Companies seek more export incentives

Oliver Kazunga, Senior Business Reporter
INDUSTRIES in Zimbabwe say the Government needs to offer more export incentives for the manufacturing sector so as to promote economic growth.

Zimbabwe has suffered subdued economic growth since the turn of the millennium with a noticeable drop in domestic output and export earnings.

According to the 2016 Confederation of Zimbabwe Industries (CZI) manufacturing sector survey report released last week, companies highlighted that the Government should continue offering incentives such as subsidies, raw material import restriction or reduction, tax reduction and rebates.
Industry also pointed out that the Government should continue addressing the ease of doing business, improve on policy consistency, market research, exhibitions and international awards.

“The reasons for not exporting are high cost of exporting, low capacity for exporting, cumbersome export procedures, and capital constraints, among others,” CZI said in the report.

As part of incentivising the local export sector, the Reserve Bank of Zimbabwe (RBZ) has announced the introduction of bond notes which are expected to start circulating today. The printing and issuance of bond notes to the market is relative to the amount of exports.

RBZ Governor Dr John Mangudya has said the introduction of an export incentive scheme of up to five percent was meant to promote the export of goods and services to help sustain the economy’s capacity and ability to generate foreign exchange to meet its domestic and foreign requirements.

Of late, concerns have been raised over Zimbabwe’s negative trade deficit. For the eight months period to August this year, the country’s trade deficit stood at $1,8 billion. According to the Zimbabwe National Statistics Agency, imports were made up of consumptive goods which continued to outstrip exports.

The Government in June promulgated Statutory Instrument 64/2016, which removes several goods from the Open General Import Licence as part of measures to protect the local manufacturing sector from unwarranted competition.

“The top problematic factors for exporters are: access to trade finance, access to imported inputs, at competitive prices, burdensome procedures at foreign borders, difficulties in meeting customer requirements as well as high cost of delays caused by domestic transportation,” said the CZI report.

Meanwhile, the survey has shown that synergies with small to medium enterprises (SMEs) have significantly boosted capacity utilisation resulting in a 13 percent increase in capacity utilisation this year.

Capacity utilisation for SMEs stood at 48 percent, while for bigger players it was at 46 percent.

About 53 percent of the respondents who participated in the survey indicated that they already have small to medium enterprises in their supply chain.

“This shows that in as much as linkages with SMEs has not been coordinated, a number of companies have already been working directly with SMEs,” said CZI.

“Of the 53 percent, 41 percent indicated that SMEs supply raw materials, 10 percent indicated distribution services, and two percent indicated after sales support.  SMEs recorded an average capacity utilisation of 48 percent while large corporates recorded 46 percent.”

CZI said the weighted capacity utilisation of 47,4 percent would imply an increase of 13,1 percent from last year’s weighted of 34,3 percent. One of the reasons why capacity increased, according to the apex body, is the “boosted response rate within the small to medium sized enterprises.”
CZI suggested that as a way of strengthening business linkages, SMEs should attain a semblance of professionalism and to engage in training and development activities.

They would stand greater chances of being picked for synergies with bigger corporates, and if they outdo themselves, it would be the opening to greater opportunities.

The apex body also suggested Government intervention as a way of creating business linkages. One of Government’s policies, which support SMEs states that Government should award 25 percent of its tenders to SMES.

CZI also pointed out capitalisation of SMEs as imperative to the creation of lasting business synergies. The unavailability of affordable financing is also a major barrier for growth of the sector.