The Gospel according to the book of IDP

06 Jul, 2014 - 06:07 0 Views

The Sunday Mail

Last week, Bishop Lazarus, on my extreme left here, apparently gave poor Gershem Pasi, ZIMRA Commissioner-General, a bitter communion to swallow.
“How on earth can Pasi tell us that he is failing to collect revenue? He has one job to do: to bring in the cash and avail it to Treasury. Just one job, Pasi, one job. Do it!,” charged the charismatic Bishop to Pasi.

The poor fellow had already been called “ignorant” and all sorts of hyperbolic stuff from other quarters.

However, it appears the good Bishop might have given communion before preaching to Mr Pasi, a stern canonical gaffe with a likely consequence of failing to convert his prospective preachee.

Thus, in this instalment, I would like to preach the gospel according to the book, the Industrialisation Development Policy (IDP), which was written by Government a couple of years back, with a view to give insights that might have escaped Mr Pasi’s imagination, in his controversial and infamous presentation to Parliament a few weeks back.

Inasmuch as many have taken in hand to set in order a narrative of those things which have been said by the Commissioner-General in Parliament, just as those who from the beginning were eyewitnesses and wordsmiths of the messages he previously delivered, it seemed good to me also, having a perfect understanding of all things from the very first, to write to you an orderly account, most esteemed Commissioner-General, that you may know the uncertainty of things in which you instructed Parliament.

In your presentation to Parliament, you proposed to lower import duty on finished clothes to reduce smuggling and increase revenue collection.

“Would it not be better off opening up and allowing people to import freely so that they declare and we get some duty?” you challenged parliamentarians.

Firstly, I see some sort of contradiction in your proposal, to say let’s “allow people to import freely” and “get some duty”. How do we get some duty when people import duty free?

But my intention here is not to spotlight your self-contradictions but rather to underline the contradictions of your pronouncements to the objective ideal scenario.

The proposals being made by Mr Pasi on the clothing and textiles sub-sectors to combat rampant smuggling and foster revenue collection should first and foremost be understood in the milieu of the impact it might have on the local manufacturing sector.

I understand ZIMRA is under pressure to collect revenue, having failed to meet its target last year. I also value Zimra’s crucial role of endeavouring to timely make available cash for crucial National Budget expenditures.

ZIMRA has of late been facing various conflicts in its inherent mission to collect revenue, particularly with the police and private sector.

The conflict is not only understandable but natural. It is consistent with any resource-deficient and tight liquidity conditions that conflict makes a stubborn and untraceable emergence like that of a weevil.

However, mere revenue collection is not an end in itself, in our quest towards a US$100 billion economy, but a means to an end.

It must not render sterile the industrial policy instruments that we have set out to deal with the industrial haemorrhage.

Moving on with the gospel; there was in the days of the inclusive Government, a certain policy crafted, called IDP 2012-16, whose vision was to transform Zimbabwe from a producer of primary goods into a producer of processed value-added goods for both the domestic and export market.

In the IDP, Government identified four priority sub-sectors, clothing and textiles included, as the pillars and engine of manufacturing renaissance.

The qualifying criteria for prioritisation include the sector’s contribution to GDP, employment creation and retention, export earnings and potential for value addition as well as forward and backward linkages with other sectors of the economy.

The prioritised sector was also to have a quick turnaround period where policy initiatives can be felt in both levels of industry, potential to grow its capacity utilisation levels to an internationally competitive level and hence contribute to the manufacturing sector’s growth objectives.

The clothing and textiles industry was found to be qualifying, when measured against all these criteria aspects.

The long and short of my message to Mr Pasi therefore is: touch not the Government’s anointed, I mean prioritised one. Let us not be myopic to the extent of becoming too much revenue oriented while overlooking the integral need to rebuff industrial free fall.

The new Constitution has “objectives to guide State and all institutions and agencies of government.”

One of those objectives, in Section 13(c), is that “the State must take measures to foster the development of industrial… enterprises in order to empower Zimbabwean citizens.”

It will therefore be misguided for the State and government to let the clothing and textiles subsectors go bust, by heeding Mr Pasi’s call to reduce or scrap duty on imported clothing.

The move will open floodgates of ferocious foreign ogres that will wipe out what is left of our prioritised clothing and textiles subsector. We cannot compete with subsidised and cheap imported clothes even in the existence of high tariffs, what more if they are lowered down?

The IDP identified tariff protection to our local industry as one of its signature instruments.

The policy says that: “The situation in Zimbabwe demands that we rely on it (import substitution) to offer temporary protection for our industry to counter the surge in the disruptive imports of cheap and dumped goods… the principle of import substitution will have to be applied in conjunction with an alignment of our tariff regime which will be primarily an instrument of industrialisation with revenue aspects… the adjustments sought will in the majority of cases require a raise in tariff levels.”

What comes out clearly here is that the solution to the local textile and clothing subsector’s insurmountable problems lies not in incremental debate but in action. Let’s not be modest in implementing what we resolved to do in the IDP.

While Mr Pasi is proposing to lower tariffs, the IDP is, on the contrary, proposing to raise them and actually recognise them as the main actor. I am not disinclined to agree with the IDP. Mr Pasi can still get lots of revenues, in VAT, corporate taxes and PAYE; if we are to resuscitate all our establishments in the clothing and textiles sector, your David Whitehead et al, to operate at full capacity, as well as have new players come into the sector. My understanding is that the value chain in cotton production is actually not yet complete.

The chain is said to require investment into the establishment of de-linters and de-hullers to further process the cotton by-products into special papers, inks, emulsifiers and paint undercoats.

The IDP has actually estimated that the sector needs a minimum of approximately US$50 million for recapitalisation and working capital. This should get the ball rolling.

What the taxman should be actually proposing is duty-free importation of machinery and raw materials and other tax incentives that can improve competitiveness in the clothing and textiles sector.

Why should the raw cotton that we produce here be sent thousands of miles to China, and travel back the same thousand miles as clothes, but still be cheaper than our locally produced clothes?

That we should protect our local clothing and textiles sector does not, however, mean that local players in the sector should abuse the good gesture by Government, and become the Mafia that nicodemously smuggle foreign clothes.

Players in the clothing and textiles sectors should pay for the tariff protection privilege by coming up with smart and concrete plans to become competitive.

The clothing industry is actually pushing for a policy that compels parastatals and local authorities to purchase corporate wear and any other regalia from local clothing manufacturers.

Although buy local initiatives are regarded as one of the non-tariff barriers that regional trading bloc to which Zimbabwe is a member are trying to eliminate, there is room to have a sensitive list of products that remain sacrosanct and not open for negotiation.

The clothing and textiles subsector should not only be prioritised but also classified as sensitive.

The IDP did not deny that smuggling of clothing and textiles is taking place.

“Lack of adequate control of incoming goods at border posts is allowing a lot of imports to be brought in without paying duties . . . Government will tighten the borders and close the loopholes on smuggling,” reads the policy.

We, therefore, cannot fear smuggling to the extent of simply allowing imports to randomly and freely walk into the country, like nobody’s business.

The IDP has already proposed to tighten our borders, maybe through strengthening our security at border posts and mechanising them. Revenue collection must not be naively driven by the accounting concept of seeking to balance revenue with expenses, while leaving key sectors of the economy to sink.

We need to swiftly take action to foster the renaissance of the clothing and textiles subsector.

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