THE Government’s 2022 financial plan will carry measures aimed at diversifying Zimbabwe’s production structure as authorities target a dynamic economic development, Finance and Economic Development Minister Professor Mthuli Ncube has said.
The local economy has for far too long been skewed towards the primary industries of agriculture and mining, which has meant that the country has been exporting mostly primary commodities.
This dependency on primary commodities makes the country extremely vulnerable to the vagaries of the global market.
And with the coming into play of the African Continental Free Trade Area (AfCFTA) has provided an additional incentive for local manufacturers to up their game.
Minister Ncube said value addition and diversification are key elements of the upcoming financial plan.
“The export of raw commodities from minerals (such as gold and platinum) and crops (tobacco) with little value addition constrain economic growth and foreign currency receipts as well as undermine socio-economic development of the country.
“To support drivers of growth, there is need for more value addition on all primary products across all sectors in the country. For example, increasing domestic financing of tobacco will maximise foreign currency inflows,” said the Finance Minister while presenting the 2022 Budget Strategy Paper during yesterday’s Mid-term Fiscal Policy Review.
“Structural transformation is, therefore, required to stimulate inclusive and sustained growth that ensures more people will benefit from higher productivity levels across all sectors of the economy.
“This is more important as the African Continental Free Trade Area comes into force and industry is expected to be geared to compete with other countries on value added products for the country to benefit from increased intra-African trade.”
Zimbabwe has already ratified the AfCFTA Agreement, whose operationalisation commenced in January this year, and is in the process of fine-tuning the tariff offer framework.
The country’s industrial players cannot afford to enter the US$3 trillion marketplace without strong capacities.
The 2021 National Budget estimates put the manufacturing sector’s growth this year at 7 percent, largely on account of continued macroeconomic stability, a favourable 2020/2021 agriculture season, the localisation of value chains and improved electricity supply.
Manufacturing diversification is central to the achievement of the National Development Strategy (NDS1) objectives, one of which targets growing Zimbabwe’s industrial base from between 10 to 15 percent to 30 percent share of gross domestic product (GDP).
Zimbabwe is targeting to increase the contribution of value-added exports to total exports from 9 percent last year to 20 percent by 2025.
Experts say the manufacturing sector is vital to any economy insofar as it allows increasing diversification of production. Diversification of production results in more products being brought onto the market, compared to agricultural production, for example, whose expansion and diversification cannot go beyond a certain point.
“Value addition through manufacturing is the first stage of structural transformation of the economy, required to generate decent jobs and provide impetus for sustainable and inclusive economic growth.
“Increasing manufacturing activities helps to create a resilient and predictable economic structure not prone to the vagaries of weather and international commodity prices.
“The 2022 National Budget, will, therefore, prioritise the development and transforming the economy by moving up a number of value chains, as well as domesticating some of the value chains,” said Minister Ncube.
“Successful implementing of the necessary steps to upscale domestic manufacturing should result in the attainment of the desired growth target of 6,5 percent in 2022.”
The Confederation of Zimbabwe Industries (CZI) has projected that the local manufacturing sector’s average capacity utilisation will increase to 61 percent by year-end, up from the 47 percent recorded last year.