The Sunday Mail
Dr Gift Mugano
lmport restrictions give local industry a new lease of life against foreign competitors. We have noticed this in the cooking oil sector. In my view, industries can raise capacity utilisation if competitiveness issues are the central problem to their going concern. However, in instances where many problems exist and some of them are structural like in the case in the iron and steel sector where companies like Zisco Steel are now defunct, capacity utilisation will struggle to improve.
It is my sincere hope that the commodities specified in Statutory 64 of 2016 under the iron and steel section do not include products that are supposed to be produced by Zisco.
I am not privy to the processes that the Ministry of Industry and Commerce undertook to determine the commodities to be included on that import restriction list.
Hopefully the various sectors have the capacity to supply the local market after the import restrictions. In many cases, industry calls for import controls, anticipating that they will miraculously have the capacity to produce.
Where there is no capacity there will be shortages and price hikes. Honest deliberations between industry and the ministry (of Industry and Commerce) are crucial at this point.
Of late, the Confederation of Zimbabwe Industries has been working very hard on value chains and business linkages. On the other hand, Buy Zimbabwe recommended inclusion of local content requirements in the law.
By nature, local content requirements (LCRs) emphasise preferential treatment for domestic suppliers vis-à-vis foreign goods and service providers and are, therefore, viewed by many as protectionist.
From a development perspective, they can be tools to achieve certain economic and non-economic goals such as developing local supply chains, expertise, technological transfer, or achieving better social outcomes.
Unlike import restrictions prohibited by the World Trade Organisation (WTO), a number of the WTO’s provisions correspond with LCRs like the General Agreement on Tariffs and Trade (GATT), the Agreement on Trade-Related Investment Measures (TRIMs), the General Agreement on Trade in Services (GATS), the Agreement on Subsidies and Countervailing Measures (ASCM), and the Agreement on Government Procurement (GPA).
Restrictions are not sustainable.
We are in a global village and can’t run the economy on restrictions.
That time is over.
The new order is productivity, innovation, research and development.
Besides, even though I am not a lawyer, I am a trade expert who has noted that this Statutory Instrument is violating Article XI of the GATT which prohibits use of quantitative restrictions on imports and exports through quotas, licences and other measures.
This is my view.
Moreso, we are a member of the Southern African Development Community (Sadc) where we have assented to free trade agreements.
In my view, instead of coming up with this raft of restrictions, we were supposed to have tabled our case in Sadc and then granted derogation; that is free trade exemption on those commodities listed in Statutory Instrument 64 of 2016.
I don’t think this happened.
The risk, therefore, is that other Sadc countries may retaliate. That will be disastrous.
Local consumers can help industry by buying their products, and this can only happen if, and only if, local products are competitive.
We must be very clear about this.
We are all patriots, but money is not patriotic.
What we must also take note of is that the largest importer is Government, and that calls for the State to lead by example.
Further, the impact of electricity supply stability on capacity utilisation is ambiguous.
What I am failing to understand is whether this stability is a function of sustained imports or a demise of industry. I am of the view that although Government has been making frantic efforts to import electricity, there has been general decrease in electricty demand due to low industrial activity.
May the Energy and Power Development Ministry please clarify this.
However, existing industries will certainly benefit from sustained power availability and will add value to capacity utilisation.
◆ Dr Gift Mugano is a research associate and visiting lecturer, author and expert in trade in the Department of Economics and Economic History at Nelson Mandela Metropolitan University, South Africa. He shared these views with our Senior Reporter Lincoln Towindo in Harare last week.
