daniel chigunwe
Oliver Kazunga
Business Writer
A survey conducted by the Confederation of Zimbabwe Industries (CZI) has revealed that the manufacturing sector is not ready to compete under the African Continental Free Trade Area (AfCFTA) due to host of competitiveness issues.
AfCFTA to which Zimbabwe is signatory, is the world’s biggest free trade area with a population of about 1,3 billion and a Gross Domestic Product amounting to US$3,4 trillion.
The free-trade area agreement which was operationalised in January 2021 seeks to eliminate tariffs on 90 percent of goods traded between member States over 10 years.
Among other goals, the AfCFTA also seeks to streamline customs procedures, reduce bureaucracy, and harmonise technical standards to ease the movement of goods across the continent’s boarders.
According to the 2023 manufacturing sector survey report released last week, CZI outlined that AfCFTA would pose increased competition from cheaper imports entering the country triggering job losses due to factory closures.
This is on the back of a number of challenges that continue to haunt the local manufacturing sector.
Such challenges include outdated machinery and technology, high cost of production due to energy costs, limited access to raw materials and finance as well as skills gaps in the workforce.
Against this background, CZI in the latest manufacturing sector survey report highlighted that 46 percent of the respondents indicated that they were not ready for the AfCFTA while 21 percent were not sure and 34 percent indicated readiness to stand against competition from the bloc.
In an interview, CZI chief economist Dr Cornelius Dube said those that expressed scepticism over withstanding competition from the AfCFTA merely lacked enough information about African continental free-trade area.
“They don’t even know what it means and when their products are likely to face competition from the African Continental Free Trade Area,” he said, adding that those that have indicated readiness to the AfCFTA believe they have the necessary technology and know-how to stand against competition from any other company in Africa.
“Basically, it’s just a competitiveness issue where people believe that Zimbabwe as a landscape we are not yet ready to compete against the companies in other countries which are actually outside SADC and Comesa.”
From their analysis as Zimbabwe’s industrial representative body, Dr Dube said, some of the major issues of competitiveness is the cost of regulation.
“Remember where we are coming from, this template of regulation that we have when we were in the hyperinflation, when the fiscal space was now constrained, the Government actually made a deliberate effort to say regulatory authorities should try as much as possible to be self-sustained.
“That’s where we started seeing so many such instruments saying EMA (Environmental Management Agency) should charge this and this regulatory authority should charge this and so forth. Unfortunately, even when the economy was relatively stable, we continued with that template where regulatory authorities tried as much as possible to raise money for their operations through charging for their services, even if those services are statutory obligations,” he said.
The survey revealed that an average 17,9 percent of total overheads went toward regulatory obligations.
As a country to improve competitiveness of the manufacturing sector, the CZI chief economist said it is imperative to reduce the cost of regulation.
“Even if we just say, first of all we just want to reduce by 50 percent, I’m sure they are not going to go broke.
“We won’t see EMA getting broke just because their charges have been reduced by 50 percent.
“And of course, some of these are just natural economic environmental issues. You talk of your NRZ that is not operational- that one, obviously you cannot really blame the Government because it’s just a result of mismanagement.”
Dr Dube said a majority of the challenges facing the local manufacturing sector are bound to disappear if the structural economic transformation pillar of National Development Strategy 1 (NDS1) is enforced.
NDS1 is the first five-year national development plan towards Vision 2030, of an empowered upper middle-income society envisioned by President Mnangagwa which leaves no-one and no place behind.
Under the first five-year development agenda, the targeted areas included economic growth and stability, food and nutrition security, governance, human capital development, health, infrastructure development, and social protection and devolution.
“The only challenge that is there is that there has not been deliberate police initiatives that are aimed at unlocking some of the opportunities that are available in our value chains.
“For example, import dependent companies are actually increasing at the moment; even manufacturers themselves, they don’t care where the product is coming from as long as it is cheaper. Just because our environment is costly, it’s easy for any company out there to outcompete us in the market.
“What simply needs to be done is we need to deliberately have policy strategies in place to strengthen our value chain.
“If you also look at our structure for our GDP at the moment, you see that agriculture and mining have been increasing in terms of contribution to GDP while manufacturing is going down,” said Dr Dube.
CZI indicated that the manufacturing sector’s contribution to the GDP has fallen from 23 percent in the 1980-1989 period to 9 percent last year.
“The reason why manufacturing is going down is simply because there are no policies that are as clear-cut as agriculture and mining. The policy landscape right now has been geared more towards supporting mining and agriculture rather than manufacturing.
“But there are so many opportunities that can be done. Even if you look at any value chain you can think of, for example, the cotton value chain. Is there any need for us to continue to exporting lint instead of trying to value-add first and unlock more value?”
He said it is vitally important to ensure policies are in place that make it more attractive for investment as well as exploitation of resources from the natural endowment including local investment rather than only focusing on Foreign Direct Investment.
Bongani Ndlovu