Industrial lobby group, Confederation of Zimbabwe Industries (CZI), says the Government needs to quickly revert to the policy of restricting entry of low priced imported products into Zimbabwe to quicken the pace of rebuilding the manufacturing sector through organic growth.
This comes after Government late last year suspended a piece of legislation that restricted the importation of basic commodities, which was meant to give local firms the space to grow production and retool. CZI said controls imposed in 2016 saw local industry post huge strides in growing production.
The import controls created some trade frictions with South Africa, which claimed the measures violated regional trading block Sadc’s trade protocols.
But in October last year, Cabinet resolved that the Ministry of Industry and Commerce temporarily amends Statutory Instrument 112 of 2017, to allow individuals and companies with offshore funds and free funds to import basics, amid shortages that drove prices sky high and beyond the reach of many.
Government relaxed rules around lowly priced imports following widespread shortages of key commodities such as cooking oil, rice, soaps and sugar while manufacturers claimed they were facing serious challenges accessing foreign currency needed for imported inputs, hence the short supplies.
But Zimbabwe’s largest industrial representative body, CZI, said this week that after years of economic meltdown and hyperinflation, which stalled or made recapitalisation of operations impossible, many firms were now operating antiquated equipment and technology, which made them inefficient.
This has made it difficult for the majority of the local companies to compete against products manufactured and imported in low cost jurisdictions, including neighbouring South Africa, which is Zimbabwe’s largest trading partner.
Low FDI inflows
CZI president Sifelani Jabangwe, said in an interview this week that given Zimbabwe was still facing limited inflows of foreign direct investment (FDI) and offshore funding to retool their operations, Government should ensure that the biggest chunk of the domestic market goes to local producers.
The CZI president also said it was critical that Government puts appropriate supportive legislation in place to ensure the billions of dollars that are lying idle within the country’s cash rich
pension funds industry were tapped and invested in the struggling domestic manufacturing industry.
Jabangwe said some of the policy measures the Government had already put in place to support domestic industry were bearing fruit, as seen in the slight growth in the levels of capacity utilisation, which rose from 45 to 48 percent, according to CZI’s 2018 industry capacity utilisation survey report.
“So we are on the right track, but the critical issue is that we must be manufacturing our own goods rather than depending on imported finished goods.
“Right now, there is not enough money to retool meaning local industry will not be as competitive as it should be if we had access to money for retooling.
“So these uncompetitive industries need to be given space to sweat the assets that they have.”
Jabangwe said amid the capital crisis it was critical to help local firms have a lion’s share of the local demand because “if the local market is ours, that is what you might use to stimulate industrial development”.
“When companies (capacity utilisation) grow to at least thresholds of between 50 percent and 60 percent-you then maybe can liberalise, but if we don’t do it, we keep going round and round,” Jabangwe said.
At a time most of Zimbabwe’s productive sectors are stuck in the rut of productive inefficiencies, which makes them very uncompetitive, the Southern African country has become heavily dependent on imports, further worsening the country’s already precarious balance of payment situation.
Tapping regional FDI
The CZI president said it was also imperative that the country attracted foreign investment from regional countries, which have a fairer appreciation of the socio-economic and political terrain of this country.
“We need not to just wait for (offshore) foreign direct investment (FDI), we need neighbouring countries (to invest as well) because I think like what we had with (Tanzania’s) Bakhresa (investing in Blue Ribbon), that was an African investor investing in an African country, which has boosted capacity.
“We need investment from the neighbouring countries to also boost intra-Africa investment because when you have investment from close to where you are, they understand you better and Africa is very big,” he said.
“So in the same way we need to look at South Africa and Botswana (among others), because these have the (funding) and investments in Zimbabwe so it is about how we promote (regional) investment.
Pension funds option
Further, Mr Jabangwe said Zimbabwe needed to tap into lots of funds within the country, which unfortunately it has “not created the structures to tap into”. He said there were monies sitting with pension funds enough for what industry needs, and the question was “how we use those funds?”
“Why don’t we find ways to direct them to industry so that we create more employment? There are specific structures (needed). The fund managers do not just come.
“I had a meeting with some of them last week and they indicated that some pieces of legislation are actually preventing them doing that (investing in domestic industry).
“We did not know about that; had we known we would have been lobbying about it a long time ago.
“So we are engaging them because we have been saying why is it that funds from outside Zimbabwe can easily do that (invest in Zimbabwe) while funds in Zimbabwe cannot got about hunting for good investments in the country,” Jabangwe said.
He said some of the domestic asset management companies were not well connected to the manufacturing sector to the extent that they can realise how to structure their products to serve the industry.
“It is something that we are trying to work on; there are quite a lot of these asset managers who work with the pension funds that we are trying to work with to see how they can create these finances, particularly for value chains.
“One fund manager indicated that there is a piece of legislation that needs to be amended to facilitate the pension funds to be able to pick up the investment in manufacturing companies,” said Jabangwe.