Download Forestry Company of Zimbabwe

LANGKAWI INTERNATIONAL DIALOGUE 2011
19TH to 21ST JUNE 2011
EXPLORING NEW DIMENSIONS:
What has business has to offer:
‘Sell yarn or fabric not cotton my son’
Lessons from my mother
By Joseph Kanyekanye
President – Confederation of Zimbabwe Industries
&
Group Chief Executive Officer – Allied Timbers Holdings
Presentation Summary
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Introduction & Scope
Africa today and tomorrow
Zimbabwe Mineral resources
Key challenges for Zimbabwe
Power as an enabler for growth
Western Skepticism or Sanctions
Forecasted GDP Growth
Forecasted Sectorial Growth
Areas of Competitive Advantage
Mining Opportunities Reloaded
Other opportunities
Conclusions
Moderation
Introduction
Stability and political unity since 2009
Resource rich country with arable land 7 agric/industry link
 Education – unquestionably Mugabe legacy
 GDP growth averaging 7% in last 2 years
Constraints – I refuse
 “Sell yarn or fabric not cotton” Lesson from my mother. I
was born and doctored on value-addition
Come to share, learn and adapt – look east.
What to share the social economic transformation of
Zimbabwe in the immediate past and co-author its future.
 Malaysia palm trees – technology transfer back to Africa
 Comments borne out of need to eradicate poverty while
accepting inclusive business plus sustainability.
This is an objective story of my country and how SMART
PARTNERS can share in future development
Africa today
• Total population: 1 billion
• Population under 15: 41%
• Adult literacy: 62%
• GDP income per capita is 10th of world average
• Around 45% living on US$1 a day
• Mobile phone subscribers: 37%
• Population living in urban areas: 40%
• Collective GDP (2008): US$1.6t
• Combined consumer spending (2008): US$860b
Africa tomorrow
• Total population: 1.4 billion by mid 2025
• Total population: 2.1 billion by mid 2050
• 128 million households with discretionary income
by 2020
• Consumer spending will be US$1.4t by 2020
• Collective GDP will be US$2.6t by 2020
• Around 47% of Africans will be living in cities
by 2025
Contemporary Views on Africa
o“Africa could be on the brink of an economic takeoff, much like
China was 30 years ago, and India 20 years ago.”The World Bank
Source: Africa’s Future and the World Bank’s Support to It,
The World Bank, March 2011
“Big misperceptions about Africa still exist, especially in the mainstream media
where Africa is still considered as a place of civil unrest and war.” Olaf Meier,
African Development Corporation
"KFC intends to double its restaurants in Africa", The Wall Street Journal Asia, 9
December 2010.
“So the point really [...] is not whether you should be doing business in Africa, but
rather how.” Leslie Rance, British American Tobacco
“Africa is the untold story, and could be the big story, of the next decade, like
India and China were this past decade ... The presence and the significance of
our business in Africa is far greater than India and China even today. The
relevance is much bigger.”Muhtar Kent, CEO, Coca-Cola 2010.
Zimbabwe : The real King Solomon Mines Reloaded
Gold reserves estimated at $billions but currently producing
12mt per year but capacity to do 50mt/year exists
Abundant Nickel under care but can produce 10 000 tonnes
Second largest PGM in Zimbabwe worth $400billion. 4 projects
on feasibility stage.
Abundant coal reserves at 2.7 million tonnes production/year
Chrome production rose 167% in 2010 to 517 000t.
Zimbabwe Kimberlitic diamonds at 4 million carats and alluvial
reserves can account for at least ¼ of world production
Zimbabwe
Pulp & Paper
Activity > 0.5%
Key Challenges for Zimbabwe
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ABSENCE OF LINES OF CREDIT
WESTERN SCEPTICISM: SANCTIONS & DIVIDE AND EXPLOIT CF
DBSA, INHERITED DEBT, PTA AND AFREXIM ASSISTANCE
DIFFICULTIES IN ACHIEVING NATIONAL CONSENSUS ON
PRIORITIES: DEBT, PRIORITIES IN GNU AFTYER FOCUS ON
SANCTIONS
LACK OF NATIONAL INTEREST – TOO MUCH FOREIGN MEDDLING
RESTOPRSTION OF COMPETITITIVENESS – BUSINESS
REMODELLING
DANGER OF A SUPERMARKET ECONOMY : RSA VERSUS
ZIMBABWE BALANCE OF TRADE
INNOVATION: RESOURCE LEVERAGING FOR NDIAMONDS, COAL
TO PLATINUM
ATTRACTING TIMID INVESTMENT ESPECIALLY INFRASTRUCTURE
PARTICULARLY POWER
COMMUNICATION GAP BETWEEN GOVT/NGOs AND PRIVATE
SECTOR ON ON CONCEPTS AND SPEED OF IMPLIMENTATION
ZIMBABWE ELECTRICITY TRANSMISSION AND
DISTRIBUTION COMPANY
Internal Correspondence
Power as an enabler for growth
Source
Current Av.
Capacity
(MW)
Dependable
Capacity
(MW)
Remarks
Kariba
720
750
 All units in Service
Hwange
300
780
 Major Overhauls a Must
 Fuel (Coal & Diesel) constraints
Small
Thermals
0
150
 Coal ABUNDANT BUT NO
INVESTMENT
 High Cost Relative to Tariffs
Total
1020
1680
>600 MW Shortfall
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SANCTIONS MUST GO
‘ Until the President makes the certification described
in sub-section(d), and except as may be required to
meet basic human needs or for good governance, the
Secretary of the Treasury shall instruct the United
States Executive director to each international financial
institution to oppose and vote against: (1) any
extension by the respective institutions of any loan,
credit, or guarantee to the Government of Zimbabwe:
or (2) any cancellation or reduction of indebtedness
owed by the Government of Zimbabwe to the United
States or any international financial institution’
SANCTIONS? TARGETEED? IMPACT ON BUSINESS REAL –
COMPANIES,ECONOMIC DEVELOPMENT, WORLD BANK, IFC
ABSENCE
USA/EU Skepticism and Sanctions - 1
FACTS? TRUTH?POLITICS? FAILURE TO ENGAGE?
Conversations with EU,USA, Ambassadors, ADB, World
Bank, IMF, PTA .
Zimbabwe Democracy & Economic recovery Act (2001)
versus Bill (S.3722.IS) Zimbabwe sanctions Repeal Act 2010 (
acknowledges the burden of sanctions in Zimbabwe GNU)
EU Council resolution (EC) – 314/2004 CFSP – financial
restrictions on Zimbabwe and travel ban on select
government leaders
Sanctions UNILATERAL – no WTO rules
Can sanctions be justified post in a unity government You
decide.
Is it fair when compared to other regions since 2009?
Western Skepticism or EU US Sanctions - 2
FACTS? TRUTH?POLITICS? FAILURE TO ENGAGE?
 ZIDERA prevents debt rescheduling cf post
independence odious debt of US$1.5 billion
US/EU can influence Zimbabwe getting lines of
credit
The West has not forgiven or forgotten land reform
– heart of the issue
Targeted entities:
State constitute at least 40% of businesses
State utilities and enablers of growth largely
depend on foreign loans for capex – power,
railways
Zimbabwe needs to deal with ZIDERA /land reform.
Opportunities in Mining Reloaded
•Chrome ore export ban cries for investment to
cause beneficiation of at least 517 00mt
•Scope for new investors in platinum, coal and
gold mining
•Thermal and Hydro Power generation options
•Nickel operation under care and maintained due
to funding constraints .
•Kind Solomon is open for business and CZI will
help
•New one stop shop allows speedy investments
ZIMBABWE FORECASTS
% p.a.
GDP Growth
Inflation – end
year
Interest Rates (USD)
Source: Hawkins 2010
2011 2012
9,3
7
6
6
13
10
ZIMBABWE SECTORAL GROWTH
% p.a.
2011 2012
Source: CZI2011
Agriculture
25.0
15.0
Mining
45.0
55.0
Manufacturing
9.5
12.0
Distribution
8.0
10.0
Tourism
6.0
6.0
Some Key areas of competitiveness in
Zimbabwe
Clothing
and textile industry
Agro-Processing
Chemicals & Tourism
Manufacturing - Food
Pharmaceuticals
Metals and Minerals
Technology
Wood and furniture
Opportunities
Zimbabwe to focus on priority industries to focus
on. – incubation strategy, modernization, capital
injection, technology transfer
 The products must come from sectors where the
country has competitive advantage and can
therefore be pushed into the region – focus on
quick fix e.g. in Argentina and Hungary
[SADC&COMESA]
 Consideration must also be given to tourism
 Resource leveraging on minerals: coal, gold,
platinum, diamonds
 Value addition especially on cotton and tobacco
which have recovered – Land reform cannot be
seen as a disaster even by the most pessimistic
critic
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Opportunities continued
 Government
should come up with a
comprehensive National Industrial Strategy
 Use of the EPA benefits as this may yield
increase and progress in market liberisation
 Industry must innovate or die
 Allowing more players and ensuring that
market rules apply
 Seek incubation period via derogation non
WTO obligations
Opportunities Continued.
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Foreign enterprises and other players that seek to
partner local industries urgently needed
Endeavour to export value added products
Line of credit of US$2 billion or same value revolving
fund urgently needed at rates of 10% per annum an
a tenor of at least 1 year
Industries need to modernise
Need to dump high mark-up low productivity
business models
Use Total Quality Measurement Strategies (TQM)
and ISO standards to improve the quality of goods
and services and sustainable environmental
practices thereby increasing customer satisfaction.
Opportunities - continued
Institutional and structural reforms – stop fighting
private sector, commercialise or privatise state
enterprises immediately
 Make the nation attractive to investment – Political
stability
 Policies that spawn new firms so as to keep ourselves at
the top – e.g. micro-finance for value adding like in fruit
drying
 Boost Research and development through tax credits ,
lower corporate tax, Capital equipment credits and NO
VAT FOR CAPEX.
 Pace of work ….governments slow and on three
speeds eg leveraging of minerals & resolution of
sanctions
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Opportunities continued
Assistance in form of incentives, tax holidays
Supporting of low interest rate loans which businesses
can borrow
Providing affordable industrial finance which enables
industry to recapitalize, retool and increase capacity
utilisation
Going back to the social contract & a investor - friendly
Labour Relations Act
Continuing to groom entrepreneurs – Government must
privatise now airlines, phone, power, commercial
investment to experience the Chinese “miracle”
CONCLUSION
Building
blocks for policies must be market based
principles:
Focus on incentives rather than punitive measures
Look East and Learn – Kenya case: Sino-Indian
Persian triumvirate has upstaged UK 3 billion pound
investment, Oversubscribed Bond Programme,
Growth
Governments have the mandate to rule but they
must ideally lead by consensus.
'Behind me is infinite power; before
me is endless possibility; around me
is boundless opportunity. What I
need is Smart Partners" Adapted fromStellaStuart
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THANK YOU
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