The Sunday Mail
Livingstone Marufu and Darlington Musarurwa
Zimbabwean industries say Government has to come up with additional incentives, particularly in the form of tax rebates, to help them defend their turf against imported commodities and spur exports.
This comes amid indications that while Zimbabwe has been accused of flouting Sadc trade protocols through Statutory Instrument 64 of 2016, other countries in the region have erected various non-tariff barriers (NTBs) to protect their own industries.
SI 64 of 2016 restricts importation of certain goods that can be produced locally.
And as Zimbabwe has been criticised in some quarters for the protectionist policy, most countries are in fact doing the same and offering incentives and subsidies to exporters.
As such, even with SI 64, many local companies can still not compete with their regional peers, prompting Confederation of Zimbabwe Industries vice-president Mr Sifelani Jabangwe to call for similar incentives to be provided here.
He told The Sunday Mail Business, “There are rebates that are given to exporters to Zimbabwe by the governments of these exporting companies in South Africa. These rebates allow the exporting companies to export at a very low cost and then make their profits on the rebates which may be as high as 15 percent of export value, and we believe that there are some countries that give rebates equivalent to the cost of labour incurred in the production of the goods being exported.
“This can result in goods being cheaper in Zimbabwe than they are in the country of origin which is more or less a form of dumping.
“This is unfair competition, hence we should do more on top of bonus export incentives in form of bond notes or just give an incentive to all those exporting more goods across the country’s boarders in order to motivate our players in the industry,” said Mr Sifelani Jabangwe.
Though Government offers some support to manufacturers and exporters, the incentives fall short of industry’s expectations.
Currently, the taxable income from a manufacturing company which exports more than 30 percent but less than 41 percent of its output is 20 percent; while companies shipping more than 41 percent but less than 51 percent attract a tax rate of 17,5 percent.
Those who export more than half of their products are taxed 15 percent.
State backing
While Zimbabwe offers support at one end of the production cycle, regional economic powerhouse South Africa offers relief to companies at every stage of the production process – from offering grants to entrepreneurs establishing business to subsidising manufacturers and giving a helping help to exporters.
Cumulatively, this considerably lowers the price of their exports.
Through the department of trade and industry, South Africa offers a wide range of incentives to businesses.
Small entities that qualify for the Black Business Supplier Development Programme (BBSDP) are eligible for a R1 million grant (about US$65 000), of which 80 percent is used to buy machinery and equipment while the remainder is earmarked for improving corporate governance, management, marketing, productivity and acquiring modern technology.
Also, companies undertaking feasibility studies that are likely to increase exports qualify for grants that range from R100 000 to R5 million (US$6 500-US$320 000).
The most far-reaching intervention by the South African government is through the Manufacturing Competitiveness Enhancement Programme.
The MCEP covers industries such as basic chemicals, basic iron and steel, pulp and paper manufacturing, basic precious and non-ferrous metals, and petroleum refineries and nuclear processing.
Incidentally, some of the products produced by these industries are now restricted from entering Zimbabwe thanks to SI 64 of 2016.
Through the scheme, the South African government offers non-taxable grants that range from seven to 15 percent of the Manufacturing Value Added.
Companies whose assets top US$13 million also qualify for the programme.
In such circumstances, Zimbabwe cannot be expected to compete on an equal footing, more so when the country has been under sanctions from the United States and the European Union for the past 16 years, limiting its access to cheap financing for industry.
As a result, 60 percent of local supermarket shelves are stacked with South African goods.
Barriers
It is financial muscle such as that exhibited by South Africa that has prompted several countries in Sadc to protect their own markets.
Long before SI 64, Angola – which in 2003 signed the 1996 Sadc Protocol on Trade, which emphasises promoting a common market characterised by common external tariffs – has remained reluctant to open up its market.
After emerging from a 27-year civil war, Angola felt, and still feels, that local industries need protection.
In fact, at some time the region’s second-biggest economy even increased its top tariffs on goods such as alcohol, construction materials, soft drinks and certain vegetables from 30 percent to 50 percent.
Most protectionist policies in Southern Africa have taken the form of non-tariff barriers that are meant to make goods from other regional countries uncompetitive.
South Africa itself has some of the most stringent NTBs, notwithstanding its own industrial capacity, and the Zimbabwe Government is engaging authorities across the Limpopo to scrap regulations pertaining to pharmaceuticals.
Tshwane demands that anyone selling pharmaceuticals to them must bring them in by air, which makes them more expensive than products manufactured in South Africa. At the same time, South African firms export their pharmaceutical products by road.
Trade experts say NTBs account for more than US$3,3 billion, or a fifth of regional trade. The largest complaints on NTBs recorded in the region are transport related.
The Federation of East and Southern African Road Transport Associations has complained about Zambia’s continued contravention of Article 6,5 of the Sadc Protocol on Transport.
Zambian police fine transporters whose vehicles do not comply with the requirements of the Zambian Bureau of Standards, especially vehicles that do not have yellow reflective tape.
Such complaints mirror the extent to which regional countries still distrust each other when it comes to trade.
In 2014, former Zambia central bank governor Dr Caleb Fundanga accused South Africa of frustrating intra-regional trade.
