adminKudzanai Gerede
WHILE the recent reduction of traveller rebate may be viewed as a mere measure by Government to boost its revenue streams by targeting individual travellers passing through the country’s borders, there is a general laxity by the country’s producers to exploit the low hanging fruit from the matrix.
Among a host of economic hostilities confronting the country’s economic recovery has been a lackluster consumer uptake of the local product, a precedence which was perpetuating the influx and ultimate massive spending on foreign products in the domestic market.
Recently released figures by ZIMSTAT highlighted that between January and February 2016, Zimbabwe imported goods worth $839 million against exports worth $459 million. Further worrying was the list of imported products the country splashed its much needed foreign currency on which constituted consumables such as maize, rice and various processed foods which local industry has the capacity to produce with the exception of crude oil which also topped the list of imports.
The country’s export basket continues to be characterised by unprocessed raw materials such as precious minerals and tobacco, a trend which is undermining local industries through potential value addition along the manufacturing value chains.
Government has shown its interest in creating an enabling environment for local producers to reclaim the local market by putting a number of fiscal initiatives to subvert the uneven playing field local producers have to put up with against imported products.
Government has put up protectionist strategies in the hope of reviving the struggling manufacturing industry by launching the Buy Zimbabwe Campaign which seeks to promote local products.
Local producers’ ability to compete with foreign goods faces several ordeals. The high cost structures continue to hinder production with depleted machinery characterising most of the country’s industries leading to inefficiency and quality.
However government’s recent reduction of travelers’ rebate from US$300 to US$200 seeks to minimize the superfluous spending on foreign goods by the local public. Under the new regulations all travelers using small cross-border transport or buses with huge trailers and carrying goods of a commercial nature no longer qualify for rebate.
Prior to the development, individual travellers would enjoy the rebate whether they used commercial transport, buses or small cross border transport operators and this facility was being abused by local businesses to circumvent paying duty at the border posts.
The reduction of rebate will therefore have a negative bearing on the imported product for the traveler as it will have underwent extra costs which will in turn make the local products more attractive.
“The reduction of rebate is welcome for local industry which has been complaining about competition from imports particularly from South Africa. You find despite surtax of 25 percent South Africa imports have been finding their way through to Zimbabwe due to high costs of local products which cannot compete,” said National Economic Competitiveness Forum economist, Mr Pepukai Chivore.
“Most products imported are bordering on superfluous spending by locals, you find drinks, jiggies and processed food stuff which can be produced locally so by reducing rebate it’s an encouragement for small local producers.
“This will affect even vehicle importers because rebate was not only reduced but was scrapped to zero so without rebate people will be encouraged to buy locally from local car assemblers like Mazda Willowvale and Quest Motors,” he added.
He, however, warned of ineffectiveness of the rebate reduction considering that the country continues to rank among one of the highest priced nations which was affecting local economy’s competitiveness.
The high prices which marred every facet of the production value chain had a corresponding cost bearing on the cost build up to the final product. Protectionism strategies without a corresponding strategy to stimulate the local industry are a non event.
“We have not seen the reduction of rebate triggering industrial development because ever since rebate was reduced we have not seen much in terms of industrial stimulus. One can safely say without thwarting the high costs of production reducing rebate will be like protection inefficiency of our local industry,” he added.
The Minister of Finance and Economic Development is on record blasting poor corporate governance in the country’s echelons of business administration. Most of the local manufacturers continue to cry foul over uneven playing field against foreign products yet very few have made efforts to replace antiquated machinery through investment in latest technologies to increase efficiency, quality and cut on production costs.
“Rebate reduction is just a short-term intervention to promote local producers, they have to up their game and compete not only against invasion by foreign imports but by also aiming to export at competitive prices,” said Mr Ray Chipendo an economic analyst.
Some economic analysts have also warned that reduction of rebate might appear attractive at face value but can also harbor unintended outcomes. Whilst rebate reduction is aimed at minimizing imports by making foreign spending less attractive, there are fears of defiance by consumers which can led to high prevalence of smuggling of goods to avoid paying duty for excess goods at border posts.
The country’s border posts are known to be porous hence reducing travelers rebate will push levels of smuggling even further.
Mr Chivore also warns of possible retaliation by the country’s major trade partners as protectionist strategies are retrogressive to the continent’s free trade and free movement agenda that is aiming at improving intra- African trade.
“Remember Zimbabwe also needs to export its Platinum and tobacco among other things to our trading partners who might also feel the need to retaliate through various measures to protect their local producers which was against the tenets of a free trade zone our leaders have been advocating for across the African continent,” he stressed.
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