To date, Zambia’s manufacturing sector, although growing, is performing well below its optimum.
The country has continued to be swamped with cheaper imported goods despite having the requisite raw materials to manufacture value-added goods locally.
The country has continued to export unprocessed raw materials and primary products to the outside world at cheaper prices, and ultimately importing the finished goods made out of the same raw materials at exorbitant prices.
Another reason for the poor economic performance has been low industrialisation in rural areas. With the collapse of former State-owned enterprises (SOEs), few private investors have shown interest to invest in the rural areas. Most rural areas lack economic activities and have, therefore, remained underdeveloped.
This has contributed to the increasing poverty levels among the rural population. The formation of the Industrial Development Corporation (IDC) is set to reverse the negative trends.
The Zambian Government has for some time nourished the idea of establishing the IDC.
The IDC will provide an opportunity for the Government to accelerate the industrialisation programme, achieve economic diversification of the country and maximise economic growth potential and wealth creation.
The corporation will ensure that Government optimises the performance of the current stock of State Owned Enterprises (SOEs) and facilitate the creation of new enterprises in collaboration with the private sector.
Of note is that the IDC, whose board chairperson is President Edgar Lungu, will be led by Andrew Chipwende, a versatile professional who served as chief executive officer of the Zambia Privatization Agency (ZPA) from 2002 to 2006, the organisation he joined in 1995.
He has also served as Zambia Development Agency (ZDA) director-general, which gives him a good understanding of Zambia’s development scenario.
Mr Chipwende has long seen the need for a radical shift in Zambia’s economic policies to achieve sustainable development, as could be demonstrated from his presentations at monthly Economic Association of Zambia fora.
And, now, as the head of IDC, he is best-placed to lead the team that will work towards steering Zambia to prosperity.
The establishment of IDC will stimulate economic activities in areas that have seen no progress in the past 50 years the country has been independent.
Disadvantage
There have been fears that the setting up of IDC will disadvantage the private sector, a misgiving which the Private Sector Development Association (PSDA) has dispelled.
In January 2014, PSDA chairperson Yusuf Dodhia said the IDC was a welcome step that would help grow the economy.
Mr Dodhia said as opposed to restricting private sector participation, the corporation would within the liberalised economy create competiveness between the Government and the private sector.
“The IDC is a useful tool in driving the economy in the right direction, and the original concept under UNIP’s INDECO helped the country establish various parastatal companies. The IDC will also help open up more investment opportunities which the private sector can utilise.”
Mr Dodhia said the IDC had the potential to attract government-to-government investment, which the private sector could not do.
He only cautioned that the IDC would fail if it started receiving concessions and other tax incentives from Government.
Losing out
The country is currently losing out on value-added products, employment opportunities and foreign exchange which could have accrued to the economy had the manufacturing sector been operating efficiently. Some of the gaps in the economy that have warranted the introduction of the IDC include a collapsed industrial base.
Special assistant to the President for Press and Public Relations, Amos Chanda has pointed out some additional benefits of the IDC.
“After all the shares were moved to IDC, it will in the coming weeks go to international markets to borrow as a private entity without Government guarantees,” Mr Chanda told Reuters.
He said that as a private entity, there was less risk associated with the IDC than with State-owned companies. In this regard, the IDC plans to issue a US$500 million private bond to invest in the energy sector and other infrastructure.
The people of Zambia should learn from the past economic decisions that it is safer to be resolute and to take a route that will put the country on firm economic recovery.
This trend has robbed the country and its people of the opportunity to benefit from local resources through employment at industrial level.
It is inarguable that Zambia has not maximised value from the remaining parastatals.
Since the demise of ZIMCO in the 1990s, SOEs have been operating under the supervision of line ministries, a situation that has impacted negatively on these parastatals in terms of investment, growth, governance and accountability.
Line ministries are strong on providing overall sectoral policies, but do not necessarily possess commercial and investment expertise to improve the performance of Government’s investment on State enterprises.
In addition, the State has not been able to maximize the revenue potential of these State-owned assets, resulting in most of them not adding value to the treasury, and in most cases continuing to survive on Government subventions.
Another critical point is that there has been absence of a strategic investment arm for Government.
Government has been unable to create strategic partnerships with the private sector for investment opportunities, particularly in rural areas.
The current business environment is conducive to the introduction of an investment vehicle which will allow Government to act as a catalyst for industrial development in areas and sectors not favoured by the private sector for investment.
Innovation
The IDC has, in this regard, been created to be the driving force of commercially sustainable industrial development and innovation to the benefit of Zambians.
Some of the specific benefits of the IDC will include sustainable employment. Through the creation of industries that will process local raw materials, the IDC will contribute towards accelerating job creation locally.
There is also envisaged sustainable industrialization. The IDC will venture into new start-up firms, resulting in greater diversification by Small and Medium Enterprises (SMEs) and creating new entrepreneurs in the economy.
Other expectations are improved supervision and management of parastatals.
The IDC will provide an opportunity for the Government to maximise value derived from its parastatals, whose assets could now be leveraged to raise fresh capital to maximise their potential and viability.
The restructuring and reform of parastatals will help in reducing the Government’s financial burden of sustaining them and will bring focus and discipline to Government investments and policies in these enterprises. -Feature courtesy of SUMA SYSTEMS