The Sunday Mail
Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) has extended the export incentive scheme to the cotton and tourism sectors as a deliberate effort to stimulate production and generate more foreign currency.
Exports have been averaging US$2,5 billion in the last four years, which is markedly lower than the targeted US$7 billion under the 2011 National Trade Policy.
The incentive scheme was introduced in July last year targeting gold producers and tobacco farmers.
Import restrictions have helped cut foreign currency outflows as imports dropped to US$5,2 billion in 2016 from US$6 billion a year earlier.
As a result, the trade deficit narrowed to US$2,8 billion last year from US$3,3 billion in 2015.
RBZ Governor Dr John Mangudya announced on February 15 this year that the central bank will be extending the five percent bonus to cover not only the cotton and tourism sectors, but exporters of value added products as well.
“These measures are necessary as the country needs to pursue a new economic development model that is anchored on an export-led growth strategy to balance exports and imports whilst simultaneously addressing the structural rigidities besetting the economy in order to expand output.
“It is against this productivity mantra or conviction that these measures are being put in place to sustain the national economy under the new normal,” said Dr Mangudya.
It is believed that the tourism industry has lost competitiveness as a result of the price differences between Zimbabwe and its regional peers.
The predominant use of the United States dollar in the current multicurrency system is making the local tourism product relatively expensive.
Cotton brings in new money as it is purchased using offshore lines of credit.
Almost 80 percent of cotton lint is exported.
The central bank is trying to boost output and competitiveness of the local economy.
Zimbabwe, however, relies on exporting raw materials such as gold, platinum and diamonds.
Confederation of Zimbabwe Industries (CZI) vice president Mr Sifelani Jabangwe recently told The Sunday Mail Business that low capacity in the manufacturing sector is a major drawback to improved export earnings.
CZI’s 2016 manufacturing sector survey indicated that capacity utilisation rose to 47,4 percent from 34,3 percent in 2015.
The industry lobby group believes manufacturing companies still need more time to recover.
“Our exports are ranking lowly, the development of this area has been quite slow. We have always been saying it is very difficult for companies operating at 34 percent to export.
“But with the coming in of SI64, which I can say has been a panacea to our industry’s challenges, we have seen some companies such as those making cooking oil and baked beans beginning to export,” said Mr Jabangwe.
There are however, nascent signs of recovery in industry.
Surface Wilmar, which produces Pure Drop cooking oil, is considering spreading its wings to Malawi, Botswana and Zambia.
The business has the potential to refine and pack 16 000 tonnes of cooking oil per month.
The dairy industry has also been able to ramp up production despite obtaining economic challenges.
Many companies are presently being drawn into investing on the local market.
Trade Kings Zimbabwe (Private) Ltd has since ploughed US$50 million into the construction of a state-of-the-art plant that will manufacture a number of brands, including Boom washing powder.
Also, South Africa’s Willowton Group intends to set up a US$40 million cooking oil and detergents plant in Mutare.
The plant will produce D’Lite cooking oil, among other products.
