Zimbabwe - Overseas Development Institute

quite r a p i d l y exposed both the long term weaknesses of the firms
and of the p o l i c y environment under which they had operated f o r
so many years.
A f t e r Independence the costs of inputs across the whole of
the manufacturing sector began to r i s e more r a p i d l y , due l a r g e l y
to increases i n the minimum wage, the f a l l i n g value of the
Zimbabwe d o l l a r and to other s p e c i f i c p r i c e increases, part
i c u l a r l y for f u e l and e l e c t r i c i t y and s t e e l . At the same time
the i n s t i t u t i o n a l p r i c e c o n t r o l mechanism was tightened and
extended such that f o r most of the leading products manufactured
by both Zimplow and Bulawayo Steel Products s p e c i f i c p r i c e
increase a p p l i c a t i o n s had not only to be made but they were
subject to Cabinet approval. This need f o r both more s p e c i f i c
and f o r higher p r i c e increase a p p l i c a t i o n s occurred at a time
when the Government was focussing i t s economic p o l i c i e s on two
p a r t i c u l a r o b j e c t i v e s : on the one hand working to keep down
p r i c e s of goods purchased by low income r u r a l groups ( i n c l u d i n g
simple hand and a g r i c u l t u r a l implements) and, on the other hand,
increased determination to check what i t perceived as the
e x c e s s i v e l y high p r o f i t l e v e l s of p r i v a t e companies'". The
r e s u l t was that from 1981 onwards. Government awarded p r i c e
increases f a r lower both than those requested and than those
required to accommodate the r i s e i n input costs''. The immediate
e f f e c t s were c l e a r l y an erosion i n p r o f i t l e v e l s ' ^ . What i s of
more i n t e r e s t from a p o l i c y perspective i s the e f f e c t that t h i s
p r o f i t squeeze had on the companies: quite r a p i d l y i t exposed
weaknesses and i n e f f i c i e n c i e s which i n these instances at l e a s t
led to the adoption of more c o s t - e f f e c t i v e production methods.
The immediate response of both companies to the p r o f i t s
squeeze and the drought-induced f a l l i n domestic demand was
vigorously to expand i n t o the export market. This was s u c c e s s f u l
inasmuch as export sales went up - Zimplow's exports doubled to
$700,000 from 1982 to 1984, while Bulawayo S t e e l Products exports
rose from 25% to 50% of t o t a l production by 1985 i n c l u d i n g the
export of $1 mn of goods to Zambia i n 1985. However from a cost
point of view, the strategy would appear to have been fool-hardy
- i n some instances products were exported at l e s s than the
marginal costs of production and i n others the marginal costs
were covered but, of course, with domestic p r o f i t margins
squeezed, the t r a d i t i o n a l subsidy of the domestic market had been
cut s u b s t a n t i a l l y . I t was i n t h i s context, with Zimplow r e t u r n ­
ing s u b s t a n t i a l absolute losses and Bulawayo Steel Products, i n
the words of the current Managing D i r e c t o r , "gradually going
under", that the management of both companies was replaced.
The changes w i t h i n each f i r m were dramatic: f a c t o r i e s were
r a d i c a l l y reorganised with production l i n e s a l t e r e d from a s e r i e s
of separate and unco-ordinated operations to a continuous f l o w
system; more r a p i d throughput meant that stock l e v e l s could be
reduced; s t a f f t r a i n i n g education was i n i t i a t e d to upgrade
workers and i d e n t i f y p a r t i c u l a r tasks i n the o v e r a l l production
process; new s k i l l e d s t a f f were employed on the shop-floor,
leading to higher q u a l i t y products being produced and to improved
designs of t r a d i t i o n a l l i n e s . The r e s u l t was that i n the space