Why Zimbabwean Products are not Competitive: A Productivity Perspective

The OECD defines country or\nnational competitiveness as “the degree to which a country can, under free and\nfair market conditions, produce goods and services which meet the rest of the\ninternational markets, while simultaneously maintaining and expanding the real\nincomes of its people over the long term.”  In order for Zimbabwe to achieve the level of\ncompetitiveness required in this definition we need to overhaul the whole\nsystem; just the way we do things around here. I am not going to focus on\nnational competitiveness but on the competitiveness of local firms which\ncontribute to country competitiveness.  We can’t even talk of national competitiveness\nbecause so far it seems we have no capacity to leverage on the resources we to\nmake Zimbabwe a very competitive country.

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It is known and it has always\nbeen known that Zimbabwean products are uncompetitive for various reasons.  The recent press reports coming from the\nmanufacturing sector are indicating that the oil industry like many other\nsectors will find it difficult to export due to uncompetitive prices. 

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The sources of competiveness for\nZimbabwean products can be traced directly to the fact that Zimbabwean\norganisations are un-productive.  I have\nseen stakeholders celebrating the coming in of SI64. Yes SI64 gives relief from\noutside competition and will lead to increased capacity utilisation but it will\nnot help the local companies to be more productive. CZI and other industry bodies\nneed to encourage their members not to rely on regulatory protection as a\nstrategy to sustain their business performance. The CZI has tended to focus on\ncapacity utilisation instead of productivity. Capacity utilisation is just but\none component impacting on productivity but to a larger extend it has nothing\nto do with efficient use of resources which is at the centre of productivity\nimprovement.  The industry’s major thrust\nhas been to increase capacity utilisation with the hope that it will increase\ncompetitiveness. This strategy which has been tried many times will not result\nin Zimbabwean products being competitive.

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Instead CZI and the government\nmust focus on productivity measurement and enhancement. At the present moment\nno one knows the level of productivity in the manufacturing sector. A few\nguesses here and there but most of them seem completely off the mark\nconsidering what we are observing on the ground.

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Let me dispel a few myths about\nproductivity before going back to competitiveness and its link to productivity.\nThe first myth is that production equal productivity.  Most people including those in high offices\ncelebrate a rise in production and equate that to productivity. Productivity\nhas to do with the efficient use of resources to produce products and services\nthat the market is willing to pay for.  There are companies that have 100% capacity\nutilisation but very unproductive. There are companies that are exceeding their\nproduction targets but also highly unproductive.  

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The second myth is that most\npeople think that every company that is profitable must be highly productive.\nWhile that logically make sense, in practice it does not follow that a company\nthat is profitable is highly productive. Profitability in companies can change\nfor reasons that have little to do with productivity. Such factors include\nprice inflation or cost may bear no relationship to the efficient use of\nresources. In the Zimbabwean situation it is very likely that most companies\nare being profitable by increasing their prices at a much faster rate than the\nprice of inputs (price over recovery). \nZimbabwean companies are over recovering prices but they always blame\nthis on high cost of labour and other inputs. Instead of reducing prices of\ntheir products when prices of inputs decrease they celebrate the higher margins\nthat make the products very uncompetitive outside our borders.

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Productivity focuses on value\ncreation for all stakeholders and not just for a few stakeholders. Instead of\nreducing product prices to benefits the customers and allow more customers to\nbuy their products they are looking for regulatory protection. We must all\naccept that we cannot regulate ourselves to competitiveness as a country.  Imagine even if the government was to protect\nevery product that we produce locally we will still fail to export because we\nare very unproductive.  Why have all\nthose who are protected by S64 not reduced their products to enable more local\npeople to but local.  Instead in some\ninstances we have seen upward price movements because of people who a greedy\nwho think they now a captive market. 

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The first thing we need as a\ncountry is to start measuring productive at national level, sector level and at\ncompany level. This will show the areas where we are getting productivity gains\nand t5he areas where we are making productivity losses.  It is important for people to also understand\nthat productivity is measured between two periods (year to year, quarter to\nquarter or month to month). You cannot make meaningful conclusions from\nproductivity measurement results based on one period. The best approach to\nmeasure productivity at sectorial and company level is to use the profit linked\nproductivity approach.  This approach\ntells you how much productivity gains or losses are impacting your\nprofitability over two periods. It will also show you how much your\nprofitability is impacted by out or resources prices movements.

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Which areas will our local\nindustries need to focus on to increase productivity and competitiveness.  A business friendly regulatory environment\nwill help but it is unlikely to be the major source of competitive advantage.\nThe first area that can give us competitive advantage to look at our capital\nstructure. How modern are the tools we use and are they backed by latest\ntechnology?  With a “highly educated”\nworkforce what stops Zimbabwe to leverage on this if this is a true competitive\naverage of the country. Automation, modernisation and ICT are core areas we can\nleverage on. This must even start with the government. If the government was\nmodernised it would never need the current levels of employees it has which add\nto the cost of doing business.

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The other factor that can give us\ncompetitive advantage is to improve on the quality of labour we have. We have a\n“highly educated” workforce that is running down companies.  The quality of management is appalling and\nthis is the hurdle we have to face as a country. Poor leadership and management\nmisuse resources thereby impacting in productivity significantly. Poor managers\nborrow money and instead of financing the business they squander the money on\nnon-core activities.  In the areas of\nskills development we need to shift the focus to training hands on people who\nare going to make things work instead of the current focus where 90% is on\ntraining office people who are all aspiring to be managers to manage other\nmanagers.

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Demand intensity is the other\narea we need to focus.  We need to create\nproducts that can sell beyond our borders. \nSome industries and products need to be allowed to die so that we can\ncreate new ones. It’s not unique to Zimbabwe that companies close. In every\npart of the world business close sometimes in order to start afresh in a\ndifferent area. There are companies here that are still depending on archaic products\nand business models because these worked 50 years ago. What a shame. We must\nbuild industries and products that can compete in any part of the world.

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Technical progress is the other\narea we can focus on specifically technological advancement.  If I we go into our manufacturing sector do\nwe find the same technology that you find in Finland, Singapore, and USA etc?\nIf not should that not be our focus? Research and development are another key\nareas under this cluster.  How many\ninnovative ideas or products are coming out of Zimbabwe into the open global\nmarket?  Until we start working on these\nkey areas we will remain uncompetitive.

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I know our wage system is a\nhindrance but considering that our NEC recommend wages that are not in line\nwith productivity. In Zimbabwe minimum wage is less than $2 per our but in the\nhighly competitive markets its $13 to as high as $18 an hour. With such high\nwages how come these countries and companies from there are highly competitive?\nThe trick in relation to labour is to get the best people for each role and pay\nthem well to produce the maximum output. The opposite is currently obtaining;\nwe pay people for showing up even if they no nothing and add no value.

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In Zimbabwe which product our we\nknown for on the global market? Tobacco and minerals which we are exporting in\nraw form. We cannot gain competitive advantage from those products because we\ndo not influence the prices. If we are as “clever” as we claim why not build\nour competitive advantage around the brain power we have.  We are too much worried about being protected\nwhen the world has moved miles ahead of us. In other parts of the world you get\ninputs to your product from the cheapest source in any part of the globe.  Why on would sofa bean grown here be more\nexpensive than from any other part of the world? The reason is the farms are so\nunproductive that they would want to make their money in one season. They want to\nhide under a price umbrella that cripples the whole value chain.  This problem is not limited to this industry\nalone it’s a common problem across all sectors.

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Zimbabwe has no option but to\nraise the level of productivity so fast so that we can compete with other\nnations. India produce information technology engineers in abundance and they\nexport to all parts of the globe. Why cant’s Zimbabwe produce its own engineers\nbe they mining engineers, agriculture engineers, data scientist etc. and export\nthe skills.  Currently we have exported\nlow level skills that bring some diaspora remittances but we could get more if\nwe export highly skilled individuals. Imagine if we had let’s say 50 000 mining\nengineers all over the world. The benefits would be enormous. Yes we claim to\nhave highly educated workforce. If I may ask; which field are we blessed with\nhighly skilled and educated people except politics? We need to accept that we\ndo not have the skills to raise the level of productivity and develop a\nstrategy to up the levels of skills across key strategic areas. The STEM project\nby the Ministry of Higher and Tertiary Education, Science & Technology\nDevelopment is a step in the right direction but its one part of a big puzzle.

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Zimbabwean companies must go out there and hassle with everyone. That way they develop the right level of managerial skills and technology required to compete on the global stage.

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Memory Nguwi is the Managing\nConsultant of Industrial Psychology Consultants (Pvt) Ltd, a management and\nhuman resources consulting firm. Phone 04-481946-48/ 481950/ 2900276/ 2900966\nor cell number 0772 356 361 or email: mnguwi@ipcconsultants.com or visit our\nwebsite at www.ipcconsultants.com