Zimbabwe - Overseas Development Institute

The main d i f f i c u l t i e s f a c i n g Zimplow and Bulawayo Steel
Products have revolved around three f a c t o r s : the nature of the
products they have been engaged predominantly i n manufacturing,
t h e i r management and, f i n a l l y , the i n s t i t u t i o n a l p o l i c y environment.
Both firms began^' by making and are s t i l l predominantly
dependent upon supplying the more simple range of a g r i c u l t u r a l
implements and hand t o o l s to the Zimbabwean market. Their sales
volumes therefore l i e outside t h e i r grasp and c o n t r o l : when the
country s u f f e r s from drought - as i t d i d i n 1982-84 and 1985-6-
domestic sales f a l l d r a m a t i c a l l y . On the supply side, because
some 90% of raw materials ( l a r g e l y l o c a l s t e e l ) i s supplied
domestically, dependence of these two firms on import a l l o c a t i o n s
i s s m a l l ' " . Nonetheless, although production i s f a i r l y labour
i n t e n s i v e , c e r t a i n pieces of machinery (presses and forges etc.)
have had to be imported and both the age of machinery and the
shortage of spares have had an i n c r e a s i n g l y adverse e f f e c t on
both p r o d u c t i v i t y and product q u a l i t y ' ' .
U n t i l r e c e n t l y , however, none of these issues nor comparat
i v e l y poor management have challenged the v i a b i l i t y of the firms
i n question which have been able to maintain s a t i s f a c t o r y ( a l b e i t
not very high) p r o f i t l e v e l s and without e x e r t i n g much e f f o r t at
expanding i n t o the export market. In s p i t e of only these two
firms supplying the domestic market, a s u f f i c i e n t l y "competitive"
environment e x i s t e d to keep costs down and deter p r i c e - f i x i n g
c o l l u s i o n , while s i m i l a r management and engineering c a p a b i l i t i e s
led to "adequate" l e v e l s of p r o d u c t i v i t y and product q u a l i t y on
the f a c t o r y f l o o r ' ^ . There was, however, no p r i c e or p r o f i t
r e l a t e d i n c e n t i v e f o r e i t h e r f i r m r a d i c a l l y to improve product
i v i t y . The o v e r a l l s e t t i n g was a p r i c e c o n t r o l system which
allowed p r i c e r i s e s to be passed on to the domestic consumer i n
l i n e with r i s e s i n inputs i n the normal cost-plus manner. There
was l i t t l e i n c e n t i v e to keep p r i c e s down or to improve r a d i c a l l y
on product q u a l i t y or p r o d u c t i v i t y . In s p i t e of often quite
dramatic v a r i a t i o n s i n the l e v e l of domestic demand, plant s i z e ,
the p r i c e regime and d i f f i c u l t i e s of exporting to independent
A f r i c a provided no s u b s t a n t i a l i n c e n t i v e to expand s i g n i f i c a n t l y
i n t o the export f i e l d . Nonetheless, the f a c t that exporting
(mostly to South A f r i c a during the l a t t e r UDI years) d i d take
place i n d i c a t e s that the i n s t i t u t i o n a l framework and the product
i v e system d i d ( i n t h i s instance) enable these two firms to
remain broadly i n t e r n a t i o n a l l y competitive (as confirn^ed by the
DRC data). Over the longer term, however, the -^naintenance of
t h i s p o l i c y environment would almost c e r t a i n l y have done l i t t l e
more than lead to a widening between domestic and i n t e r n a t i o n a l
p r i c e s , next to no improvement i n product q u a l i t y and i f there
was to be export trade i t would have to be financed i n c r e a s i n g l y
from higher domestic p r i c e s ' ' .
I r o n i c a l l y , i n p r a c t i c e i t was neither the growing pressures
for greater l i b e r a l i s a t i o n from i n t e r n a t i o n a l agencies nor the
dramatic cuts i n f o r e i g n exchange a l l o c a t i o n s :that a f f e c t e d
adversely so many manufacturers i n the mid-1980s) which uncovered
the v u l n e r a b i l i t y and economic precar iousness of t.^.ese two firms.
Rather i t was a l t e r i n g the p r i c e c o n t r o l mechanise Un e s s e n t i a l
part of the UDI i n s t i t u t i o n a l framework for ir.anufacturing) which