BERF Zimbabwe – What Works in Local Content Policy

In a continuation of its support to help Zimbabwe re-build its institutions and strengthen its business environment, BERF has provide guidance on how Zimbabwe should potentially use Local Content Policies to achieve long – term industrial competitiveness. Evidence from the research will help to ensure that DFID Zimbabwe’s clients in government are able to operationalise regulations effectively.

The research identifies lessons on what worked and what hasn’t worked in designing and implementing local content policies drawing on case studies from developing countries. BERF also looked at initiatives in relevant middle-income countries where the lessons could be transferable to Zimbabwe’s context.

A second objective was to review evidence of the impact of local content policies on economic growth of key sectors – extractives (mining), agribusiness and agriculture. The evidence illustrated the potential impact of local content policies on supply chains, considering direct, indirect and induced jobs and unintended potential effects on other sectors of the economy.

The report concludes that almost all government policy has some role in supporting the domestic economy to create value. Local content policy is a focused attempt to promote the objective, but it is often difficult to separate interventions from other supporting policy areas. The evidence focused on the mining and agro-processing sectors — two economic areas of great importance for Zimbabwe.  Agro-processors are able to market their goods domestically, with significant opportunities for integrated local supply chains. In contrast, domestic markets for cut and polished diamonds and gold jewellery are very small, so the vast majority of mineral production will be exported. Forward linkages in mining must be internationally competitive to survive, beyond the influence of local content policies.

Further analysis of agro-processing led researchers to focus on retail and tourism as the marketplaces to which local content policy can most readily be applied to promote domestic manufacturing and agricultural inputs. These are sectors in which ‘information asymmetries’ tend to favour imported inputs, even though Zimbabwean products could, with the right support, compete on price and quality. They are also areas in which consumers may be persuaded to pay a premium for locally sourced goods.  Other prospects for local content policy were seen  in government procurement, which offers a range of opportunities for promoting local content — including content from disadvantaged groups.

A critical lesson of the local content experience elsewhere is that the process is just as important as the exact measures chosen. The government needs detailed high-quality data in order to target measures to induce sustainable change, and it needs early and open dialogue with the private sector.

The Evidence and Learning Note concludes by observing that local content policy lies at the intersection of a broad array of policy areas, from education to infrastructure to immigration, and is often unable to compensate for more fundamental policy weaknesses. While local content policy relies on dialogue with the private sector, the government should be ready to listen and identify other policy reforms that more directly contribute to the priority needs of industry.

DFID feedback suggested ‘’The report provided helpful pointers for both mining and agriculture, and the forward linkage to retail and tourism are particularly interesting.   The report comes at a time when the Government of Zimbabwe has again indicated interest in signing up to the Extractive Industries Transparency Initiative; and on the agriculture side, is validating the first comprehensive Agricultural Policy Framework in 15 years.   The recommendations will provide a useful basis to discuss and advocate for effective regulatory / policy implementation’’.

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