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Friday, 15 May 2009

The quest for diversification..

An interesting piece by Yusuf Dodia over at the  Zambia Economic Development blog on the need for Zambia transform her economy from a primary raw material producer, to a sustainable manufacturer of semi processed and processed metal products :

"The copper slump will go, and no doubt return after a few years. Zambia must make some decisive choices about how to tackle the rising and falling prices of copper on the world market. We can choose to go with the flow and be subject to the price variations out there, or we can decide that we will consciously invest in the value addition components of the industry, so that the changes in metal prices have as little impact as possible on our own domestic economy.

The impact of value addition in the copper industry has implications far beyond the copper industry. Copper metal fabrication and processing has the effect of creating capacity to add value to other metals such as zinc, aluminium, etc. This metal processing sector can quickly become the basis for many different forms of manufacturing across the country.

This phenomenon is evident as we currently experience the development of a steel industry in Zambia. There are several steel processing plants in operation, and several more being developed by the private sector. The impact is already being felt in the manufacturing sector as new companies are being set up to manufacture steel based products such as door frames, window frames, steel re-enforcement building products, trailers, machinery, and farming implements that were previously imported..."
I most certainly agree on the need to consider the "traditional route to diversification" - mining to low cost manufacturing. Unfortunately the article ignores two fundamental issues - "revenue" and "r&d".  As I keep saying, to undertake substantial diversification requires access to revenue. Unfortunately our government does not recognize this point and prefers to give freebies to mining companies. To add insult to injury, the MFEZ policy does not recognise the complex issues surrounding FDI which have been heavily trailed on this blog and I shall not bore regular readers.  Zambia's only current approach to diversification is agriculture and tourism.  The Government has no manufacturing and mining diversification policy. For discussions on diversification see - Five Questions on Diversification.

2 comments:

  1. Here is a good example of diversification - production of electric meters for the regional market. It does not matter if the components are imported, since their assembling utilizes local labor.

    http://www.times.co.zm/news/viewnews.cgi?category=12&id=1247032635

    ReplyDelete
  2. A new Zambian export - power services in West Africa:

    http://www.postzambia.com/post-read_article.php?articleId=5910

    ReplyDelete

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