Industry pushes for protection

21 Jun, 2020 - 00:06 0 Views
Industry pushes for protection Workers at Harava Solar project in Seke install solar panels on Thursday. Construction of the 20MW project is now 70 percent complete and expected to start feeding into the national grid at Dema substation in two months. – Picture: Kudakwashe Hunda

The Sunday Mail

Golden Sibanda

Low industrial production is probably one of the major factors militating against the country’s push for economic growth and production.

It has also naturally led to a growing appetite for imported goods and services, including raw materials.

This has, however, come at a heavy cost to the economy.

A disproportionately high import bill and underperforming exports have ostensibly resulted in the country’s biggest economic problem post dollarisation — exchange rate volatility, which in turn has stoked inflation.

The annual inflation rate has since risen to 786 percent as of May 2020.

Captains of industry believe that protectionism, which managed to provide a lift for industry between 2009 and 2016 through sustained growth in industrial output, is the immediate short-term solution to rebooting.

It is believed that protectionism might help provide the much-needed buffer from competition, especially at a time when local industry is most vulnerable.

With limited protection, manufacturing sector capacity utilisation, as reported by the Confederation of Zimbabwe Industries (CZI) in the “2019 Manufacturing Sector Survey”, fell to 36,4 percent in 2019 from 48 percent in 2018, representing a drop of 11,8 percentage points.

The decline in local production was largely blamed on competition from foreign entities, limited access to foreign currency, irregular power supply, high cost of utilities (water, electricity), high transport costs and shortages of raw materials, among other factors.

This is, however, relatively better than 2008 when industrial output bottomed out to 10 percent.

Presently, Zimbabwe largely relies on imported products, which haemorrhage foreign currency and stifles opportunities for growth and job creation.

The country’s largest industrial grouping, CZI, believes that re-establishing the industrial base should be premised on protecting domestic firms from external competition for a defined period.

CZI vice president Joseph Gunda said such an intervention would afford local companies time to retool, acquire new technologies and ramp up production.

According to Mr Gunda, the domestic economy could also be better served by policy consistency.

“Many of these successful economies like China, South Korea, India and all have put in place deliberate policies to protect their industries, and this is not anything new, and as CZI we have pushed for it.

“Up until 2018, the figures were showing that there was an improvement in productivity, capacity utilisation went up, but policies were changed and then we reversed the gains of protectionism.

“We allowed anything and everything to be imported, so the little money that was supposed to be used by (local) manufacturing companies to import raw materials and create employment and local products is now being used to import products that should not be imported,” Mr Gunda said.

A negative balance of payment position, where imports far outstrip exports, often creates pressure on the exchange rate.

But there are concerns that protectionist measures are against regional trade protocols that are being pushed by the Southern African Development Community (SADC) and the African Union (AU), especially after the recent signing of the African Continental Free Trade Area (AfCFTA).

However, Mr Gunda said the country could negotiate for exemptions.

The region and international community, he added, were aware of the delicate economic situation of Zimbabwe and derogation could be secured for 10 to 15 years before certain protectionist measures were removed.

Treasury announced this week US$75 and US$30  Covid-19 allowances to be awarded to civil servants and Government pensioners for the next three months.

Further, future industrialisation strategies should be encapsulated in knowledge and technology-led reindustrialisation processes.

“It is only now that industry is linking up with institutions of higher learning and forming industrial hubs — that should certainly help us in terms of import substitution.

“We need these institutions to begin to work with industry closely,” he said.

Mr Gunda said the Government needed to ensure it created an environment conducive for innovation and investment in research and development.

Share This: