‘Increase collaboration to substitute imports’

Prosper Ndlovu, Business Editor

INDUSTRY and Commerce Minister, Dr Sekai Nzenza, says increased collaboration between productive sectors is critical for the country to boost domestic production and effectively substitute unnecessary yet costly imports.

As a result of subdued domestic production, which has seen manufacturing capacity utilisation drop to 36.4 percent in 2019 from 48.2 percent in 2018, according to the Confederation of Zimbabwe Industries (CZI), the country is heavily reliant on imports for both raw materials and essential consumer goods. 

For instance, the country’s merchandise imports clocked US$4.8 billion in 2019, compared to cumulative export estimate of US$4.5 billion, the Reserve Bank of Zimbabwe reported. The apex bank noted that exports were largely weighed down by lower agriculture and mineral exports, tobacco and gold in particular. 

Sustained power outages, persistent fuel shortages, foreign currency challenges and high operational costs amid rising inflation, among other factors, adversely affected production in the mining sector and consequently mineral exports. 

The trend persistently piles pressure on forex requirements at a time when foreign direct investment and diaspora remittances through formal channels are also minimal. 

A combination of reduced local output, limited exports and prevailing exchange rate distortions, have compounded the situation, thereby frustrating viability of local producers and heightening the plight of consumers. Due to shortages of some basics, Government last November relaxed import regulations to allow individuals with free funds to buy basic goods from outside the country. 

In an interview, Dr Nzenza admitted that this duty-free import window has created new complications in the form of sprouting of and thriving informal sector, which has stacked pressure on registered players. She noted that in her engagement with industry, big corporates have raised complaints over unregulated informal activities that are squeezing out their operations.

“I have spent the last three months consulting captains of industry and key stakeholders to hear their concerns and what is working well or not. I have met CZI, retailers, millers, small and medium enterprises and different private sector players. In 2020, we are saying industry’s role is to promote growth. We went to Nyanga for a review of our strategy and we are working on promoting local production, which buttresses the thrust of import substitution,” said Dr Nzenza.

Import substitution is at the heart of the Zimbabwe National Industrial Development Policy (ZNIDP-2019-20203), under the auspices of the Local Content Strategy, which seeks to drive local value addition through utilisation of domestic resources and localisation of supply chains. The minister said the strategy will create economic linkages and business opportunities for local entrepreneurs.

“To companies that import a lot and ask for more forex allocation, we are saying let us promote local production. Nestle Zimbabwe, for example, is now sourcing 85 percent of their raw materials locally through working with smallholder farmers. They have cut their import bill by about 80 percent and reduced associated product costs,” said Dr Nzenza.

The minister said a vibrant domestic industry was beneficial to consumers who need a competitive service and jobs. As such, Government has said the import substitution drive will be implemented through specific evidence based local content thresholds in prioritised sectors. “We need to revive these industries but a lot of them have old equipment and we are looking at the aspect of innovation and embracing the 4th Industrial Revolution,” said Dr Nzenza. 

“Our industries will be revived if we collaborate and not only as the private sector but line ministries as well. For example, agro-processing industries require synergies between manufacturing industry players and agriculture sector. We are, therefore, strengthening our relations with the agriculture sector on the value addition and beneficiation thrust.”

In its assessment of the raw material supply dilemma, CZI noted in its 2019 manufacturing survey report that development of vibrant local value chains should anchor long term solutions to imports.

“The proportion of companies sourcing raw materials locally and abroad speaks to foreign currency requirements, value chain development and local content,” said the industry body. It further noted that in addition to forex shortages, businesses were facing numerous constraints when importing. These include forex duty, cost of licensing, prepayments demand by some suppliers, inspection procedures and border delays. 

Through the ZNIDP, Government and industry acknowledge that as the global economy becomes increasingly dynamic with technological frontiers moving outwards, it is necessary for Zimbabwe to embrace the 4th Industrial Revolution with the attendant industries upgrading and modernising.

In this regard industry will need to work closely with higher education institutions and research bodies to come up with new production and commercial technologies. Adoption of E-Commerce and digital marketing come to the fore as critical components to be mainstreamed to extend the market reach of local industries and commercial enterprises. 

Dr Nzenza said the implementation of the ZNIDP requires strategic partnerships starting with the agro-processing value chain especially, given its potential and downstream gains in the economy.“We need to revitalise production of those high value crops like cotton and soya bean for domestic processing and also work on our exports,” she said.