Govt works on Competitiveness Commission

24 May, 2015 - 00:05 0 Views
Govt works on Competitiveness Commission Mr Mike Bimha

The Sunday Mail

Mr Mike Bimha

Mr Mike Bimha

AD-HOC committees are overseeing the process of addressing factors that make the local economy uncompetitive as Government puts in place mechanisms for establishment of the National Competitiveness Commission (NCC).

Industry and Commerce Minister Mike Bimha told The Sunday Mail Business that unavailability of cheap money for retooling and working capital was pushing prices of goods and services upwards.

Last year, Zimbabwe’s imports of US$6,4 billion dwarfed exports, yielding a US$3,3 billion deficit.

The trend has continued this year.

Official statistics show that in the three-month period to March, Zimbabweans had imported goods worth US$1,6 billion.

There is concern over miscellaneous items that are being brought onto the local market and by the end of the first quarter, locals had imported lemons, fresh grapes, peaches, frozen vegetables, carrots and turnips worth US$93 200, US$695 023, US$243 682, US$61 486 and US$101 281 in that order.

Interestingly, the imported agricultural produce is cheaper than local products and Zimbabwean farmers are being pushed out of business as a result.

Big companies have been similarly affected.

Delta Corporation is battling softening consumer demand despite lowering prices to stimulate demand.

Low-end consumers are opting for cheap spirits.

High production costs and a strengthening US dollar especially against the Rand is making imports increasingly attractive.

The South African rand has slumped to 1:12 against the greenback.

Neighbouring South Africa, from which the bulk of local imports originate, is Zimbabwe’s biggest trading partner.

Statistics from South Africa’s department of trade and industry show that between 2005 and 2014 exports to Zimbabwe grew by 247 percent to US$2,7 billion.

Conversely, Zimbabwe moved goods worth US$2 billion to South Africa last year, representing 67 percent of total exports.

It has become cheaper to import cement from South Africa where a 50kg bag costs R60, which is about US$5. In Zimbabwe, the same bag of cement costs between US$11 and US$15.

Similarly, a 20kg bag of roller meal costs US$11,80 in Zimbabwe, while in Zambia a 25kg bag of the same costs ZMK79, which is about US$10.

In Zambia, the petrol price is at ZMK7,6 per litre (about US$1) while in Zimbabwe prices range from US$141 to US$152 per litre.

A recent African Development Bank report on Zimbabwe noted that the “competitiveness of manufactured products is compromised mainly due to high production costs compared to those prevailing in neighbouring countries”.

“On average, Zimbabwean firms’ borrowing costs (estimated at an average of 28 percent in 2013) are twice to three times the levels observed in the region.

“The real weighted average lending rates for corporates and individuals tightened over the period December 2013 to December 2014 with possible negative effects on aggregate output growth as the cost of borrowing for investment and consumption increases,” said the AfDB.

In 2014, manufacturing sector capacity utilisation was 36,3 percent and Industry and Commerce Deputy Minister Chiratidzo Mabuwa indicated last month it could drop to 30 percent this year.

As one of several measures to address this, Government is setting up the NCC to make local goods more competitive.

“Government has approved the principles of transforming the National Incomes and Pricing Commission (NIPC) into the National Competitiveness Commission.

The Commission will be tasked with restoring competitiveness on local goods.

“However, restoring competitiveness is not a one day event by a process. We are making amendments to the (NIPC) Act to cover broader issues such as productivity, policy, imports and some of our regional agreements; it is a whole gamut of issues.

“It might take time before it (the NCC) is put in place but we have ad-hoc committees from Government and the private sector that are looking at all those issues,” said Minister Bimha.

A key area attracting Government attention is the labour market, with investors saying laws are unfavourable to them.

Local industry believes high labour costs are bleeding operations.

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