The use of antiquated machinery coupled with shortages of both foreign currency and electricity will derail the country’s potential to achieve export-led industrialisation as highlighted in its recently launched industrial development policy, Zimtrade chief executive officer Allan Majuru has said.
Zimbabwe recently launched a Zimbabwe National Industrial Development Policy (2019-2023), which among other things looks to the export sector as a key growth area. The target is to have an export-led industrialisation.
“The country will deliberately pursue an industrialisation path that is centred on export development in order to ensure a healthy Balance of Payments position,” reads the National Industrial Development Policy (ZNIDP).
“Central to this will be the growth of manufactured exports so that the country can move higher up the global value chain. The objective is to realise higher value on exported products rather than continue to be dependent on exports of primary products.”
Players in the export sector have, however, highlighted some of the issues that are an impediment to export businesses.
“The biggest challenge remains shortage of foreign currency, which in turn has led to erratic availability of raw materials, especially those that are imported,” noted Majuru in emailed responses to Business Weekly.
“Further to this, Zimbabwe has been experiencing power shortages, forcing productivity levels of industries to go down.”
Zimbabwe is going through crippling power cuts with some places going through 24 hours of load shedding. Efforts to resort to diesel powered generators though costly are also futile as the country battles limited supplies. This, according to Majuru, is negatively affecting productivity.
Henry Nemaire, chairman of trade committee for the Confederation of Zimbabwe Industries said the current situation where exporters are using imported diesel make local companies uncompetitive.
“With current power shortage, exporters are using imported diesel to generate power with standby generators. The duty on such diesel makes it uncompetitive to export products,” he said.
Majuru said this in addition to the use of antiquated machinery that some local players are still using hinder productivity.
“These old technologies consume more electricity, and are not sustainable in the long-run. In addition, there are cyclical export regulations cyclical export regulations that are costly and cause shipment delays,” he said.
Nemaire said diesel imported by exporters to supplement power should be exempt from duty. Majuru said to improve “our export capacity there is need to engage the private sector and understand bottlenecks that are affecting operations of local sector players”.
“Some of these include access to foreign currency through the interbank market, electricity supply, improvement of cost structures to lower unit product cost.
“There is also need to address challenges related to non-tariff barriers such as long permit processes and multiple agencies to clear exports,” he said.
Nemaire echoed similar sentiments saying “export licensing is causing informal sector to smuggle goods into neighbouring countries,” and hinted the need to scrap export licences.
“Uganda farmers export banana into South Sudan. No licensing required or phytosanitary impediments.”
Majuru also said development of logistics infrastructure such as roads and our railways will improve the competitiveness of Zimbabwean exporters on the international market.
“Further emphasis must be placed on local manufacturers to improve quality of products. Also development of centres of excellence will attract other nationals to our facilities such as hospitals and universities,” Nemaire added.
Improvements over the last few years
Majuru, however, acknowledged that the sector had registered some improvements in the ease of doing business.
“As indicated, there are signs of improvements. For example, a total of 11 out of 22 statutory reforms were implemented by various regulatory authorities in response to submission done under the ease of doing business framework.
“These were targeting the ease-of-doing business for exporters. 15 other non-legislative processes have also so far been streamlined under the same initiative,” he said.
He added that the initiative to improve the ease of exporting is still on-going and Zimtrade is confident that more reforms will be implemented soon.
“In addition, following the re-engagement efforts by the Government, the Ministry of Foreign Affairs and International Trade has been working hard to assist local sector players connect with international markets.
“This has increased the visibility of Zimbabwean products in foreign markets.”
National Industrial Development Policy major activities for Export Led Industrialisation will include the following:
- Entrenching the National Export Strategy and the National Trade Policy within industry;
- Aggressively pursuing export of services; e.g. education, health, tourism, financial services, ICT;
- Facilitating the ease of export business;
- Encouraging industry to produce quality products and packaging in order to penetrate international markets;
- Adopting international best practices and standards in production;
- Adopting Research and Development with a bias towards export products;
- Taking part in export led initiatives and optimise the benefits to the country from trade; and
- Participating at local, regional and International exhibitions.