‘Duty-free imports may undo progress in local production’

Tapiwanashe Mangwiro

THE Confederation of Zimbabwe Retailers (CZR), a business lobby group that represents mostly small traders, recently called for duty-free imports of basic goods to counter rising prices in the formal retail and wholesale sectors, blaming manufacturers for monopolistic tendencies and price manipulation.

The Government used a similar strategy last year to ensure the availability of affordable basic goods after prices appeared to go beyond the reach of many as the then-Zimbabwe dollar lost ground against the greenback.

Similarly, prices of goods and services, in the local currency, have surged in response to the softening local unit, amid shortages of foreign currency needed by manufacturers and importers.

The central bank has since responded by injecting a staggering US$64 million into the interbank market, which is expected to calm down the exchange rate and restore price stability. Analysts, however, cautioned against duty-free imports as a short-term strategy to address price hikes, arguing that it has the potential of undoing the progress industry had made over the past decade, particularly as the country strives towards the Vision 2030 goal of becoming an upper middle-income economy.

Economist Mr Tinevimbo Shava said opening the borders for duty-free imports of basic goods would deal a heavy blow to the manufacturing sector, which has worked hard to rebuild capacity in the face of significant challenges, including the impact of the Covid-19 pandemic.

Over the past six years, the manufacturing sector has made remarkable progress, with capacity utilisation increasing from an average of 45 percent to 56 percent.

This growth, Mr Shava emphasised, was the result of concerted efforts by both the Government and the private sector to rebuild the local industry after the 2008 economic challenges characterised by hyperinflation.

“Opening the borders for imports would flood the market with cheaper goods from foreign manufacturers that benefit from economies of scale,” Mr Shava explained.

“Local producers, which are still recovering from the devastating effects of the pandemic and years of economic turmoil, would struggle to compete with these imports. The result would be reduced demand for locally manufactured goods, leading to a contraction in production capacity and potential job losses.”

Mr Shava pointed out that, while the retail sector might benefit from lower prices in the short term, the long-term consequences for Zimbabwe’s economy would be severe.

“Allowing duty-free imports undermines the very foundations of our industrial recovery. The manufacturing sector is not yet robust enough to withstand such competition, and this could lead to a regression in the gains we have made in recent years,” he said.

Analyst Ms Simone Mavaza echoed the same sentiments, warning that the move would not only threaten industry capacity but also have devastating social consequences. She argued that opening the borders to duty-free imports would turn Zimbabwe into a “tuckshop economy”, where small-scale retailers dominate, but industrial production, job creation and economic growth are stunted.

“Zimbabwe has been working towards industrialising its economy, and this progress is reflected in the increase in manufacturing capacity over the last six years. However, by allowing unfettered imports, we risk a situation where our local industries collapse, leading to mass retrenchments,” Ms Mavaza said.

“This would exacerbate poverty levels, as hundreds of thousands of workers employed in the manufacturing sector and its value chains could lose their jobs.”

She further explained that, while lower prices might seem attractive to consumers in the short term, the long-term consequences would be negative.

A reduction in local production would result in fewer employment opportunities, stagnation in wages and overall economic decline. The immediate savings at the checkout would not compensate for the deepening poverty that would follow widespread job losses.

“This is not just an economic issue,” Ms Mavaza emphasised.

“It is a social issue. Increased poverty and unemployment will have ripple effects across society, from rising crime rates to increased demand for social services. We cannot afford to take such a short-sighted approach.”

Economist Ms Gladys Shumbambiri-Mutsopotsi warned that if the Government accedes to the CZR’s request for duty-free imports, it would be a major setback for Zimbabwe’s Vision 2030 agenda.

The blueprint, which is aimed at transforming Zimbabwe into an upper middle-income society by 2030, puts strong emphasis on industrialisation, job creation and economic self-reliance.

“Allowing duty-free imports would derail these efforts by weakening the local manufacturing base, reducing industrial output and increasing dependency on foreign products,” Ms Shumbambiri-Mutsopotsi said.

“This is not the path to achieving an upper middle-income society. Instead, we should be focusing on strengthening our local industries, improving the ease of doing business and stabilising the macroeconomic environment.”

She believes the Government should focus on policies that promote sustainable industrial growth, such as improving access to foreign exchange for manufacturers, reducing regulatory red tape and fostering a more stable business environment.

While analysts agree that the rising prices in the retail and wholesale sectors are of serious concern, they argue that opening the borders for duty-free imports is not the solution.

Instead, they call for a more balanced approach that addresses the root causes of inflation, such as exchange rate volatility and supply chain disruptions, without sacrificing the gains made in the local industry.

Analysts want the Government to take a more measured approach that supports local production and addresses structural economic challenges, rather than put Zimbabwe’s hard-won industrial gains at risk.