The Sunday Mail
Munyaradzi Mlambo
LOCAL industry has the capacity to seamlessly cover the gap that will be left by the temporary restrictions on imported goods effected through Statutory Instrument 64 of 2016, manufacturers have said. The SI restricts imports of coffee creamers, camphor creams, white petroleum jellies, body creams,
wheelbarrows, structures and parts of structures of iron or steel, rods, angles, plastic pipes, corrugated roofing sheets, dairy juice blends, milk, canned fruits and potato crisps, among others.
Government is seeking to revive industries whose output has been affected by the indiscriminate importation of commodities, particularly from Zimbabwe largest trading partner, South Africa. Some of the country’s biggest manufacturers – National Foods Limited, Cairns Holding Limited, United Refineries Limited and Nestle Zimbabwe – told The Sunday Mail Business they were ready to step up, notwithstanding the fact that they import the bulk of their raw materials.
National Foods, which produces maize meal, flour, oil, rice, salt and stock feeds, imports around 150 000 tonnes of wheat and between 150 000 and 200 000 tonnes of maize yearly to augment local supplies.
The company’s managing director Mr Michael Lashbrook said even though National Foods could meet local demand, there was need to stimulate production to ensure raw materials are locally manufactured as well. The firm, which is operating at 50 percent capacity across all its business lines, imports more than 50 percent of its raw materials.
“Our challenge is that we do not produce enough raw materials locally, so in the basic commodities sector around 50 percent of the raw materials used in manufacturing is imported. As stakeholders we need to find ways to stimulate local production of commodities such as maize, wheat and soya beans.
“A reduced import bill means scarce foreign currency can be directed to essential imports and productivity in the local agro-sector will be stimulated,” said Mr Lashbrook.
Confident
Cooking oil producers are confident they can exceed local demand, and are actually exploring the possibility of exporting to the region. Oil Expressers Association chairman Mr Sylvester Mangani said, “No imports are necessary as all cooking oil requirements can be met by local producers. As our capacity exceeds local demand, we are now looking at exports as a way to increase capacity utilisation.”
United Refineries CEO Mr Busisa Moyo – who is also the Confederation of Zimbabwe Industries president – said import restrictions would help Zimbabwe retain foreign currency. Industry estimates that the country has spent more than US$50 billion importing sundry items such as toothpicks, onions, tomatoes and apples in the past seven years.
Figures from the Zimbabwe Statistical Agency show that the trend spilled to this year despite measures adopted in the 2016 National Budget to stem the tide. During the first quarter of 2016, the country imported apples worth US$1 million, US$317 000 worth of chewing gum, and skin care products valued at US$3 million. Mineral water imports came in at US$690 000.
“The country imports thousands of line items which unbeknown to most of us are part of the cause of the cash shortages, failure to pay for essential imports which cannot be manufactured locally, unemployment and company closures.
“The amount that Zimbabwe has imported since dollarisation a staggering +/-$50 billion has the potential to create over one million direct jobs and even more indirect jobs,” said Mr Moyo.
United Refineries’ average capacity utilisation stands at 72 percent. But delayed payment to suppliers of raw materials occasioned by obtaining cash shortages threatens to slow production.
United Refineries imports 2 500 tonnes of crude vegetable oil and 500 tonnes of palm fats for its industrial processes monthly. Cairns Foods banks on contract farming for raw materials
Demand
Other manufacturers who produce products directly affected by import restrictions say an expected demand for local products will spur their operations. Cairns, for example, has been on an upward trajectory since the US$30 million investment by Takura Capital in 2013. The company’s CEO Ms Nancy Guzha said additional restrictions on imports would not translate into shortages on shop shelves
She said similar measures in the biscuit, milk and cooking oil sectors that were adopted last year had “no adverse effects on either supply in general, or variety on-shelf”.
“What the ministry is looking to do is to control volumes coming into the local market so as to give local companies an opportunity to recover from the last 15 or so years when industry has progressively deteriorated and to stop foreign companies from dumping or offloading excess stock in Zimbabwe at a sub-economic price to increase their capacity utilisations, create employment and convert their currencies into US dollars, whilst local industry suffers.
“When you overlay this with the current cash crisis, this move was actually long overdue, and it is the right move to make on a sector by sector basis, pending readiness of the sector or company in question … I do not see how such a scenario can possibly create shortages and, again, looking at the three sectors I have mentioned as being the fore-runners or the pilot of this initiative, the results – on-shelf in retail and in consumers’ homes – speak for themselves. Local manufacturers have really come to the party,” explained Ms Guzha.
Cairns sources raw materials such as maize and wheat for its Harare plant locally. For the Mutare plant, Cairns uses Michigan pea beans and sugar. Last year, 40 percent of pea beans were sourced locally while the balance was imported. Cairns’ contract farming initiative is set to expand the amount of the commodity sought from the local market to 80 percent. Sugar is purchased locally.
Leverage
Milk processor Nestle Zimbabwe will use Government’s intervention to improve capacity. “This is very important to grow the local economy through new job creation,” said Mr Ben Ndiaye, Nestle’s managing director (Zimbabwe, Zambia and Malawi). Nestlé Zimbabwe is operating at just over 40 percent capacity.
Over the past five years Nestle has embarked on capital investment projects worth US$30 million to refurbish its dairy, creamer and cereals manufacturing lines.
Production capacity has been ramped up to meet local demand. Nestlé Dairy Empowerment Scheme – launched in 2011 – supports both large and small-scale dairy farmers who benefit from both financial and technical support from the firm’s agricultural services department.
There are suppliers who provide the company with raw materials and packaging materials. The milk, cement, cooking oil, maheu and the beverages sectors have already upped production levels and are exceeding national requirements.
Pricing
Though local manufactures are naturally savouring the edge that they have been afforded by Government’s intervention, there are fears that local companies will extortionately charge consumers, especially in an environment where competition from imported products has been eliminated. While a two-litre bottle of coke costs US$2,25 in Zimbabwe, it fetches R15 (about US$1) in South Africa.
Studies by local think tank the Zimbabwe Economic Policy Analysis and Research Unit in 2014 indicated that local production costs were between 45 percent and 55 percent higher than regional averages. Bank interest rates, wages, rentals, electricity charges, lawyers’ fees, school fees, levies and rates are also higher.
CZI says internal devaluation or cost-correction mechanisms are needed to improve competitiveness of local products. “Our regional peers and the biggest competitor (South Africa) for the domestic market are using softer currencies which are weakening. So we must understand why before blaming local manufacturers who are reeling in high costs.
“Even re-tooling, as we have been accused of using antiquated equipment is illogical if the cost environment is not right and the prospects of profit are low or absent.
“Once we have a correct and appropriate cost environment, not only will we match or be lower than import parity, we will be export competitive, this is the ultimate aspiration,” said the CZI president.
