Chronicle Editor
Sikhulekelani Moyo, Business Reporter
LOCAL industrialists should accelerate import substitution initiatives as lead architects of the economy and help the country tame the huge demand for foreign currency that is spent on finished products, some of which can be produced at home.
The call comes at a time when economists are concerned over the pressure exerted on forex resources, which is fuelling the wild exchange rate movement on both the formal and parallel markets.
The country’s heavy reliance on imported raw materials and some of the finished products creates an outbound drain on hard earned forex, which contributes to weakening the local dollar.
Zimbabwe Institute of Foundries (ZIF) chief operations officer, Mr Dosman Mangisi said this in an interview yesterday where he challenged industry captains to embrace the local content policy and domesticate value chains.
He, however, admitted that doing so will require more investment in building adequate capacity, especially for ailing businesses that are operating at below capacity.
“Industrialists are the architects of the economy and have the ball in their court as they know what is needed to substitute imports and reduce the demand for forex,” said Mr Mangisi.
While the Government has set a supportive policy framework for local content through the value chain focus, he said more capitalisation support was needed to drive attainment of credible results.
According to the weekly Reserve Bank of Zimbabwe (RBZ) auction system, procurement of raw material has insatiable appetite for forex, gobbling between US$12 million to US$17 million every week and still not enough.
Mr Mangisi said the foundry industry was one of the heavy forex users, draining close to US$500 million every year in procurement of raw material from outside the country. Consumables, retail goods and energy products also top the list of forex guzzlers.
The mining sector, for instance, imports products worth close to US$3 billion every year, which can be substituted if foundry industries get capacitation from the Government, said Mr Mangisi.
“If the foundry gets capacitation, we can be able to save US$1 billion worth of imports out of the US$3 billion being used by the mining sector,” he said.
“The RBZ will not have a headache of allocating foreign currency for importation of steel balls and other locally available materials for the mining sector.”
As a result of shortage of raw materials and pressure for forex, he said the foundry sector was operating at 40 percent capacity, which results in failure to meet local demand for steel products.
“Last year’s projection was 194 000 tonnes of steel, but we managed to produce 123 000 tonnes with a shortfall of 71 tonnes. That 71 tonnes was imported by customers to meet their needs as we did not manage,” said Mr Mangisi.
Ironically, Zimbabwe exports the bulk of its scrap metal when local players are in need of it, prompting calls for a ban on such sales given the demise of Zisco.
Mr Mangisi said also said demand for foreign currency was driven by the penchant for forex sales even for products that are produced locally, that by right must be indexed in Zim-dollar.
“There are locally produced raw materials like coke, ferro-chrome and other metal products, which we buy in forex and that also increases the demand for hard cash,” he said.
“We need to appreciate our own currency and the Government should come up with policies to allow local industries to purchase locally produced raw material in local currency. That way our Zimbabwean dollar will start to appreciate value and circulate thereby reducing the demand for forex.”
Although Zimbabwe discarded the multi-currency system in 2019 to adopt the local dollar, some sections of the market still prefer the US-dollar, raising fears that the economy could be re-dollarising, a possibility that the Government has ruled out.
Going forward, Mr Mangisi has called for speedy implementation of domestic value addition and beneficiation.
This, he said, must be buttressed by a review of the production cost structure, retooling and incentives that cushion producers and enhance competitiveness on the international market.
“Imports are sometimes driven by expensive products due to high production costs and people opt to import,” said Mr Mangisi.
“If production cost is reduced, then it becomes easy for the local industries to compete with the international markets.
“Also, capacitation and retooling will help to increase production to meet demand, hence substituting imports, reducing the demand for forex and strengthening our local currency.”
Further, Mr Mangisi said the Government should not only focus on luring foreign investors only, but unlocking potential from local investors and capacitate them to promote meaningful industrial growth. – @SikhulekelaniM1
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