Sustainability of the manufacturing sector in Zambia has been threatened in recent years due to the sector’s continued deterioration. According to the World Bank Development Indicators, manufacturing value added contribution to Gross Domestic Product (GDP) has fallen from 30.9% in 1989 to 8% in 2018. In addition, the growth rates of the manufacturing sector have also fallen over the years, from 37% in the 1980s to 2% in 2019. The deterioration of the sector raises concerns because a slowdown in the manufacturing sector has significant impacts on the rest of the economy and the sector’s contribution to growth, employment and consumer welfare.
Manufacturing has been threatened by a number of factors, including but not limited to: policy inconsistency and incoherence; unavailability of relevant skills; high cost and lack of consistently available energy, illicit trade, high cost of borrowing and high cost of doing business among others. While the above-named factors are somewhat out of the ambit of control of the manufacturers, the constraints caused by a lack of developed economic linkages between the manufacturing sector and other sectors presents can be overcome.
Several studies have shown that the sector has high ability to promote stronger inter industry and inter sectoral linkages, firm productivity, technological development and innovation since the manufacturing sector can employ more people, produce higher income and has greater output multipliers in comparison to agriculture and service sectors. The growth of the manufacturing sector has the ability to upgrade and diversify agriculture through agro-processing, as well as drive demand for higher value-added services. Once a growth pattern is strategically undertaken and effectively implemented, the manufacturing sectors competitiveness can be accelerated leading to the achievement of sustainable and inclusive development in the country.
Henceforth, to secure the future of the manufacturing sector and meet national aspirations such as increasing the contribution of general manufacturing to GDP to 36.12% and manufacturing exports as a share of merchandise exports to 71% by the year 2030 as stipulated in the Vision 2030, there is need for increased investment in supplier development programs, aimed at building capacity of the local manufacturers.
Worth-to-note is that several policy initiatives have already been put in place by the Government to enhance local manufacturing such as the local content strategy, the industrialization and job creation strategy and the export strategy all launched by the Ministry of Commerce, Trade and Industry. Additionally, other market access platforms such as the Joint Zambia – South Africa Private Sector Working Group have been created as a framework that is beneficial. The working group also works to ensure that South African chain stores allow for trade with local suppliers by increasing shelf lines of local goods in their stores. This is based on the thinking that a ready market will provide the necessary revenues for reinvestment and growth of the sector in the long term.
Most manufacturing companies in Zambia are still in their growth stages, therefore they lack the necessary capacity to meet quality or quantity demanded. To improve the manufacturing sector, it will be important that supplier development programs are carried out. Particularly, to help manufacturing players meet requirements, ideas could be observed from countries such as Columbia that implemented these programs. Companies with people that were trained went on to start their own ventures, therefore increasing the number of manufacturing firms and ultimately leading to increased employment creation and a wider tax base. But this is not to mean all manufacturers don’t have the capacity, as some large companies have the necessary capacity to meet the quality demanded such as meeting standards, as well as have huge production capacity.
Hence, it is important that even as the Government is looking to develop and implement a local content law. The Government in collaboration with strategic partners such as the Zambia Association of Manufacturing can develop mentorship programs, where small companies are attached to large companies that have already built capacity. The partnerships will allow for companies to build the necessary capacities and be able to run as lead contractors in future engagements.
The biggest threat with local content strategies is that they are potentially going to not have significant impact on the development of industry if no necessary capacities are developed. Hence, the trainings should also attempt to build capacity for the manufactured products to be competitive in foreign markets and not disturb continental aspirations of promoting foreign trade through platforms such as the continental free trade area. In summation, there are no short cuts to sustainably build the manufacturing sector. Other relieving the tax stress on the industry, there is need for sustainable linkages, which will require huge investments in capacity building.
