. Chikwanda

AS the debate heightens on the 2015 National Budget, Government’s intention to embark on the establishment of industrial clusters in each district, is a key component worth looking at and the effects to be derived on national growth.
Industrial clusters have been around for a very long time and it is evident that this idea has helped spur industrialisation in most developed countries such as Canada, Japan among others, serving as a catalyst for economic growth.
The clustering concept was popularised by Harvard Business School professor, Michael Porter in 1990.
Dr Porter’s techniques teach communities to analyse their existing business and industrial bases and build their economic development on those strengths.
From the identified clusters in an area, the next step is to develop a marketing plan for industry.
By developing a massive database of companies, area by area, Dr Porter’s research has statistically grouped businesses together in clusters.
A strong cluster will include the suppliers of raw materials and the distributors, as well as the primary producers.
It will also include specialised services in finance, marketing, packaging, education, and more, including specialised trade associations.
In general, the broader the base of related businesses, the better for the cluster, for that often reflects the specialisation that comes with concentrated resources.
Related firms and industries have tended to locate in close geographical proximity for a number of reasons.
In his 1916 economic text, Alfred Marshall, one of the most influential economists of his time, firstly saw the benefits of spatial clustering, the existence of a pooled market for specialised workers, the provision of specialised inputs from suppliers and service providers.
This was coupled with the rapid flow of business-related knowledge among firms, which results in technological spillovers.
He observes that it may be difficult to predict where clusters will emerge beforehand, but their growth is easier to predict due to the benefits gained from the strategy.
A variety of terms are synonymous to a cluster; these include co-location, industrial districts, and innovative milieus.
What makes clusters unique is not just that companies with similar or complementary interests, competencies, and needs congregate around each other.
It is that, an entire value chain exists within a cluster: suppliers, manufacturers, distributors, academic institutions, researchers, and workforce training, as well as those who provide relevant support services.
Academic research conducted by the Institute for Strategy and Competitiveness at Harvard Business School indicates that areas with strong clusters produce more economic growth, more jobs, stronger wage growth, increased entrepreneurial activity, and more intellectual property, such as patents, than other areas.
One of the most widely discussed issues in community and economic development today is the role of industrial clusters as engines of regional growth and development.
Industrial clusters remain a rapid growing topic, at the same time, analysts have likened this philosophy to another economic development fad that will eventually be supplanted by the next “hot” strategy.
Locally Government on a wide scale has already taken a growth strategy through the establishment of Multi-Economic Facility Zones (MFEZs), which are rapidly taking shape in various locations.
Industrial clusters planned to be opened in each district are a miniature version of the MFEZs but benefits accrued are similar.
Experts cite some of the benefits of having industrial clusters providing members with preferred access to extensive markets, technical, and competitive information that accumulates inside a cluster.
Cluster members also benefit from being associated with the cluster through efforts such as joint marketing, trade fairs, bulk purchasing and brand recognition.
The clusters are incubators of innovation, for example, through having a close relationship with sophisticated buyers within a cluster, suppliers are more tuned to their specific needs.
Clusters often provide the ability and the agility for members to implement innovations more rapidly and thirdly clusters ignite new business formation.
Firms develop to take advantage of the concentrated customer base.
Gaps in the market lead to spinouts where product and service innovations can be developed.
These products and services can be developed at considerably reduced cost and risk through the leveraging of established relationships.
This is the more reason that Zambia’s growth plan is being pegged on this idea of industrial clusters.
Not long ago, Commerce Trade and Industry Minister Bob Sichinga was in Petauke, where he led a team to inspect some of the industry projects mainly in groundnut product.
Mr Sichinga checked the groundnuts value chain, and indicated that the growth potential of the industry was an anchor for an industrial cluster to easily find base in the economically viable district, which is also high maize producing belt among other farm produce.
“This is why Government is planning for these industrial clusters, there is potential in this country and we can achieve what we want and produce what we need locally,” he said.
The projects that were inspected, are funded under the Citizens Economic Empowerment Commission (CEEC) and the idea is to support value chain development.
Finance Minister, Alexander Chikwanda indicated during his presentation of the Budget that out of 1, 526 approved projects under the CEEC this year, 1, 072 projects valued at K48 million have since been funded, 92 per cent of these projects are in rural areas.
On industrial clusters, Mr Chikwanda indicated that, Government has already embarked on the design.
“The clusters will provide industrial workshops from which our entrepreneurs will be able to manufacture various products, thus promoting value addition, particularly in the areas of metal fabrication, timber and agro-processing, aquaculture and automotive industry,” he said.
The adage that, “Rome was not build in a day”, applies in this context but the direction and decision is ripe for Zambia to embrace various developmental strategies.