HR PERSPECTIVE: Why Zim products are not competitive

HR PERSPECTIVE: Why Zim products are not competitive
Industry and Commerce, Minister Mike Bimha

Industry and Commerce, Minister Mike Bimha

THE Organisation for Economic Co-operation and Development (OECD) defines national competitiveness as “the degree to which a country can, under free and fair market conditions, produce goods and services which meet the rest of the international markets, while simultaneously maintaining and expanding the real incomes of its people over the long term.”
In order for Zimbabwe to achieve this level of competitiveness, we need to overhaul the whole system; just the way we do things around here. I am not going to focus on national competitiveness but on the competitiveness of local firms which contribute to country competitiveness. We cannot even talk of national competitiveness because so far it seems we have no capacity to leverage on the resources we have to make Zimbabwe a very competitive country.
It is known and it has always been known that Zimbabwean products are uncompetitive for various reasons. The recent press reports coming from the manufacturing sector are indicating that the oil industry like many other sectors will find it difficult to export due to uncompetitive prices.
The sources of competiveness for Zimbabwean products can be traced directly to the fact that Zimbabwean organisations are not productive. I have seen stakeholders celebrating the coming in of Statutory Instrument 64 (SI64) which gives relief from outside competition and will lead to increased capacity utilisation but will not help the local companies to be more productive.
CZI and other industry bodies need to encourage members not to rely on regulatory protection as a strategy to sustain their business performance. The CZI has tended to focus on capacity utilisation instead of productivity. Capacity utilisation is just but one component impacting on productivity but to a larger extend it has nothing to do with efficient use of resources which is at the centre of productivity improvement. The industry’s major thrust has been to increase capacity utilisation with the hope that it will increase competitiveness. This strategy which has been tried many times will not result in Zimbabwean products being competitive.
Instead, CZI and government must focus on productivity measurement and enhancement. At the present moment no one knows the level of productivity in the manufacturing sector. A few guesses here and there but most of them seem completely off the mark when you consider what we are observing on the ground.
Let me dispel a few myths about productivity before going back to competitiveness and its link to productivity. The first myth is that production equals productivity. Most people including those in high offices celebrate a rise in production and equate that to productivity. Productivity has to do with the efficient use of resources to produce products and services that the market is willing to pay for. There are companies that have 100 percent capacity utilisation but are very unproductive. There are companies that are exceeding their production targets but are also highly unproductive.
The second myth is that most people think that every company that is profitable must be highly productive. While that logically makes sense, in practice it does not follow that a company that is profitable is highly productive.
Profitability in companies can change for reasons that have little to do with productivity. Such factors include price inflation or cost; and this may bear no relationship to the efficient use of resources. In the Zimbabwean situation it is very likely that most companies are being profitable by increasing their prices at a much faster rate than the price of inputs (price over recovery). Zimbabwean companies are over recovering prices but they always blame this on high cost of labour and other inputs. Instead of reducing prices of their products when prices of inputs decrease they celebrate the higher margins that make the products very uncompetitive outside our borders.
Productivity focuses on value creation for all stakeholders and not just for a few stakeholders. Instead of reducing product prices to benefit the customers and allow more customers to buy their products, they are looking for regulatory protection. We must all accept that we cannot regulate ourselves to competitiveness as a country. Even if the government was to protect every product that we produce locally, we would still fail to export because we are unproductive. Why have all those who are protected by S64 not reduced their product prices to enable more local people to buy local. Instead, in some instances we have seen upward price movements because of people who are greedy who think they now have a captive market.

FacebookThe first thing we need as a country is to start measuring productive at national level, sector level and at company level. This will show the areas where we are getting productivity gains and the areas where we are making productivity losses. It is important for people to also understand that productivity is measured between two periods (year-to-year, quarter-to- quarter or month-to-month). You cannot make meaningful conclusions from productivity measurement results based on one period. The best approach to measure productivity at sectorial and company level is to use the profit linked productivity approach. This approach tells you how much productivity gains or losses are impacting your profitability over two periods. It will also show you how much your profitability is impacted by output prices or resource prices movements.
Which areas will our local industries need to focus on to increase productivity and competitiveness. A business friendly regulatory environment will help but it is unlikely to be the major source of our competitive advantage. The first area that can give us competitive advantage is to look at our capital structure. How modern are the tools we use and are they driven by the latest technology? If our “highly-educated” workforce is a competitive advantage, what stops Zimbabwe from leveraging on this? Automation, modernisation and ICT are core areas we can leverage on. This must even start with the government. If the government was modernised it would never need the current levels of employees it has, which add to the cost of doing business.
The other factor that can give us competitive advantage is to improve on the quality of labour we have. We have a “highly educated” workforce that is running down companies. The quality of management is appalling and this is the hurdle we have to face as a country. Poor leadership and management misuse of resources is negatively impacting our productivity. Poor managers borrow money and instead of financing the business they squander the money on non-core activities. In the areas of skills development we need to shift the focus to training hands on people who are going to make things work instead of the current focus where 90 percent is on training office people who are all aspiring to be managers to manage other managers.
Demand intensity is the other area we need to focus on. We need to create products that can sell beyond our borders. Some industries and products need to be allowed to die so that we can create new ones. It’s not unique to Zimbabwe that companies close. In every part of the world business close sometimes in order to start afresh in a different area.
There are companies here that are still depending on archaic products and business models because these worked 50 years ago. What a shame. We must build industries and products that can compete in any part of the world.
Technical progress is the other area we can focus on specifically technological advancement. If I we go into our manufacturing sector do we find the same technology that you find in Finland, Singapore, and the United States etc? If not, should that not be our focus? Research and development are another key areas under this cluster. How many innovative ideas or products are coming out of Zimbabwe into the open global market? Until we start working on these key areas we will remain uncompetitive.
I know our wage system is a hindrance considering that our NEC’s recommend wages that are not in line with productivity. In Zimbabwe, the minimum wage is less than $2 per hour but in developed economies its $13 to as high as $18 an hour. How come these countries and companies are highly competitive with such high wages? The trick in relation to labour is to get the best people for each role and pay them well to produce the maximum output. The opposite is currently obtaining; we pay people for showing up even if they are doing nothing and add no value. In Zimbabwe which products are we known for on the global market? Tobacco and minerals which we are exporting in raw form? We cannot gain competitive advantage from those products because we do not influence the prices. If we are as “clever” as we claim why not build our competitive advantage around the brain power that we have. We are too worried about being protected when the world has moved miles ahead of us. In other parts of the world you get inputs to your product from the cheapest source in any part of the globe. Why on earth would soya beans grown here be more expensive than that from any other parts of the world? The reason is the farms are so unproductive that they would want to make “all their money” in one season. They want to hide under a price umbrella that cripples the whole value chain. This problem is not limited to this industry alone it is a common problem across all sectors.

TwitterZimbabwe has no option but to raise the level of productivity so fast so that we can compete with other nations. India produces information technology engineers in abundance and they export them to all parts of the globe. Why can Zimbabwe not produce its own engineers; be they mining engineers, agriculture engineers, data scientist etc. and export the skills. Currently we have exported low level skills that bring some diaspora remittances but we could get more if we export highly skilled individuals. Imagine if we had let us say 50 000 mining engineers all over the world. The benefits would be enormous. Yet we claim to have highly educated workforce. If I may ask, which profession are we blessed with highly skilled and educated people except politics? We need to accept that we do not have the skills to raise the level of productivity and develop a strategy to up the levels of skills across key strategic areas. The STEM project by the Ministry of Higher and Tertiary Education, Science & Technology Development is a step in the right direction but its one part of a big puzzle.
Zimbabwean companies must go out there and hassle with everyone. That way they develop the right level of managerial skills and technology required to compete on the global stage.
Memory Nguwi is an occupational psychologist, data scientist, speaker and managing consultant — Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone 481946-48/481950/2900276/2900966 or cell number 077 2356 361 or email: mnguwi@ipcconsultants.com or visit our website at www.ipcconsultants.com

  • Wilson Magaya

    You have nailed it on the head Memory. I would say the sacred cow in our economy is the “QUALIFICATIONS” we are more focused on professional qualification than on commitment to a cause or downright industrial experience. We inherited most of our industries and there has been very few if any new companies with a growth mindset coming out of Zimbabwe. We need COMPETITION. Our remuneration models need to be changed across all sectors especially the public sector. We have institutions that should be collecting data and analysing it and producing information products for the INNOVATION PROCESS. They are failing us totally.

    The most critical however is our definition of INNOVATION. there is a difference between ideas and INNOVATION. We are a nation full of ideas yet we have not been able to turn them into products that have value on the global marketplace. in as much as we need to infuse new leadership in various industries we also need to inculcate a high growth entrepreneurial mindset in our hard working people. We will only be competitive if the people are competitive. “Nyika Vanhu”

  • Timothy Thorton

    Interesting discussion but seems to touch on too many issues. First, productivity is a measure of efficiency and efficiency leads to competitiveness and higher profits. A country’s ability to compete on the global market is dependent on how well it uses its resources to produce goods and services. National economies are are generally driven by the country’s private sector whose main motive is profit. These companies tend to be highly efficient and measure productivity through various parameters all indicative of how well resources normally measured in dollars are utilised. Such measures as cost per unit clearly indicate the productivity of a company. Production is simply output per period while productivity is production per given resources. Governments must however monitor their tax structures as this has the tendency to add to production costs. Global competitiveness is very complex as other countries incentivise their companies to assist them to export.

    The country’s products are not competitive because we are extremely expensive due to inefficiencies that we have accepted as a norm. Most plants/factories are designed to produce at certain levels, If they are to sustain themselves let alone making a profit but in Zim anything is possible. Price is a function of inputs and overheads. In Zimbabwe its okay to produce at 30% and carry the full costs and therefore there is no way we can be competitive. Efficiency is a measure of how well you utilise resources. In simple how well an organisation manages its inputs vis-av its outputs.

    We have failed to identify what our problems are and so we cannot solve them. This article insinuates that there are no skills in this country which is surprising. South African mines are run by Zim engineers, arisans are roaming the streets and found in every country in the world. Australia is like Zimbabwe. We have enough skills in this county and some economies are benefiting from our high skills. Our problem is that we have a dysfunctional economy due to our policy inconsistency. That problem is not going to be addressed by STEM or the new curriculum.

    Our products will become competitive when we understand that profitability is a function of productivity and efficiency driven by the need to get more from less. Government has a key role in promoting global competitiveness by providing the correct incentives while the private sector needs to do more to manage inefficiencies at the local level..

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