The Sunday Mail
Statutory Instrument 64 of 2016, which imposes restrictions on select imported goods that can ordinarily be produced locally, has raised a crucial existential question for our industry and, by extension, the economy. And, naturally, opinion and positions are split. On the one hand, industry says Government’s latest intervention will help it recover and sustainably establish a foothold against the tide of cheap imports.
Local personal care manufacturers – Crown Health Care, Datlabs, Kubi, Plus Five Pharmaceuticals, Prochem and Vaida – cheered Government’s move on Friday. However, those who survive as mules of mighty South African companies and merchants are naturally displeased since this, in their view, is also an existential threat for them.
Spurred by sophisticated technology and a US$350 billion economy, South African companies hold sway in regional trade. And there have been rich pickings for those who rely on wheeling the goods across Beitbridge Border Post into Zimbabwe. Any changes to the regime on movement of goods would naturally cause problems, most immediately at Beitbridge. And sure enough we saw those problems on Friday — though the violent protests were clearly unexpected.
The net beneficiary of the pre-SI 64 status quo was South Africa.
Statistics from the Zimbabwe Statistical Agency and the South African department of trade and industry show that we imported goods worth more than US$420 million from our neighbour in the first three months of 2016 against exports of US$214 million.
This is both unsustainable and untenable. Zimbabwe is in danger of turning into a regional “cash till” for other countries. While the aspirations of the regional bloc Sadc are to promote trade liberation and free trade among members, the dynamics facing individual countries have to be taken into account.
Trade cannot be considered fair when a country blighted by sanctions for 16 years is expected to compete within the same framework as countries that are not similarly encumbered. It’s like pitting small David – without the sling – against a brutish Goliath. SI 64 seeks to give local industry, which is stuck with antiquated machinery, the much-need sling to at least have a shot at Goliath.
During the colonial administration, particularly between 1965 and 1979, there was a saying that “buy local and your dollar will work for you”.
It is a truism that will work well if Government secures goodwill from local consumers. The multiplier effect of promoting local demand will arguably set Zimbabwe on a sustainable growth path.
A fortnight ago, Cairns, buoyed by new investors and Government’s push to promote production, indicated it would embark on contract farming so as to source about 80 percent of its pea beans locally.
As Cairns’ fortunes improve, so, too will those of the general economy in terms of employment and revenue base. SI 64 must be considered is this light. The renewed thrust to promote local industry and stimulate demand-led growth fits within the persuasion of modern economic theory.
Both schools of thought supporting demand-led growth, as expounded by John Maynard Keynes and Nicholas Kaldor, argue that high wages and profit-led growth set foundations for future economic growth.
Local wages, which are US$-denominated, are already relatively higher than those in Sadc. It can be argued, therefore, that Government’s latest legal instrument can give local industry capacity to support economic growth.
However, Government needs to be clear. Last week, there seemed to be a disconnect in the spirit and intention informing SI 64 and the way it was being implemented by Zimra.
Individuals were the unfortunate victims. As Industry Minister Mike Bimha says, the target has to be individuals and businesses that are importing goods for commercial purposes. However, it seems even people importing for personal consumption faced the tax authority’s wrath.
The need to protect manufacturing is not peculiar to Zimbabwe.
Notwithstanding agreements like the 1996 Sadc Protocol on Trade, whose implementation began on January 25, 2000, some countries in the region have been working to protect their own industry. Angola, for example, signed the Protocol in 2003, a year after emerging from an enervating 27-year civil war, but has been reluctant to implement it citing the need to afford its own industry time to grow.
Also, being the second-largest economy in the region, Angola’s 19 million population and their petrodollars are an attractive market.
But instead of complying with the regional tariff, Angola’s government increased its top tariff of goods that could be produced locally such as alcohol, construction materials, soft drinks and certain vegetables, from 30 percent to 50 percent. This was meant to protect its nascent industry. Similarly, Zimbabwe’s circumstances — considering the sanctions still shackling the economy — call for the same protection.
It’s unfortunate that Government hasn’t embraced and materially supported the “Buy Zimbabwe” movement beyond mere slogans in the same way that the South African government leveraged on the “Proudly South African” campaign. So, there is still more work to be done.
EDITORIAL COMMENT: SI 64 is our David’s sling
The Sunday Mail
Statutory Instrument 64 of 2016, which imposes restrictions on select imported goods that can ordinarily be produced locally, has raised a crucial existential question for our industry and, by extension, the economy. And, naturally, opinion and positions are split. On the one hand, industry says Government’s latest intervention will help it recover and sustainably establish a foothold against the tide of cheap imports.
Local personal care manufacturers – Crown Health Care, Datlabs, Kubi, Plus Five Pharmaceuticals, Prochem and Vaida – cheered Government’s move on Friday. However, those who survive as mules of mighty South African companies and merchants are naturally displeased since this, in their view, is also an existential threat for them.
Spurred by sophisticated technology and a US$350 billion economy, South African companies hold sway in regional trade. And there have been rich pickings for those who rely on wheeling the goods across Beitbridge Border Post into Zimbabwe. Any changes to the regime on movement of goods would naturally cause problems, most immediately at Beitbridge. And sure enough we saw those problems on Friday — though the violent protests were clearly unexpected.
The net beneficiary of the pre-SI 64 status quo was South Africa.
Statistics from the Zimbabwe Statistical Agency and the South African department of trade and industry show that we imported goods worth more than US$420 million from our neighbour in the first three months of 2016 against exports of US$214 million.
This is both unsustainable and untenable. Zimbabwe is in danger of turning into a regional “cash till” for other countries. While the aspirations of the regional bloc Sadc are to promote trade liberation and free trade among members, the dynamics facing individual countries have to be taken into account.
Trade cannot be considered fair when a country blighted by sanctions for 16 years is expected to compete within the same framework as countries that are not similarly encumbered. It’s like pitting small David – without the sling – against a brutish Goliath. SI 64 seeks to give local industry, which is stuck with antiquated machinery, the much-need sling to at least have a shot at Goliath.
During the colonial administration, particularly between 1965 and 1979, there was a saying that “buy local and your dollar will work for you”.
It is a truism that will work well if Government secures goodwill from local consumers. The multiplier effect of promoting local demand will arguably set Zimbabwe on a sustainable growth path.
A fortnight ago, Cairns, buoyed by new investors and Government’s push to promote production, indicated it would embark on contract farming so as to source about 80 percent of its pea beans locally.
As Cairns’ fortunes improve, so, too will those of the general economy in terms of employment and revenue base. SI 64 must be considered is this light. The renewed thrust to promote local industry and stimulate demand-led growth fits within the persuasion of modern economic theory.
Both schools of thought supporting demand-led growth, as expounded by John Maynard Keynes and Nicholas Kaldor, argue that high wages and profit-led growth set foundations for future economic growth.
Local wages, which are US$-denominated, are already relatively higher than those in Sadc. It can be argued, therefore, that Government’s latest legal instrument can give local industry capacity to support economic growth.
However, Government needs to be clear. Last week, there seemed to be a disconnect in the spirit and intention informing SI 64 and the way it was being implemented by Zimra.
Individuals were the unfortunate victims. As Industry Minister Mike Bimha says, the target has to be individuals and businesses that are importing goods for commercial purposes. However, it seems even people importing for personal consumption faced the tax authority’s wrath.
The need to protect manufacturing is not peculiar to Zimbabwe.
Notwithstanding agreements like the 1996 Sadc Protocol on Trade, whose implementation began on January 25, 2000, some countries in the region have been working to protect their own industry. Angola, for example, signed the Protocol in 2003, a year after emerging from an enervating 27-year civil war, but has been reluctant to implement it citing the need to afford its own industry time to grow.
Also, being the second-largest economy in the region, Angola’s 19 million population and their petrodollars are an attractive market.
But instead of complying with the regional tariff, Angola’s government increased its top tariff of goods that could be produced locally such as alcohol, construction materials, soft drinks and certain vegetables, from 30 percent to 50 percent. This was meant to protect its nascent industry. Similarly, Zimbabwe’s circumstances — considering the sanctions still shackling the economy — call for the same protection.
It’s unfortunate that Government hasn’t embraced and materially supported the “Buy Zimbabwe” movement beyond mere slogans in the same way that the South African government leveraged on the “Proudly South African” campaign. So, there is still more work to be done.
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