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Tapuwa Mashangwa
THE potential for agro-industrial development in Zimbabwe and other developing countries is largely linked to the relative abundance of agricultural raw materials and low-cost labour.

The most suitable industries in such conditions are those that make relatively intensive use of these abundant raw materials and unskilled labour and relatively less intensive use of presumably scarce capital and skilled labour.

Many of the industries using agricultural raw materials have in fact those characteristics that make them particularly suitable for the circumstances of many developing countries. Where the raw material represents a large proportion of total costs, its ready availability at a reasonable cost can often offset such disadvantages as a lack of infrastructure or skilled labour.

Furthermore, for many agro-industries, a small plant may be economically efficient, which is another important factor in developing countries where the domestic market is limited by low purchasing power and sometimes by the small size of the market itself.

The factors that determine the most economic location for an agro-industry are actually complex.

Generally transport is a main factor. Most agricultural products either lose weight and bulk in processing, meaning they can be transported more cheaply after they have been processed, or they are perishable and so can be more easily transported in processed form.

The situation is also affected by labour supplies and the availability of power and other infrastructure.

But industries based on these products can often be set up economically in the area where the raw material is produced.

They can therefore contribute to the relief of the rural underemployment, which is characteristic of developing countries.

There are, however, exceptions. For most grains, shipment of the raw material in bulk is frequently easier, while many bakery products are highly perishable and thus require production to be located close to the market.

Oilseeds (except for the more perishable ones such as olives and palm fruit) are also an exception and can be transported equally easily and cheaply in raw form or as oil, cake or meal, so there is more technical freedom of choice in the location of processing.

The same is true for the later stages of processing of some commodities.

For example, while raw cotton loses weight in ginning, which is consequently carried out in the producing area, yarn, textiles and clothing can all be transported equally easily and cheaply.

Where there is a high degree of technical freedom in the choice of location, industries have frequently tended to be located in proximity to the markets because of the more efficient labour supply, better infrastructure and lower distribution costs in the large market centres.

With production for export, this factor has often tended to favour the location of processing in the importing country.

This tendency has been reinforced by other factors, including the need for additional raw materials and auxiliary materials (particularly chemicals) that may not be readily available in the raw material-producing country; the greater flexibility in deciding the type of processing according to the end use for which the product is required; and the greater regularity of supply and continuity of operations that are possible when raw materials are drawn from several different parts of the world.

However, with improved infrastructure, enhanced labour efficiency and growing domestic markets in the developing countries, there is increased potential for expanding such processing in the countries where the raw materials are produced.

In addition, with growing liberalisation of world trade, more developing countries will be able to take advantage of lower labour costs to expand their exports of agro-industrial products.

One further aspect of importance for the location of agro-industries would appear to be the possible existence of economies of scale. Where there are considerable economies of scale (as in the production of rubber tyres and pulp and paper), large markets are of course essential.

The size of market needed for economic production in such cases may be far in excess of the domestic market in individual developing countries, where it is limited not only by the low level of per capita income but also by the frequently small size of the total population. Although in most agro-industries average costs of production can be reduced as the scale of plant is increased, the importance of economies of scale should not be exaggerated.

The lower cost of production with a large-scale plant results not only from the spreading of capital and other overhead costs, but also from the frequently smaller labour requirements per unit of output in the larger plant, an aspect which is of less importance in developing countries where labour costs are low.

There will always be room for growth in developing countries and Zimbabwe is not limited to having bigger and more developed agro-processing industries.

• The writer is Engineer. Tapuwa Justice Mashangwa, a young entrepreneur based in Bulawayo, Founder and CEO of Emerald Agribusiness Consultancy. He can be contacted on +263 739 096 418 and email: tjmashangwa@gmail.