Despite having a positive growing contribution to gross domestic product (GDP) and a good outlook over the years, the manufacturing sector’s ability to add value to vast local raw materials remains extremely low. Most of the raw materials extracted are exported in raw form, therefore breaking the value chain at the first level. In its 2013 report on Light manufacturing in Zambia, the World Bank show that while a share of the many raw material are processed domestically, at the middle stage of the value chain or the production of intermediate inputs, the processing technology remains outdated and the quality of outputs inferior to the quality of imported products.
Attesting to the low value addition in recent years, the Zambia Statistics Agency (Zamstats) show a downward trend in manufacturing value added contribution which fell from 30.9% GDP in 1989 to 7.1% in 2010, although contribution to GDP has steadily arisen to 8.1% in 2019. Zamstats additionally show that Zambia’s manufacturing sector imported raw materials and inputs worth K36.7 billion but only added value to items worth K21.9 billion in 2018. So while the total value added in manufacturing somewhat improved on an upward trajectory in the period, the value added in manufacturing was mainly occurring on imported inputs and minimally on locally produced raw materials and inputs.
Large imports of manufacturing intermediate inputs due to the absence of a local intermediate inputs sector and the low levels of manufacturing value addition as a percentage of GDP have constrained the development of a raw material and an input industry for intermediate goods production within the country. Total imported manufacturing inputs have been increasing rapidly with no deliberate policy action to overturn the status quo.
Notably, the corona virus disease 2019 (COVID-19) pandemic, showed that, manufacturing subsectors which seemingly used more of imported inputs not readily supplied in Zambia, were among the most negatively affected by the effects of COVID-19 in 2020. With Zambia being a landlocked developing country, closures of key borders meant that supply chains were disrupted, and key manufacturing inputs could not be delivered.
Six out of the eight manufacturing subsectors contracted in 2020 largely on account of the disrupted value chains. The subsectors negatively affected by COVID-19 are among the priority sectors meant to enhance Zambia’s economic development in the manufacturing sector, as was selected by the National Industrial Policy of 2018. The six include textiles, clothing and leather which shrunk by 34.9%, non-metallic mineral products such as cement and coal, contracted by 10.7%, fabricated metal products diminished by 2.6%, wood and its products reclined by 1.0% and food and beverages reduced by 0.6%.
Such growth challenges merit the need to ensure that local raw material value chains are developed within the country to feed into the local manufacturing production processes. At the time of the identifying the priority sectors in manufacturing, little detail of the value chains involved in the selected priority subsectors was provided, making selection devoid of information regarding what inputs could be sourced locally and what inputs could be imported to set up and strengthen the processing and manufacturing parts of the value chains in these subsectors. The absence of the value chain analysis made the policy decisions, lack the necessary information to help support processing and manufacturing development in Zambia.
Value chain analysis in these priority sectors in manufacturing, remains very cardinal for promoting value addition on raw materials produced in Zambia. The knowledge of which raw materials are required to be developed locally will feed into policy interventions that will ensure that the manufacturing sector realises subsector and sector wide economic growth. Each manufacturing subsector has different inputs. While some subsectors can easily acquire most of their inputs locally, others must import most inputs. With the Zambian manufacturing subsectors importing a significant number of raw materials and intermediate goods for their production process.
Thus, undertaking of subsector value chain profiling in the manufacturing sector is key to ensuring that local value chains are developed to feed into the local manufacturing production processes. Therefore, the Zambia Association of Manufacturers (ZAM) in partnership with OXFAM Southern Africa, conducted subsector profiles that attempt to understand how much value addition is being undertaken on local raw materials and intermediate inputs in five priority manufacturing subsectors, that is, food processing, mineral processing, manufacturing of leather and its products, textiles and garments manufacturing and wood processing with a view to influencing deliberate actions to grow develop local value chains.
The findings of this study are detailed in a paper dubbed “Developing Value Chains with Local Content Utilisation”. In this regard this paper will be launched tomorrow on Thursday 15th July 2021. ZAM appreciates the continued support we have received from you in the previous events, and we are therefore requesting you to attend the virtual launch of the paper. Kindly join us and you can find the link on the ZAM website on www.zam.co.zm. Your positive consideration of this request is appreciated, and we look forward to your support and participation during the Launch event.
