Presentation by: Mrs A. Shonhiwa Secretary for Industry and Commerce 29 January 2013

1. 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

2. THE VISION FOR INDUSTRIAL DEVELOPMENT POLICY 2012-2016 • To transform Zimbabwe from a producer of primary goods into a producer of processed value-added 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.

3. 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.

4. 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.

5. 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.

6. Essential components of any successful implementation of an IDP: • Energy (Electricity, Coal, Fuels, etc) • Telecommunications • Water • Road network • Rail network • Civil aviation

7. 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

8. 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.

9. 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.

10. 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

11. 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.

12. 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. .

13. 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.

14. 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.

15. 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.

16. 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.

17. THANK YOU