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SUPPORT for the manufacturing sector is crucial to reviving the country’s economy and efforts underway in this regard need to be redoubled so that industry attains high capacity utilisation levels. The Ministry of Industry and Commerce has been seized with this matter and in its interactions with captains of industry, has gained an understanding of the kind of challenges the sector is facing.
Zimbabwe is currently a net importer of goods with the balance of trade skewed in the negative and in favour of other countries it does business with. A special advisory committee set up by the government yesterday revealed that Zimbabwe could save $2 billion annually by reducing the importation of 40 percent of products coming into the country despite the existing capacity to produce them locally. The committee was set up this year to look into the problem of imports and smuggled goods into Zimbabwe and the impact this has had on local industry.
It was also tasked to assess the capacity of industry to supply the market, industry’s competitiveness and recommend appropriate action the government should take. Acting chairperson of the imports advisory committee, made up of experts from the private sector, Masimba Marangwanda, handed over the report of their findings to Industry and Commerce Minister Mike Bimha. Minister Bimha also received a report from a similar special private sector committee tasked to look into Zimbabwe’s ease and cost of doing business, which have seen the country performing poorly on global rankings. Marangwanda said his committee came up with recommendations on industries that could have quick turnaround periods if imports are reduced.
He also said that the committee had identified industries that could be nursed back to viability within a period of two to three years through import substitution. As such, sectors identified as having low hanging fruits or potential to turn around in the short to medium term if imports were reduced included the food, dairy, grain millers, pharmaceuticals, motor and oil industries. “We also believe that we can save up to $2 billion through import substitution, the subsequent effect of local value addition and money multiplier effect,” he said.
Marangwanda said the savings could be channelled towards improving capacity of local industry, which has fallen to 39.6 percent from 44.5 percent in 2013. According to Finance and Economic Development Minister Patrick Chinamasa’s mid-term policy review statement, imports for the first half of the year were down on last year, but relatively remain high at $3 billion. Corresponding imports for last year were $3.9 billion. Marangwanda added that the committee noted that capacity utilisation could go up substantially in certain sectors of the manufacturing industry such as oil pressers, yeast, biscuits and soap producers if effective measures were instituted to reduce imports. He also pointed out that there has been worrying increase in products that were being smuggled into the country and evading paying taxes in a development that negated measures to protect the local industry.
Against this background, he said it was not only critical to craft policies to protect industry, but to constantly interact with the private sector to understand its problems. We believe the committee’s findings should be taken seriously and its recommendations implemented to aid local industry. As we report elsewhere on these pages, rampant smuggling of goods is killing local industry. The Zimbabwe Poultry Association chairman Solomon Zawe says local producers are struggling to find a market for the 7.4 million day-old chicks produced in June this year due to the rampant smuggling of cheap chicken into the country. He told Business Chronicle that local producers were forced to reduce prices to counter the imported chicken. “In June we produced about 7.4 million day-old chicks. Selling these chickens is a challenge now because of cheap smuggled chickens. Local producers are now reducing prices and this doesn’t make them sustainable,” Zawe said.
We agree with him and call on authorities to tighten controls at border posts to curb smuggling. We also believe it is possible to improve capacity utilisation of local industry by supporting it through coming up with policies that stimulate production. Some companies such as United Refineries have shown that it is possible for local industry to thrive in a challenging economic environment through adopting measures that make it possible for them to compete with cheap imports. They should be used as models from which other companies in the same sector can learn from. Interactions between the government and industry should be an ongoing exercise with the ultimate aim being to increase capacity utilisation and production. So far the government’s open door policy to business appears to be bearing fruit and that relationship should continue to thrive.
Bongani Ndlovu
Online Reporter