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Imposing tariffs on imports might backfire as the capacity of local industries to increase production remains doubtful, a local think tank said on Tuesday.
The government has imposed duties on products such as steel and plastic, dairy, biscuits, oil and blankets to protect sections of the local industry from cheap imports to allow them to recover.
Local industries are still limping from the debilitating economic meltdown of the past decade and remain severely undercapitalised.
The Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) said a protectionist strategy could be counterproductive.
“The capacity of the local industry to respond is questionable as most firms are using antiquated machinery and technology to match what their counterparts in the region are using,” Zeparu said.
“This calls for significant capital injection to overhaul the production systems in most industries.”
According to the Confederation of Zimbabwe Industries, local industry requires over $2 billion for working capital and re-tooling in the short term.
Low product demand has also fuelled a decline in capacity utilisation which is hovering around 40 percent.
In a study conducted for the Zimbabwe National Chamber of Commerce, Zeparu said the hike in duties could backfire for consumers through price increases while the local industry failed to supply.
“Import restrictions might work against the government’s price stability objective,” it said.
“This implies the imposition of tariffs could have negative effects on consumer welfare as consumers would still be subjected to tariff induced price increases.”
Zeparu said increasing tariffs might also be viewed as being at cross roads with regional integration and the trade facilitation agenda being pursued at the global level.
It called on authorities to ensure that imports were of high quality and met set standards to prevent dumping of low quality goods. — New Ziana.
Online Reporter