Industrial players say the country’s manufacturing sector capacity utilisation is now under threat again due to detrimental effects that come with recent government directive to open borders to allow the influx of imported basic commodities.
Business member organisations said this in separate interviews following a statement by Finance and Economic Development Minister, Professor Mthuli Ncube that the Government has opened flood gates for the public to import basic commodities.
Government say it will lower import tariffs to enable people to import more basic commodities that largely comprises food and non-food items such as cooking oil, mealie meal, salt, and bath and laundry soap.
Mthuli said the move has been triggered by the recent substantial price increases in the retail market.
“To further ensure that citizens have access to basic commodities, in face of recent substantial price increases in the shops, the Government hereby opens up imports of basic commodities by citizens, through the lowering of import tariffs and other accompanying measures,” Mthuli said.
“This is with immediate effect. Those with free funds are, with immediate effect, to make use of these funds and other resources to import basic commodities.”
Zimbabwe’s inflation has been on an upward trajectory recording 96,4 percent last month, the highest rate since June last year.
In March this year, the annual rate of inflation was 72,7 percent.
The Government has attributed the sharp rise in inflation to the recent exchange rate movements that was driven by negative sentiments by economic agents as opposed to economic fundamentals.
Speaking by telephone from Bulawayo, Confederation of Zimbabwe Industries (CZI) immediate past national vice president Joseph Gunda, said the latest pronouncement by Mthuli reverses the positive gains the local manufacturing sector recorded over the past two years.
“I think that announcement we never expected, it’s a disaster for local industry, that’s what we can see already. Opening the floodgates for imported products that local industry should be supplying is retrogressive.
“I am not sure of what is the motivation for the Minister to do that in the short-term and announce it immediately.
“What we thought he was going to do was to give incentives and cut down tariffs on those raw materials that the local companies use to manufacture products.”
He said promulgating policies that incentivise the importation of goods is a demise for local industry.
According to the 2021 manufacturing sector survey, capacity utilisation closed the year at 56,52 percent from 47 percent in 2020 driven by increased investments by local industries.
“Capacity utilisation we know went up, it was looking positive, of course we were at 61 percent but we didn’t reach that.
“Those gains we have managed over one or two years created aggregate demand for local products, but will disappear because of this announcement, and all the local free funds in the country are just going to Messina, South Africa and this makes Zimbabwe again a supermarket for South African products,” he said.
“Why are we going that route, we have seen the impact of it. We are not sure of the motivation behind this, maybe it’s a question of saying there are going to be shortages. But we don’t solve this problem by such a policy, we need to protect our own industry.”
As manufacturers in the country, he said they were not consulted by the Government to find the way forward prior to pronouncement of the latest policy.
An official from the Oil Expressers Association of Zimbabwe who declined to be named citing professional reasons, said the latest move by the Government is retrogressive as far as the promotion of industrialisation is concerned.
“The latest pronouncement is an onslaught on industry and is tantamount to reversing all the gains that we had amassed in terms of capacity utilisation and strengthening of the local manufacturing sector and the value chains.
“What it therefore means is that local manufacturers are now exposed to stiff competition which they cannot withstand.
“On the other hand, the Government is supporting the thriving of foreign firms to increase their market share, create jobs and increase capacity utilisation levels,” said the official.
In an interview, the Zimbabwe National Chamber of Commerce (ZNCC) immediate past national vice president, Golden Muoni, who is also the chief executive officer of a Star Distributors, a Bulawayo-based logistics company said:
“We are now in a vicious cycle which is not ending and as long as we are not at a point of full capacity utilisation of our agricultural system. We are not going anywhere because if you say imports of ‘basic’ commodities what are those basic commodities which you can say the next door country can produce while we can’t?
“Ultimately, everything points back to say we have let ourselves down by making not even meaningful progress, but transferring jobs and killing local industry through importing and the bulk of these products are coming from South Africa.”
Traditionally, neighbouring South Africa is Zimbabwe’s largest trading partner.
Muoni said that money which the Reserve Bank of Zimbabwe (RBZ) was allotting to companies through the weekly forex auction system for raw material importation, should be channeled towards supporting the local farming sector and invested in emerging entities within the productive sectors.
This, he said, will promote productivity in sectors such as wheat, soya bean, and maize that would allow the country to be sanctions-proof.
“If the same money goes to the local farming sector and supports the local farmer, that will be sanction-proofing our economy like what other countries like Russia and China have done.
“If sanctions have caused the economy to be what it is today, why can’t we do like what Russia and China have done in terms of sanctions-proofing their economies.
“Right now for example, they are producing 133 million tonnes of grain and wheat is about 87 million tonnes. What is it that they have done better which we need to learn because we are saying Russia and China are our all-weather friends.”
“Why can’t we send our people there and learn what these guys are doing having been slapped with economic sanctions in 2014.
“Right now they are producing enough in terms of their own grain, their agriculture system has gone up, they used to import a lot of products from Europe,” said Muoni.
He said opening up for imports is not the answer to sustaining Zimbabwe’s economy to promote production and improving capacity utilisation in the manufacturing sector.
“We are importing to say we don’t want our shelves to be empty but is it the answer?
“Have we not done it (allowing the importation of basic commodities) before?
“We have done it before and said our industries are now increasing manufacturing capacity utilisation.
“What the Minister of Finance has announced to me it’s like they are a bit desperate because of the currency issue, but the decision to open the borders for imports of basic commodities to trickle in is not the answer to solving the challenges facing the economy,” Muoni.
In the past, the Government imposed a ban on the importation of basic commodities with a view to protect local industry from stiff competition posed by foreign products.
It is in this context that the Government also came up with a local content policy to promote the consumption of locally produced goods.
In his Independence Day speech this year, President Mnangagwa said the manufacturing sector was on a solid recovery path with locally produced goods constituting 70 percent of shelf space in shops due to increased capacity utilisation.
Muoni said: “And to say that those that have got free funds, can you go and import, that has been happening, it’s not something very new even where it happens in a silent way because where you are saying ‘free funds’ where is that money coming from? There is no money called ‘free funds’.
“That being the case now, a lot of commodities are no longer found in the shelves and whatever is not on the shelves is not easy to replace, so we are in a catch 22 situation, where we are very slow and react when the currency is losing its value.”
He said the latest pronouncement entails that the Government is promoting the country to become a supermarket economy as local production will go down while companies especially from South Africa would thrive through exporting to Zimbabwe.
Former Zimbabwe National Chamber of Commerce president Trust Chikohora said the move to remove duty on basic imported products will help the public to get cheaper basic goods.
“And it will also help to have prices even in our local supermarkets being contained because now there will be competition from outside, so in the end the consumer will benefit,” he said.