Transcript Potential to grow SMEs though linkages in Industry and Commerce

VALUE CHAIN BUSINESS LINKAGES
SEMINAR:POTENTIAL TO GROW
SMES THROUGH LINKAGES IN
INDUSTRY AND COMMERCE
Presentation by: Mrs A. Shonhiwa
Secretary for Industry and Commerce
29 January 2013
THE VISION FOR INDUSTRIAL DEVELOPMENT
POLICY 2012-2016
To transform Zimbabwe from a producer of
primary goods into a producer of processed valueadded goods for both the domestic and export
market.
To create a vibrant, self-sustaining and competitive
economy through promotion of viable industrial
and commercial sectors as well as domestic and
international trade.
OBJECTIVES
To restore the manufacturing sector’s contribution to GDP of Zimbabwe from the
current 15% to 30%
To increase exports from 26% to 50% by 2016 as per MTP (2012-2016).
To reduce unemployment levels from around 80% to 30% by 2016.
To increase capacity utilization from 43% to 80%.
To re-equip and replace obsolete machinery and new technologies for import
substitution and enhanced value addition.
To promote utilisation of available local raw materials in the production of goods.
Utilisation of raw materials will create employment through extraction and
processing.
Increase exports to the SADC and COMESA regions and the rest of the world.
IDP Principles
– Policy Certainty: The Principle of Policy Certainty
avoids sudden changes to Government policy
regimes.
– Import Substitution: is still required to enable
Zimbabwe to look inward to develop our own
competencies
– Value Addition: Whilst in Zimbabwe it might
appear that the industrial value chain is complete,
the level of transformation beyond primary
processing still needs to be enhanced.
IDP Principles
– The Cluster Initiative: The motive for adopting
such a strategy is, based on the proven benefits
accruing in terms of attainment of economies of
scale, enhanced value addition, global
competitiveness and development of comparative
advantages.
– Prioritized Sectors: Agri - business (Food and
Beverages, Clothing, Textiles and Leather, Wood
and Furniture), Fertilizer and Chemicals Industry,
Pharmaceuticals and Metals & Electricals.
Essential components of any successful
implementation of an IDP:
Energy (Electricity, Coal, Fuels, etc)
Telecommunications
Water
Road network
Rail network
Civil aviation
STRATEGIES FOR THE REVIVAL OF THE MANUFACTURING SECTOR AND CREATION OF
EMPLOYMENT
Industrial Financing - Zimbabwe Industrial Development Bank: Government will
establish a financial mechanism through the re-modelling or restructuring of existing
institutions to finance medium and long term recapitalization of industry.
Lines of Credit for procurement and other working capital costs e.g. ZETREF
Distressed Strategic Companies Fund: As a short term measure, the Government
will initiate revival packages for Distressed Companies with a clear-cut exit policy on
the basis of a revolving fund e.g. DiMAF
Most companies are in need of urgent financing and these above measures will
ensure availability of funding and resuscitate operations thus increasing permanent
and contract employment
 The Government will promote specialized skill
development institutions through public-private
partnerships.
 Spatial Development Initiatives will unlock latent
economic potential in a specific geographical area e.g
the clothing and textile industry can establish factories in
cotton growing areas such as Gokwe. This will ensure
economies of scale, enhanced value and increase
employment for the locals.
 Completion of the industrial value chain will offer more job
opportunities in sectors such as cotton, iron and steel and
sugar –ethanol. e.g. Cotton sector, require investment in
de-linters and de-hullers to cotton by-products into
special papers, inks, emulsifiers and paint undercoats.
SMEs
The IDP has an appropriate mix of policies for SMEs focusing on access to
technology, training, credit, marketing and distribution channels to substantially
accelerate self-employment, particularly in the informal sector and rural areas, and
among women.
The creation of micro-enterprise banks and credit unions specifically designed to
cater to the needs of the self-employed and small firms can be especially effective
and will complement Government efforts
 Self-employed persons and the small firms which they establish have enormous
potential for rapidly generating large numbers of new jobs and raising productivity
to increase incomes.
Japan's economic growth has relied heavily on the proliferation of small rural
enterprises. Today, 74 per cent of the Japanese workforce is employed by small and
medium-sized firms.
Government through IDP has also identified new projects with growth
potential and high employment levels such as:
Manufacture of batteries and other products from Lithium,
Coal Bed Methane for industrial gas and
Fertilizer production
Mango processing.
Avocado processing,
Water waste management
 Plastic waste management
Production of generators ,transformers and circuit breakers.
Solar and Wind Energy
PRIORITY SECTORS
Criteria for prioritization include the sector’s contribution to
employment creation and retention ,Gross Domestic Product
(GDP); export earnings and potential for value addition as
well as forward and backward linkages.
The agro- industries for example dominate the
manufacturing sector of the country in terms of both output
and employment accounting for approximately 60% of
manufacturing value added and about 30% to employment.
Food and Beverages:
Has back bone in the Agricultural sector which provides 60% of its raw
material requirements. Contribute to the survival of other industries such
as those in the agro-based raw material supply (seed, chemicals,
fertilizers, equipment and spares, e.t.c) printing and packaging, milling,
energy and retail sectors. Thus its survival will ensure employment in the
downstream industries.
Clothing & Textiles:
This sector is highly adaptable and can operate from the level of SMEs to
bigger corporates and can also employ more people at various skill
levels.
Wood & Timber:
The sector contributes 4% of total value of agro-industrial products and
employs about 25 000 employees. The furniture industry is expanding
rapidly (especially the home industries) more than the wood sub-sector
thus increasing employment levels.
Fertilizer Industry
Key driver of the agricultural sector.
32% of fertilizer and chemicals supplies is produced locally, while about
68% are imports.
The 68% imports show there is room for employment creation if we are to
come up with import substitution investment strategies.
The support for Organic Fertiliser manufacturing provides opportunities
for Business Linkages in that sector in both ends of the Value Chain i.e.
the collection of organic fertiliser raw materials such as cow dung,
chicken manure e.t.c. in areas of abundance ensures full utilisation of
available local resources and distribution of the manufactured fertilisers
in the market has potential to grow local commerce in Growth Points.
Metals & Electricals
The metals sector provides strong backward and forward linkages to
sectors such as mining, construction, agriculture, machinery, and
transport thus offering more employment opportunities. Government
continues to support the revival of the steel industry to promote local
industry and commerce.
CONCLUSION
In order to fulfil the overall objective of restoring the manufacturing
sector’s contribution to GDP and employment creation a closer
cooperation between :
Government,
Business including the banking sector and
Labour
is imperative.
Government will create an enabling environment and make
appropriate policy interventions.
The private sector will identify, recommend and implement strategic
action plans on a sub-sector by sub-sector basis (cluster initiatives) and
create employment conditions that recognize and respect the
contribution of labour as well as provide rewards commensurate with
performance whilst the Bankers chip in with affordable financing.
Conclusion
– Small and Medium Enterprises Support
• Given the sector’s high labour to capital ratio
there will be need to use the sector as
strategy for quick turnaround of the economy
at a relatively cheaper cost than that of
conventional larger industries.
Conclusion
– Indigenization & Empowerment
• The Industrial Development Policy will support a Model
which is premised on the participation of a broad
spectrum of the population, through the supply and
distribution chain of the whole country’s economic cake
to control downstream industries through the supply of
raw materials, services and other inputs.
• The supply of raw materials and other critical inputs
immediately empowers Zimbabweans by smoothening
the ownership of the means of production and
mainstreaming previously disadvantaged indigenous
people into active participation in economy building.
THANK YOU