Govt throws industry under the bus

THE decision by the government to open up importation of basic commodities by citizens together with a six month suspension of duty on various products will have a damaging impact on the revival of the country’s manufacturing sector.

This comes amid indications of a bruising fight between the government and business where the latter is accused of being economic saboteurs.

Last weekend, Finance minister Mthuli Ncube issued a statement in which he announced the opening up of imports of basic commodities for citizens to improve access to affordable basic commodities.

“To further ensure that citizens have access to affordable basic commodities, in the 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.

“This is with immediate effect. Those with free funds are, with immediate effect, permitted to make use of these funds and other resources to import basic commodities,” Ncube said.

Finance secretary George Guvamatanga then followed up this week with a statement announcing the suspension of duty for the next six months of an array of basic commodities with effect from Tuesday this week. These include rice, flour, cooking oil, margarine, maize meal, sugar and even salt.

This is evidence of a simmering rift between the government and business following the skyrocketing of basic commodity prices following a rapid decline in the value of the local currency on the parallel market galloping past the ZW$400 mark.

This is more than double the auction market rate of less than ZW$200 and the interbank rate which stood at just over ZW$300.

The consequences of this are already being keenly felt by the citizens. The price of bread has gone up to ZW$379 (US$1,80). This means, one needs to use more than three ZW$100 notes to buy a loaf of bread; the ZW$100 note is the highest denomination.

The Consumer Council of Zimbabwe (CCZ) recently revealed that the bread basket for a family of six went up to more than ZW$92 000 (US$450) for the month of March with inflation shooting up to 96,4% last month.

The Confederation of Zimbabwe Industries (CZI) pulled no punches warning monetary authorities that the Zimdollar was on the “brink of rejection in the face of exchange instability and increasing inflation” in a recent statement.

President Emmerson Mnangagwa, whose prospects of re-election in next year’s harmonised elections are under serious threat as a result of spiralling prices, has however accused the business sector of trying to sabotage the government calling players in the sector “economic hitmen”.

This, according to analysts, informed the latest decision to open the imports tap.

This will cripple the momentum of the government's import substitution programme anchored on capacitating the manufacturing sector to produce local products which was being championed by Industry and Commerce minister Sekai Nzenza.

According to the CZI manufacturing survey made available last week, industrial capacity utilisation rose to 56,24% last year, from 47% in 2020.

It also noted that 37,8% of the manufacturing sector undertook investments of US$147 million to increase their production capacity in 2021 resulting in an additional capacity of 25,6%.

The improved performance of the manufacturing sector has also been aided by the foreign currency auction system launched in June 2020 to help firms access cheaper foreign currency to increase the production of local goods despite the central bank failing to release allocated funds timeously.

Even Mnangagwa, in his weekly column in the state media this week, pointed to the positive impact of the auction system.

“A key detail struck me from the CZI survey: much of the US$147 million invested in new capacity came from the Reserve Bank of Zimbabwe’s foreign currency auction system,” he said.

However, the positive developments are under threat from the opening up of imports as noted by the Buy Zimbabwe in its statement this week.

“In the main, our concern as Buy Zimbabwe is that this development is likely to reverse the industrialisation gains that have been made by local industry in the supply of basic commodities in the last few years. Local industry has increased capacity utilisation to 65% while 75% of shelf space is taken up by locally produced goods. These gains are now under threat if anyone with free funds begins importing basic commodities at lowered tariffs,” Buy Zimbabwe general manager Alois Burutsa warned.

The decision to open up imports for basic commodities represents a sad day for the country’s local manufacturing sector according to one of the founding members of the Buy Zimbabwe campaign and the CEO Africa Roundtable chairperson Oswell Binha.

“It is a sad day for Zimbabwe in the sense that this is happening when we are talking about regional integration through the African Continental Free Trade Area and where we are focused on competing regionally.

“Zimbabwe will become a net importer and the Buy Zimbabwe campaign will suffer a heavy blow. You shall see a lot of companies downsizing their workforce and operations will be more difficult going forward,” Binha said.

The impact of the opening up of imports by the government threatens a return to 2009 during the introduction of dollarization which was a bleak era for the manufacturing sector which was severely weakened by the influx of cheap imports that made local products uncompetitive.

Labour market analyst and former Employers’ Confederation of Zimbabwe executive director John Mufukare fears that the move to open up imports will bring about major regression for the manufacturing sector.

“What makes this so sad is that we have gone through this whole situation before. We are going back to a situation where we had become one big supermarket. I really thought Mthuli Ncube was better than that. We are killing our own industry,” Mufukare said.