Import substitution vital post Covid-19: CZI

05 Jun, 2020 - 00:06 0 Views
Import substitution vital post Covid-19: CZI

eBusiness Weekly

Business Writer
The trade restrictions that have been imposed as a result of the coronavirus pandemic, calls for Industry to embark on an aggressive import substitution drive especially for essential key raw materials, the Confederation of Zimbabwe Industries (CZI) has suggested.

Surveys that have been carried out so far have indicated that the Covid-19 pandemic has had catastrophic impact on both domestic and international trade.

International trade has been affected as many countries across the world have locked down their economies and companies, freight services and trade ports have closed with attendant effects on countries that rely on imported raw materials such as Zimbabwe.

Several sectors that were part of the survey highlighted how their operations were affected by disruptions in the raw material supply chain from source countries.

This led to significant loss of revenue and potential threat to not only market share but jobs as well.

Zimbabwe is suffering and will continue to suffer contagion effects if any negative developments occur in source market economies due to local industry’s high raw material import exposure, reads part of the survey which CZI conducted in partnership with trade promotion body ZimTrade.

The survey is titled “The Trade Dimensions of Covid-19 on Zimbabwean Industry — Import Reliance of the Sub Sectors and Opportunities for Local Production of Raw Materials’’.

The survey revealed that the local industry is highly exposed to the South African economy through the importation of raw materials.

A total of 80 percent of firms in the agriculture and horticulture sectors source their raw materials from South Africa.

In the drink, tobacco and beverages sector, all firms indicated that they import their raw material from South Africa.

The clothing sub sector is importing almost everything after cessation of operations at David Whitehead and other clothing firms. The major raw material source is South Africa supplying 78 percent of the firms’ requirements.

In the foodstuffs sector, 61 percent of the respondents import raw materials from South Africa.

Such high levels of imported raw materials means there is room for the economy to achieve some measure of self-reliance in view of covid19 and its restrictions to trade and movement.

“This calls for aggressive resuscitation of local value chains and heightened value addition and beneficiation initiatives.

These initiatives will ensure that jobs are not exported and value added products will fetch more value on the export market,” reads part of the report.

CZI reckons over reliance on other countries, South Africa in particular, for raw materials, creates a competitive disadvantage for local firms because it becomes difficult to compete with the supplier of your raw materials.

“A deliberate cut throat method will be deployed by suppliers of raw materials so that they dominate the market.

“This points to a need for industry to invest in export value chains and work on producing the bulk of the raw materials locally,” reads part of the report.

“The survey results illustrate the need to achieve self-sufficiency and self-reliance in the production of raw materials as well as finished products because globalisation is under threat as countries are moving away from globalisation to regionalisation and to a greater extent nationalism.

“It is now imperative for the economy to embark on an aggressive import substitution drive in view of covid19 as some countries are banning certain exports to supply their own local industries and domestic markets, especially essential raw materials and covid19 related products,” reads part of the survey report.

Import substitution, according to the report, will ensure that products are produced locally through a Value Chain approach, Local Content Policy implementation as well as innovation and embracing new technology.

As Zimbabwe pursues its developmental aspirations there is need for collaboration between industry and tertiary institutions to boost production and productivity.

However, a friendly doing business environment that fosters investment is essential if the local economy is to successfully promote local production of raw materials and finished goods for the domestic market as well as exports.

Business regulatory policies and trade policy will need to deliberately address this for the competitiveness of the local manufacturing industry in view of the foreign exchange demand that is currently prevailing in the economy and the potential savings just by producing these raw materials locally but also the spin-offs in competitiveness of the exported finished goods.

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