Chronicle Editor
Nqobile Bhebhe, Senior Business Reporter
INDUSTRY cannot be on retooling mode forever but should by now be scaling up production to help stabilise prices of goods and services, Finance and Economic Development Minister, Professor Mthuli Ncube has said.
Prices have of late been increasing at an alarming rate, further squeezing ordinary people whose incomes have been eroded by resurgent inflationary pressures.
In the recent past, the Government introduced tax rebates for bakers, pharmaceutical companies, furniture makers and clothing manufacturers in a bid to spur productivity.
Prof Ncube told Senators last Thursday that industry has been benefiting from a cocktail of Government interventions, some geared at retooling.
To this end, manufacturing firms should by now be fully retooled, which should result in scaling up of production in order to benefit ordinary consumers.
“Industry is still getting a lot of incentives through the various tax rebate schemes that I always bring before this House every time you approve the budget,” said Prof Ncube.
“So, they are getting those benefits as well as rebates for retooling.
“They should have been retooled by now. We cannot be retooling forever. We should have retooled and the cost of production should have gone down and productivity should have improved.
“So, industry has been protected and it’s now time to protect and support the citizens.”
According to a recent Confederation of Zimbabwe Industries (CZI) 2021 manufacturing sector survey report, capacity utilisation in the manufacturing sector jumped to 56,52 percent in 2021 from 47 percent in 2020 largely driven by increased investments in the industry.
The surveyed firms invested US$147 million towards new capacity, with the funds largely coming from the Reserve Bank of Zimbabwe (RBZ)’s foreign currency auction system.
The report said 42,7 percent of the manufacturing sector is accessing forex from the foreign exchange auction market.
Prof Ncube said measures introduced by the Government to contain foreign-fuelled inflation, which has resulted in unjustifiable price hikes and in some cases hoarding of basic commodities like cooking oil for speculative purposes have to be addressed urgently.
“That is what we have been doing in terms of the mix of policies as they say policies have winners and losers,” he said.
“In our own assessment, this bouquet of policies seem to indicate that there are winners than losers and that is what happens in any policy mix.”
On the exchange rate, Prof Ncube said some players in the financial services sector and corporates were involved in fuelling the parallel market thereby destabilising the local currency.
“The players in the parallel market are numerous. It’s not just the ordinary citizens at the street corners. It is also the corporates,” he said.
“It’s also banks. I think we know what money changers do — they change money. So, their business is clear but illegal at the same time.
“Some of the corporates are going into the banking sector to borrow cheaply because of low-interest rates and use those resources to
acquire inventory, to store the inventory or to put it on shelves at higher exchange rate.
“Every time they do that, then the whole cycle starts all over again. We have a situation where even corporates were pushing up the parallel rate. This is announced by some faceless people that there is a new parallel rate. I don’t know where that is coming from.”
Prof Ncube said talk of a mono-currency “is not a useful argument because” as both currencies — the local and US dollar are both needed.
“If you go the route of Zimbabwe dollars alone, for now it is too early to do that.
“It would mean that we will not allow you to hold US dollars like in other countries where you cannot use US dollars to shop,” he said.
“We will also not allow the banks to keep foreign currency. We cannot let them have one and half billion US dollars in the bank.
“So, please understand that we need both currencies and the current system but we need stability.” — @nqobilebhebhe
Online Reporter