Ball is in ‘our’ court

Joram Nyathi Spectrum

Which industry is Government protecting? And a firm answer to that question by industry will determine the direction of this economy in the medium to long-term. It is not an idle question and Government must demand firm commitment from producers.

GOVERNMENT introduced Statutory Instrument 64 of 2016 two weeks ago with two aims in mind.

One was to stem the flood of cheap imports into the country which were undermining local industry and killing all efforts to create jobs. The second was that Zimbabwe, according to Finance Minister Patrick Chinamasa, had become a rich fishing pond for US dollars. In turn the country was getting fishing worms, we might add.

Besides that, Government said it introduced SI64 in response to petitions by local producers, who said they were under siege from uncontrolled imports. Second, they claimed they could meet local demand. So far there appears to be a meeting of the mind between industry and Government, and mutual sympathy.

Not so the consumer, who feels betrayed and left out in the cold by SI64.

Unfortunately, the solutions proposed by Government to deal with the national challenges are not being taken as complementary to each other.

Industry is happy to enjoy the benefits of import restrictions, but is resisting methods proposed to incentivise exports. To close the fishing pond for US dollars in the economy, the Government has mooted the introduction of bond notes.

Although these will be backed by a $200 million loan facility and pegged at 1:1 with the US dollar, industry has not only been sceptical, but hostile to this measure. This is despite Government cajoling that the bond notes would be used chiefly as an incentive to spur industry to produce more for the export market.

Thus far the bond of convenience between Government and industry seems to have shattered. Industry now seems to be minding its own interest.

A major reason why there has been so much antipathy towards SI64 by consumers is the appearance of collusion between Government and producers to force Zimbabweans to buy expensive local goods.

Never mind that the fury appears to be directed solely at Government for its “heartlessness” in “banning” the import of basic commodities. A burning question being asked, starkly, is: what industry is Government protecting?

I thought in all fairness that’s a question to which industry would respond with enthusiasm? Not necessarily to defend Government, but to justify SI64 and reassure sceptical consumers that they can meet local demand in terms of quantity, quality and price?

The Confederation of Zimbabwe Industries has come out in full support of SI64, arguing that imports had not only led to de-industrialisation, but had also drained the local economic pond of $36 billion in six years since dollarisation, given the country’s estimated annual import bill of $6 billion. It has complained about the high cost of local production.

“Manufacturing sector’s capacity utilisation, which stands at 34 percent (as at 2015) clearly shows that the country has idle capacity of over 60 percent, which can be used for import substitution,” argues the CZI in support of SI64. There are reports that more producers are lining up to have more goods removed from the open general import licence.

For its part, the Government has been clear that import restrictions are not forever, mindful of its treaty obligations to regional trade protocols and the broader desire to remove trade barriers on the continent. Beyond that, the World Trade Organisation has its own demands regarding protectionism. Industry must be alive to all this despite its successful appeals to Government for protection.

All of which takes us back to the question the consumer is asking: which industry is Government protecting? And a firm answer to that question by industry will determine the direction of this economy in the medium to long-term. It is not an idle question and Government must demand firm commitment from producers.

Here is why: It is not enough for Government to declare that import controls are not permanent. Industry has to come to the party the way it has been open about its reluctance to embrace the bond notes.

Industry must give timeframes. What are they supplying now to the market? How much time do they require to reach full capacity utilisation? To increase the variety of products? It can’t be an open licence. Is it three months, six months, a year or two?

Let’s not forget that Government is trying at one and the same time to save industries which claim to be operating at 34 percent capacity utilisation and the informal sector which has provided the biggest safety net for the bulk of workers laid off by the same industry.

The point being, producers should never hope to get away with empty promises for long by suppressing genuine demand for their products by charging prices beyond the means of consumers to give the illusion that they are producing enough.

Statutory Instrument 64 has a broader objective than protecting incompetence and profiteering. The aim is to protect jobs, to raise local productivity, to enlarge the national cake by strengthening the local value chain from producers on the farms through industry to the final end user.

It aims to reduce the amount of foreign currency used to procure non-essential goods, especially if those can be produced locally at affordable prices.

The foreign currency so saved can then be used to import critical raw materials and machinery by industry to modernise production systems. It will also be used to import medicines and technologies which improve local competitiveness.

In the long-term such foreign currency is required to meet national emergencies such as food imports in a bad agricultural season.

When all is said, let’s be clear that consumers should never feel that they have been put in a corner, that there is collusion between Government and manufacturers. Producers have a duty to meet their side of the bargain for demanding protection and meeting the needs of consumers.

Consumers can tell who promised what they could not deliver and it will be difficult to convince Government that they require some breathing space in future.

Bond notes

Let me be blunt. It is not good enough to say we don’t want bond notes. That people don’t want bond notes. To say the market doesn’t want bond notes. We are dealing with matters of pragmatism which cannot be resolved by enlisting the support of a mob led by Mawarire.

Even Government most likely doesn’t want bond notes per se, for practical reasons, too. The ball is in “our” court.

The bond notes were mooted as a measure to staunch the outflow of US dollars. They were mooted to stop people coming here to sell us worms in order to fish out US dollars. They were mooted to incentivise exporters, thus improving the circulation of notes which cannot be easily fished out of the country in exchange for a box of matches, a tooth pick or a tissue paper.

There have also been reports of massive externalisation of American dollars. Not all of it leaves the country through border jumping. Zimbabwe can’t be so hopelessly incompetent that we can’t detect the leaks.

That means we have systems and individuals facilitating the externalisation of US dollars.

The best and easiest way to reject the bond note is to stop the reckless and unconscionable outflow of US dollars. Let’s stop the self-serving lies that the solution to the current scarcity of US dollars is increased foreign direct investment and demonstrations.

The real challenge is that the country is exporting more American dollars than it does goods. Bond notes are an austerity measure which industry and commerce can stop by ratcheting up production for exports and by stopping or exposing those who externalise US dollars, resulting in the current run on the same. Industry can take advantage of SI64 to stop introduction of the bond note.