Opening for imports reversing industrial gains

26 May, 2023 - 00:05 0 Views
Opening for imports reversing industrial gains

eBusiness Weekly

Tapiwa Mangwiro

Industry and business have warned that the move by Government, to let selected imports duty-free, will derail the very efforts that they have been putting into import substitution and preserving the hard-earned foreign currency.

Government announced suspension of import duty and import value-added tax (VAT) on 10 basic groceries saying this was tantamount to exporting jobs and killing local production.

Products that can be imported duty-free are rice, flour, margarine, salt, milk powder, petroleum jelly, toothpaste, bath soap, laundry bar, and washing powder.

Industry analysts say while the removal of import duty on products can result in lower prices for consumers and improved access to goods, removing import duty may also have some negative effects such as loss of government revenue, adverse effects on domestic industries and dependency on foreign products.

The Confederation of Zimbabwe Industries (CZI) says following the suspension of duty on basic commodities by Government, local companies should up their game and be competitive so as to remain in business. CZI president Kurai Matsheza said the recent move by Government will surely affect the local industry and has potential to sweep away progress that had been accomplished in reviving production in the country.

“While the intention is to protect the general consumer from the price increase, the general consumer will not be importing, it’s small businesses and big to some extent who will be importing and then retailing in US dollars. This deepens dollarisation as basic goods will only be available in USD.”

Chairman of the board at Buy Zimbabwe Munyaradzi Hwengwere, shared the same sentiments, arguing that relaxation of import duties without supporting the local companies will bring unintended negative consequences.

“While noting the new measures, businesses felt the need to level the playing field between local producers and foreign suppliers.

‘‘For example, local sugar manufacturers are required to fortify their product yet unfortified sugar has been allowed to enter the local market,” Hwengwere also noted that previously when Government has allowed duty-free imports of certain products, there has been a general rise in the smuggling of products not covered by the Open General Import Licence (OGIL), suggesting the need to enhance monitoring of the country’s borders.

Buy Zimbabwe chairman insisted on the position that they are not averse to competition but opening the country’s borders to imports must be accompanied by efforts directed at reducing cost and enhancing ease of doing business for local companies.

However, Confederation of Zimbabwe Retailers (CZR), is blaming the situation on industry that is failing to repay the efforts of Government which has made efforts to avail foreign currency on the auction market.

CZR President Denford Mutashu in a statement said, “It is disheartening to note that some manufacturers and suppliers have decided to starve the formal market and now offloading basic goods onto the informal market, creating artificial shortages in formal retailers and wholesalers.”

He added that such a behaviour has seen retail players struggling to restock while the insatiable appetite for the USD and shunning of the local currency has created a market failure.

“CZR also notes with disdain the unjustified attacks on the Foreign Currency Auction system which has for a long period availed cheaper foreign currency to companies for retooling and purchase of raw materials among others,” Mutashu added.

Consumers as expected have welcomed the government’s decision to suspend duty on basic commodities to cushion them from price shocks occasioned by the said local speculative behaviour, which is causing price increases and artificial shortages.

A consumer who spoke to Business Weekly said, “Government has done the right thing, how can we pay for such expensive goods on low salaries that we are getting. We do welcome the move as it gives the preferred shopping points we are going to now the opportunity to stock and not run dry”

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