There is an old statement that says, “half a loaf is better than nothing”, and this has always been used as an encouragement for people to celebrate little wins.
In regional integration discourse, this statement means a lot, particularly when looking at integrating economies within a particular bloc.
Here, to achieve full economic integration, individual member states must find a position where they contribute towards the production processes of products and services that originate from the region.
As in an industrial set up with a conveyer belt, each member state must leverage on its advantages and position itself along the value chain, ensuring that it contributes towards the manufacturing process, as well as benefiting from the process.
This way, there is concerted efforts to improve production process, its products, and all countries stand to benefit from available resources through, for example, job creation and infrastructure development.
For local companies, real benefits will accrue when they integrate in regional value chains and take up activities that focus on higher value-addition process.
Apart from benefits for local companies, Zimbabwe’s economy in general stands to amass huge benefits if local companies increase their participation in regional value chains, focusing on beneficiation and value addition.
In fact, value-addition – which is the primary focus of regional value-chains – is currently at the centre of the Second Republic’s development agenda, with President Mnangagwa being clear on the direction that local businesses should take.
Speaking at the Zimbabwe-Rwanda Trade and Investment Conference earlier this, President Mnangagwa challenged businesses to discuss viable options that will increase value-addition and export diversification.
“I call upon our industrialists to enhance value addition and diversify our export mix through competitive and efficient value chains.
“In doing so, Africa will put to an end the perennial and unfortunate challenge of exporting primarily raw commodities from its sectors of the economy,” said the President.
Thus, programmes such as Eagles’ Nest Youth Export Incubation, and Next She Exporter currently being implemented by ZimTrade – the national trade development and promotion agency – are designed to enhance value-addition from youth-led and women-led companies.
The development of national export clusters across all provinces is also intended to integrate small businesses and rural communities into regional value-chains by developing their capacities as well as link them with partners, buyers, and suppliers in the region and beyond.
Further to this, through the Zimbabwe National Industrial Development Policy (2019-2023), the country adopts a value-chain approach, with the target of improving participation in regional and global supply chains.
The Policy calls for development and implementation of sector-specific value chain strategies to create competitive economic linkages and business opportunities for entrepreneurs.
Some of the targeted value chains that have high employment and export-generating potential include processed foods, leather, fertilizer, pharmaceuticals, dairy, and packaging.
At the regional level, the policy is aligned to the SADC Industrialization Strategy and Roadmap (2015 – 2063) and the African Union’s Agenda 2063.
The SADC industrialization strategy envisions the region to “progressively move from being factor-driven; to investment driven, then to efficiency-driven; and ultimately to the high growth trajectory driven by knowledge, innovation, and business sophistication.
Thus, when partaking in regional value chains, Zimbabwean companies must find a niche and capitalise on the country’s infrastructure, geographical location, favourable climatic conditions, and available human capital.
Local companies must strive to graduate from extractive industries and partake in processing industries, where real value from minerals and agricultural produces is derived.
In this two-part series, this column will explore the concept of regional value chains and discuss low handing fruits for the country.
What is a value chain?
A value chain represents interconnectedness of people, products, skills and monetary and non- monetary benefits beyond physical boarders.
Value chains are slowly transforming the nature of production and are increasingly being considered key features of the 21st century globalization.
In the modern economy, most final goods are made by combining foreign and domestic inputs via supply networks that cut across country borders and the traditional boundaries of organisations.
The Regional value chain revolution continues to attract widespread interest among both business leaders and policy makers with organizations such as the World Trade Organization (WTO) continuously exploring how trade policy institutions can be modernized to suit this new reality.
The idea of “Global Value Chains” has of late been serving as a focus of some leading events and publications, especially in the trade and as well the development community.
The concept formed the core issue of the Organization for Economic Cooperation and Development (OECD) and WTO Aid for Trade Review in 2013, and it was the fundamental topic of the UNCTAD World Investment Report in that same year.
For an improved and accelerated development within SADC and other regional economic blocs, it is becoming largely accepted that the development of regional value chains is of paramount importance.
Key benefits of being part of a value chain
In Africa, in order to enlarge national markets, regional co-operation is one-way to enjoy maximum benefits.
Through value chain participation specialization can emerge and risks can be shared. Fragmented markets such as those in Africa impede trade and competitiveness.
The development of regional value chains can help exploit economies of scale, reduce production and marketing related costs, and as well help in the removal of non-tariff barriers and ultimately promote trade.
Given that most countries, SADC members alike, export primary commodities, with some selling packaged and others processed goods with others involved in marketing, this presents opportunities for the development of synergies and eventually stimulate intra-regional trade.
Value chains have been an advantage to developing countries because they make it easier for those countries to diversify away from primary products to and services.
In the past, a country had to master the production of a whole manufactured product to export it. With value chains, a country can specialize in one or several activities in which it has comparative advantage.
For example, China has been able to export products that are seen as ‘High tech’ such as computers, smart phones as well as televisions.
Initially China was the assembler.
The production chain began from high-value design and financial inputs from advanced economies and sophisticated parts from the countries such as Japan, and the United States.
China presented the low-cost advantage of labour. Services in this case become the high- value input as the product is sent back to the United States, Japan, and Europe markets.
China’s role in value chains has played a major role in China’s growth and poverty reduction. The point of value chains is to break up the production process such that each country can focus on its comparative advantage.
*The Second Part of this discussion will look into some of potential regional value chains for Zimbabwean companies and will identifying the opportunities for growing Zimbabwe’s foreign currency earnings based on regional advantages and needs. Low hanging fruits for each value-chain and how Zimbabwean companies can participate in them will also be discussed.
