Zimbabwe - Overseas Development Institute

3.2 Inadequacies of p r i c e s as a basis f o r p o l i c y
implementation
There are f u r t h e r lessons to be l e a r n t from f i r m - l e v e l experience
about the p o l i c y context f o r manufacturing. In part
i c u l a r , the evidence shows quite s t a r k l y that to attempt to
r e s t r u c t u r e the sector towards f u r t h e r export o r i e n t a t i o n by
removing c o n t r o l s and r e l y i n g on the e f f e c t s of i n t e r n a t i o n a l
market and p r i c e forces would be an extremely fool-hardy course
of a c t i o n to f o l l o w . This can be i l l u s t r a t e d i n i t i a l l y i n
r e l a t i o n to a g r i c u l t u r a l implement exporters.
Zimplow and Bulawayo S t e e l Products c u r r e n t l y export to a
range of A f r i c a n countries i n c l u d i n g the SADCC s t a t e s , Uganda,
Sudan and South A f r i c a . Simply on the basis of p r i c e d i f f e r e n ­
t i a l s , the numbers i n d i c a t e that Zimbabwe should not be exporting
to most of these markets because as a r u l e i t s p r i c e s are higher
than i t s competitors. To take one example, India can land hoes
i n Uganda f o r $33 whereas the ex-factory p r i c e of Zimbabwean hoes
i n mid-1987 was $42. This d i f f e r e n t i a l i n large part i s due to
the 120% export i n c e n t i v e a v a i l a b l e to Indian hoe manufacturers
which undercuts the Zimbabwean p r i c e . In s p i t e of t h i s wide
p r i c e d i f f e r e n t i a l , Zimbabwean products are s t i l l i n demand and
are being imported. The reasons revolve around the f o l l o w i n g
f a c t o r s : b e t t e r d e l i v e r y time, b e t t e r q u a l i t y products, better
a f t e r - s a l e s s e r v i c e and the f a c t that the Zimbabwean product i s
w e l l known, t r i e d and tested i n these markets. Reversing the
b l i n d "export at any p r i c e " p o l i c y of the l a s t few years,
Bulawayo S t e e l Products reports that i n recent months i t s export
sales have gone up i n volume terms while i t s p r i c e s have also
been r i s i n g ' ' . There seems, a d d i t i o n a l l y , to be l e s s concern
than one might expect that B r a z i l i a n hoes are c u r r e n t l y being
imported by Mozambique at a cost 20-30% lower than Zimbabwean
ones: Zimbabwean firms remain confident that the lower q u a l i t y
of the B r a z i l i a n product w i l l soon lead to an end to the B r a z i l ­
ian competition^0.
There i s one, f i n a l lesson to be l e a r n t about i n t e r n a t i o n a l
competitiveness and p o l i c y to encourage export expansion from the
experience of Zimplow and Bulawayo Steel Products and i t concerns
consistency. The major p h y s i c a l input i n the manufacture of
a g r i c u l t u r a l implements i s s t e e l and Zimbabwe's ZISCO s t e e l
provides t h i s basic component not only domestically but also
r e g i o n a l l y . At present, and consistent with p r a c t i c e s t r e t c h i n g
back over a number of years, the p r i c i n g p o l i c y of ZISCO generall
y involves charging the domestic customers of i t s products a
higher p r i c e than i t charges export customers. While t h i s has
the p o s i t i v e e f f e c t of encouraging immediate f o r e i g n exchange
maximisation, even i f at the cost of r a i s i n g the p r i c e to
domestic consumers, an important i n d i r e c t e f f e c t i s to reduce the
i n t e r n a t i o n a l competitiveness of export products made with the
higher-priced ZISCO s t e e l . In mid-1987, Zimplow and Bulawayo
Steel Products had to purchase ZISCO s t e e l at the p r i c e of $550 a
tonne. This same s t e e l was exported to a r i v a l company, Agrimol