Giving local enterprises a fillip

A SAFIC project stakeholders’ workshop held at the Swedish Embassy in Lusaka last month. PICTURE: WISDOM KALENG’A

IT WAS in a speech to the UNIP National Council at the Mulungushi rock near Kabwe, where the Zambia African National Congress (ZANC) was founded in 1958, that former President Kaunda delivered the famous Mulungushi reforms speech.

In the words of Andrew Sardanis, who was the architect of the Mulungushi speech, it left no doubt in anybody’s mind as to who the country belonged to and who was in charge.
“First, I want to talk about the resident expatriate enterprise. Economic activity in Zambia is dominated by the European and Asian business communities whose members have been in the country for many years,” Dr Kaunda said.
“Since independence, my ministers and I have been making repeated appeals to the members of these communities calling on them to identify with the nation and urging them to Zambianise their businesses as soon as possible.
“I am very pleased to say that many have responded to our pleas and have identified themselves with the country by taking up Zambian nationality and making sincere efforts to train Zambians to skilled and executive positions.
“There is however an appreciably large number of others who have chosen to remain outside the national family. They have kept only one foot in Zambia in order to take advantage of the economic boom created by the Transitional and First National Development Plans.”
He said the other foot they have kept outside Zambia, in South Africa, Britain, Europe, India, or wherever they come from, ready to jump when they think that the country no longer suits them.
“I am afraid the period of grace is over,” Dr Kaunda said. “These people must now make a final choice. We do not want to keep them here against their will. We’re a proud nation. At the same time, it is not fair that we should allow them to make off with the jam and the butter and leave crumbs of dry bread for our people.”
With that, Dr Kaunda proceeded to announce a raft of economic measures intended to give a fillip to Zambian enterprise.
Dr Godfrey Hampwaye, head of the geography department at the University of Zambia, says sound industrial policies allow for a development arena characterised by effective private sector development, economic growth and employment opportunities.
Dr Hampwaye took part in the Successful African Firms and Institutional Change (SAFIC) project, which since 2012, explored major reasons why some Zambian firms in agribusiness and among suppliers to the mines perform better than others.
The SAFIC project aimed at enhancing understanding of why some locally-owned firms in Kenya, Tanzania and Zambia perform better than others. In particular, the project examined how different institutions affect firm-level performance. In Zambia, the project mapped and surveyed firms in the food processing and suppliers to the mines sub-sectors from 2012 to 2014. Then it conducted a number of in-depth interviews with selected firms in the two sectors from 2014 to 2016.
The premise of the project is on the understanding that the African business environment is largely unstable and sometimes rapidly changes.
Dr Hampwaye, in a brief that he presented at a workshop in Lusaka last month, said the results from the project show that policies, programmes and institutions play a significant role in enhancing the success of firms as lack of them may adversely affect performance.
“The results from the firms of both sectors [local food agro-processing and local suppliers to the mines sub-sectors] generally indicate that most of them either receive inadequate or no government support at all,” the brief says.
“With reference to government support programmes or schemes, over 70 percent of the respondents of both sectors indicated that they did not know about the existence of such government programmes which could help their firms.”
A few firms mentioned knowing of the Citizens Economic Empowerment Commission (CEEC) which endeavours to make sure that Zambians benefit from economic growth, local content initiatives and certain incentives, especially rebates when importing equipment.
Further, a significant number of the same firms reported that the foreign competitors accessed a variety of incentives which disadvantaged the local firms.
“As for membership to the various business associations, generally, the firms were members of the different associations but these were considered weak as more than 75 percent and 50 percent of the agro-processing and suppliers to the mines firms respectively stated that they did not enjoy any benefits from the incentives and policies promised by the associations,” the brief reads.
“In the agro-processing sub-sector, about 42 percent of the firms reported that there were no trade incentives offered, and import tariffs were high as demanded by the Zambia Revenue Authority (ZRA).
“The firms further doubted the capacity of the associations to influence government to make relevant policy changes. However, about 10 percent of the suppliers to the mines confirmed being assisted to obtain certification.”
It was also revealed that the quality of education and training was low to meet the high standards demanded by foreign firms, especially for the suppliers to the mines sub-sector.
As for the upgrading of skills and capabilities, most of these were conducted in-house and with limited involvement of external institutions.
“Generally, firms in the two sub-sectors experienced low level skills thereby facing challenges in handling an international competitive environment. In terms of research and development, 50 percent were not undertaking any research and development in the agro-processing sub-sector despite being important components of firm and overall industrial growth,” the brief points out.
“Overall, the growth of the firms have been severely affected by the instability of the business environment, weak relationship between State and the associations [business entities], lack of government support programmes, inadequate incentives and failure by the business associations to influence government.
“The implications of these findings are that more is needed for the businesses and the state to collaborate with the view to addressing the challenges and improving the performance of the firms in both sub-sectors.
“Unless the solutions to constraints are found, the firms will continue struggling with the negative impacts of poor infrastructure, high interest rates and high transportation costs.”
Simply put, the business environment needs to be improved including initiatives such as CEEC and local content initiatives and regulations concerning import tariffs.
“Based on the findings, it stands to reason that economic growth motivated industrial policy adjustments and new policy formulation are necessary as was done in countries such as Taiwan,” the brief recommends.
“The introduction of certain incentives is also needed to assist these firms. In order to further identify the critical policies, action plans, and necessary incentives, concerted efforts are needed by the both the State and the respective business associations to begin collaborating more effectively in order to address the concerns of the firms.
“Such synchronised efforts would lead to achievement of mutually beneficial results. Adequate efforts to disseminate information ought to be carried out so as to create awareness of existent programmes and policies that currently support local businesses.”
(This is the final article in a three-part series of features looking at the Successful African Firms and Institutional Change project, which explores why some Zambian firms in agribusiness and other suppliers to the mines perform better than others)

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