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Africa Moyo
The manufacturing sector that has been in the doldrums for some time due to an influx of cheap imports, is gearing for a rebound on the back of policies such as the charging of duty by the Zimbabwe Revenue Authority (Zimra) at the interbank foreign currency market’s current rate of 2,5.
The move by Zimra that started last week on Friday, is expected to increase the cost of imported products, opening avenues for locally produced goods.
Unfortunately, local forms are currently bogged down by funding challenges as financial institutions are unwilling to loosen purse strings at affordable interest rates.
Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe told Business Weekly on Wednesday that the policy reforms introduced by Government, which also include the introduction of the RTGS dollar, would improve capacity utilisation in the manufacturing sector.
Jabangwe believes that banks will soon be stampeding to finance local manufacturers considering that a market would be created by the decline in imports.
“As industry, we are ready to increase production riding on the positive policies that we have seen,” said Jabangwe.
“You shall see that banks will start giving us loans to increase production because when we went to seek loans in the past, they said we didn’t have the market share due to competition from imported products.
“Remember that the last time there was a policy banning chicken imports, we saw an increased interest from the banking sector to support companies in the value chain, resulting in increased chicken production by companies and even in the backyards.”
Jabangwe added that companies such as Feedmix Zimbabwe, came into being, while Irvine’s Zimbabwe also grew its chicken business.
“So a positive policy is a signal to producers to increase production. “Together as industry and our partners in the banking sector, we are likely to see a rebound of the local manufacturing sector.
“Already, even before the policy on duty was announced, local products were cheaper than imported products. So we shall see an orientation towards local companies increasing production to meet the expected demand.
“This move of having a local RTGS dollar is also a positive one compared to the rand and US dollars, as it will reduce our cost of production” said Jabangwe.
Industrialists have always argued that using the US dollar to import raw materials, spare parts and to pay employees was not economic.
RBZ Governor Dr John Mangudya announced the introduction of the RTGS dollar in 2019 Monetary Policy Statement.
The RTGS dollar will circulate alongside multiple currencies, but it is convertible at the prevailing interbank market for foreign currency.
Zimra speaks on new annual target
Zimra started using the interbank foreign exchange market rate of 2,5 when calculating value for duty last week, in compliance with the pronouncements in the 2019 Monetary Policy Statement.
Commissioner General Faith Mazani told Business Weekly last week that when people bring in their products bought in US dollars, they calculate value for duty purposes using the interbank rate of 1:2,5.
Some importers have already expressed concern over the national tax collector’s decision, saying it is making their products more expensive on the local market, which has the effect of shutting them out of business. Asked if Zimra would now revise its annual revenue collection target in line with monetary developments, from the US$6,2 billion previously set, Mazani said: “You know the issues of supply and demand are affected by a number of things.
“It depends on the level of imports. As you know, there are some imports, especially major imports such as vehicles, which were affected by the payment of duty in forex.
“So when the target is set, it will have that component; that volumes may not be the same and the revenue may not be at the same rate.”
But Mazani believes revenue may grow especially for local supplies if prices increase in response to the changes in the monetary policy.
Some companies that had not adjusted their prices to track the parallel market rate for foreign currency have already started increasing prices to match the new monetary measures.
This will allow Zimra to collect slightly more revenue compared to what could be generated if prices remain unchanged.
Said Mazani: “. . . but there are so many dynamics; so many controls, so many subsidies, so many concessions; so it depends on how things go economically.
“If volumes don’t come down, we will have a jump in revenue because we were on 1:1 (rate). But now, for any foreign currency based price, we are using the interbank rate.”
Imports of second-hand vehicles have marginally declined since November 22 last year when Government announced in the 2019 National budget that imported vehicles had to pay duty in foreign currency.
The move was aimed at reducing forex outflows on the importation of vehicles, which were not matched with generation, resulting in massive demand for fuel.
Bongani Ndlovu