Finance critical for industry growth

decision by the Government to re-introduce duty on some basic commodities, business leaders have said.
They, however, hastened to add that a critical element in improving industrial capacity is access to finance.
In presenting the Mid-Term Fiscal Policy Review on Tuesday, Finance Minister Tendai Biti reinstated duty on maize meal and cooking oil as a mechanism to boost local production capacities.
According to a recent Zimbabwe National Statistical Agency survey, average capacity utilisation during the first half of 2011 has remained within the 40 percent to 50 percent bound, reflecting high levels of idle capacity.
Grain Millers’ Association of Zimbabwe chairman Mr Tafadzwa Musarara said the association welcomed the move to re-introduce duty on maize meal.
“It is high time that the Government has rectified this anomaly. Government has not banned imports, the re-introduction of duty of these basic commodities is only a mitigation measure that will allow industry to breathe and grow to sustainable levels where there can be a total ban on imports, to this extent local producers do have the capacity to meet demand.
“This development has come when we are in the middle of harvesting season, which means it can have a positive impact on the maize producer price,” he said.
A unilateral increase in the price of commodities has been a constant fear following any introduction of duty on imported products. However, with imported goods being readily available, local producers could not pass on cost increases to customers as they did during the period of hyper-inflation.
Confederation of Zimbabwe Industries president Mr Joseph Kanyekanye said they welcomed the move, but called for an extension to other areas which have shown growth.
“The move is highly welcome, and it is necessary that where we find increased generation capacity there is need to impose duty.
“Zimbabwe has got a derogation for two years that allows it to protect certain industries by playing with duties. The Ministry of Industry and Commerce has had an opportunity to look at sectors that have achieved sufficient generating capacity such as certain foodstuffs and the motor vehicle industry were we believe duty should be re-introduced.
“For the motor vehicle industry we have also proposed that beyond the 40 percent duty, we must also add an anti-tariff duty to discourage cheap imports as is the case in countries such as South Africa,” he said.
Companies in the foodstuffs, drinks, beverages and tobacco, non-metallic minerals, mining and chemicals recorded slight improvements in capacity utilisation in excess of 50 percent, reflecting marginal investments in those sectors.
Among the hardest hit productive sectors are the textiles, leather, wood processing and metals sub-sectors, which have failed to withstand the competition from cheap imports.
The textile industry employment numbers have now dropped from 7 500 last year to 3 000 workers this year.
At its peak the sector employed over 18 000 direct workers, consuming approximately 30 million kg of locally grown cotton, and processing on average two million metres of cotton fabric a month.
Influx of imports, working capital constraints and obsolete equipment are major factors eroding competitiveness in the textile industry.
Capacity utilisation in this sector has fallen further to 8 percent from the last year’s level of 30 percent.
Industry competitiveness in the country has also been generally further undermined by reliance on ageing and often obsolete equipment with frequent interruptions to production and high maintenance costs.