The Sunday Mail
Busiso Moyo
Current (import) restrictions are likely to achieve several things as we have noticed in the milk and cooking oil sectors. Firstly, they will help reduce Zimbabwe’s US$3,3 billion import deficit, which is a major contributor to the ongoing cash shortages. Secondly, the restrictions will increase capacity utilisation of manufacturing and value adding companies while helping to create employment over the next three to twelve months.
Thirdly, when the manufacturing sector produces higher volumes, economies of scale will kick in and prices of local commodities will fall. When the high volumes are sustained, new equipment can be acquired and the quality of locally-manufactured commodities will improve.
Lastly, the restrictions will push foreign exporters based in other countries, including South Africa and Zambia, into Zimbabwe to manufacture or partner with local manufacturers in order to sell to the market.
This, in turn, creates more jobs and more jobs create more industries up and downstream each cluster. Evidence shows that local manufacturers have the capacity to meet demand for all the products in Statutory Instrument 64 of 2016.
However, support from the banking sector should lean towards supporting the manufacturing and processing sectors as opposed to incentivising imports through high interest rates and short-term financing structures.
Government, on the other hand, can further lend support to local industries by removing certain upfront costs and expenses that make locally-manufactured products expensive; for example, levies on fuel, rentals and rates for the productive sector.
This will ensure industries are not only competitive locally, but generate exports into the region. Further industry support. Focus has been on the ease of doing business but we need interventions around the other leg of cost of doing business, which affects existing companies.
On this score, Government should allow our costs to be based or benchmarked by the rand costs – all our wage minimums, rates, levies and taxes should be based on those prevailing in our biggest competitor’s environment.
Manufacturing and processing requires production or productivity-based compensation and lower minimums for wages in order to be competitive. This should not be for Special Economic Zones only, but for all companies involved in manufacturing.
Furthermore, industries need lower bank interest rates and longer terms for debt repayment to acquire new equipment and better structures. With property values so low, companies cannot raise adequate funding using property as collateral, which is a massive hindrance on access to finance.
Also, the manufacturing sector should be allowed rebates on taxes paid for all energy and fuel costs. Government should focus on restoring railways between major points; for instance, Hwange-Bulawayo-Harare-Mutare, which will bring down operational costs relating to freight and transportation.
We need to remove import permit size and use an annual or bi-annual permit system and allow import permits to be switched between import sources and import suppliers so that they can take advantage of supplier price differential.
Currently, permits expire every three months and are supplier specific. Are restrictions sustainable? Restrictions can be removed after 24 to 36 months, once our high cost US dollar environment has been dealt with sufficiently, and we are no longer 45-55 percent higher than our regional peers.
There will be no need for protection once our cost environment and infrastructure is at par with our neighbours’ or close to it. But most importantly, local vendors, consumers and the general public should participate in developing their own economy and avoid being used by foreign suppliers and wholesalers to destabilise our own economic development agenda.
Local manufacturers are willing to re-introduce hawkers’ licences to allow those in the business of buying and selling (kuhoda) to distribute locally-manufactured products. This programme is already underway with the leadership of the Cross Border Traders’ Association.
Mr Busisa Moyo is the president of the Confederation of Zimbabwe Industries, and wrote this article for The Sunday Mail.
