect mostly those countries that surround the Republic of South Africa .
Some COMESA countries that have not signed the FTA state that their economies are not developed sufficiently to compete openly with the stronger more developed states. They have therefore made a conscious effort to stimulate, support, encourage and finance their local manufacturing industries before taking the FTA plunge.
The Republic of South Africa (RSA) is strategic in signing trade protocols by ensuring that the net trade between RSA and its neighbours is always in favour of RSA. This is illustrated by the fact that Zambia can export up to 1500 tons of cotton to RSA duty free and thereafter an import tax is imposed. This measure protects RSA cotton farmers.
Globally, the European Union makes no apologies about subsidizing its farmers to guarantee local food security even if it is at the expense of denying export markets to developing countries. Their food security, their industries, and their economies come first.
The United States of America (USA) does exactly the same by imposing trade barriers on the imports of Steel, Timber, Motor Vehicles and Food Products. Local industries and local agriculture are supported and sometimes subsidized to guarantee continued production and employment.
Zambia however, does not look at what is happening in the region and the outside world so as to develop an implementable policy to support the manufacturing sector. Zambia takes great pride in being in the forefront of signing an agreement or protocol without digesting the contents and it’s impact on our economy. Regional Agreements, Protocols and Bi-lateral Agreements offer opportunities but also demand compromises that need very careful assessment and analysis by all stakeholders (Government, Private Sector and Civil Society) to ensure that once signed these commitments will support the country’s nationally agreed strategies for progress and development. Countries that have no strategy for implementation of an Agreement will lose the opportunities therein and have to deal with the consequences of the compromises made. Signing an Agreement is not an end in itself. It is the beginning of a journey that requires much preparation and serious execution to guarantee success. Zambia is embarrassed to back out of a regional or imposed trade arrangement because we may appear to look petty and un-sophisticated. Zambia has a problem with image. This is one of our handicaps when it comes to economic development.
The manufacturing sector requires that Zambia must shake off this pre-occupation with image and focus on development.
To this end, Zambia must persuade our co-operating partners to support the small and medium scale industries with cheap capital for investment purposes coupled with technical support where necessary.
The local financial institutions too must be encouraged to support manufacturing companies and investments with the funds that they manage on behalf of donors and financiers. Since the advent of Treasury Bills (TB’s) and Government Bonds (GB’s), we cannot expect the local banks to perform like ‘real banks’ in the developed world where lending to the private sector is top priority. Local banks may have already disbanded or reduced the size of their Risk Assessment Units because investing in TB’s and GB’s is absolutely safe. Our local banks may have to go back to school to learn how to support the private sector.
The Ministry of Science and Technology must continue and re-double its efforts in developing human resources that can be absorbed in various manufacturing industries in the country. The technical colleges, entrepreneurial development institutions, and vocational training centres provide trained human resources to support many varied manufacturing businesses.
Zambia faces the challenge to support the manufacturing sector beyond lip service. Current manufacturing companies are faced with bankruptcy, unwarranted Government bans, liquidations, under capitalization, unwarranted Government regulations, and price wars against imports. The Zambia Revenue Authority is perceived to be proud of its ability to close down companies because of tax problems rather than to facilitate a route for keeping companies alive and offering plans to encourage tax compliance. These problems must be dealt with by forging a partnership between the private sector and the Government with a focus on enhanced production, support and facilitation.
Zambia can take a lesson from RSA where manufactures are supported un-reservedly through the South African Bureau of Standards (SABS). Local manufacturers are encouraged to produce goods and services to SABS standards in volumes that compel the Department of Customs to protect the local industry through the imposition of stiff customs duties on similar imports. Any manufacturer that meets the SABS standards for quality and quantity can apply for it’s products to be included on the customs tariff list thereby automatically imposing higher customs duties on imports of similar products. This is evidence that RSA has a clear policy to support its local manufacturing industry.
The deliberations at the recent AGOA forum in Mauritius is another example of how governments strategize to support the development of their own manufacturing industries. RSA lobbied aggressively in Zambia and the region before making a final onslaught in Mauritius on their desire to see that the Least Developed Countries (LDC) do not secure an extension for the use of foreign fabrics in garment manufacturing beyond 2004 for export to the USA. They make no apologies for it, and rightly so. RSA is concerned that because it is not a LDC country it does not enjoy the opportunity of using foreign fabrics in it’s garment manufacturing industry to access the USA markets via AGOA. RSA fought tooth and nail in Mauritius to level the playing field and give itself a relatively privileged position although it is the biggest player in the region with no handicaps such as those experienced by Zambia, Malawi, Namibia, Angola, Mozambique, Tanzania, Kenya, Uganda etc. which by definition gives us LDC status.
Zambia must concentrate on the home front like the EU, USA and RSA. As a LDC country we are expected to do so, just as a patient in Intensive Care Unit (ICU) is expected to hang on to the Quinine drip and antibiotics for dear life. In addition to the points raised above we must protect local manufacturers and industries from subsidized foreign imports, establish quality controls through our own Zambia Bureau of Standards (ZABS), make export incentives a reality (Export Processing Zones) for Zambian companies, make the Zambian Investment Centre provide real incentives to attract local investors, ensure that Government procurement is biased towards locally manufactured products instead of imports, offer customs duty free incentives on imports of manufacturing equipment and raw materials, and above all, dialogue effectively between Government, the private sector and civil society to ensure that every Zambian is on board.