Source: Phillimon Mhlanga, Financial Gazette
GOVERNMENT is considering widening the list of products prohibited from being imported into the country as part of measures meant to protect the domestic industry, which has been pushed by cheap imports to the brink of collapse.
In June, government issued Statutory Instrument (SI) 64 of 2016, which banned the importation of 42 products, sparking riots in Beitbridge, which borders Zimbabwe and South Africa — the country’s biggest trading partner.
The riots were instigated by cross border traders in Zimbabwe and retailers across the Limpopo River, whose livelihoods were adversely impacted on by the protectionist policy.
These should now brace for another round of trade restrictions as government gives in to pressure from local manufacturers who have been forced to cut back on production or close shop, overwhelmed by competition from cheaply priced imports.
Thousands of workers have lost their jobs while those still in employment are going for several months without being paid as capacity utilisation in industry plummets.
Between 2011 and 2013, about 4 500 firms closed shop, leaving 55 000 people out of employment.
The affected firms were mostly operating in sectors such as clothing and textiles, which have been targeted by foreign producers. The fast moving consumer goods sector, which is facing competition from South African producers, has also been hurt.
Industry and Commerce Deputy Minister, Chiratidzo Mabuwa, said controls were necessary to nurse a growing list of failing industries, thrown into crisis by a switch in consumer preferences towards cheap imported products.
“We are still looking for more items so that we have another SI to protect our market,” said Mabuwa.
“We want to lubricate the local market so that you increase your capacity utilisation and productivity and make money. Then you will lubricate the fiscus,” she added.
Mabuwa told a Zimbabwe National Chamber of Commerce conference that ran concurrently with the Zimbabwe Agricultural Show recently that import bans would close the country’s trade deficit and prevent foreign competitors from dumping substandard products in the country.
Mabuwa said governments everywhere were intervening to protect their industries from imported products.
Economies with high production costs have been the most affected by imports as the landed price of foreign goods is lower than that of goods produced by their domestic industries.
“There is no country which does not have controls,” Mabuwa said. “There is no free trade. This is why we are controlling products that come into the country. Management of imports is a tool for the resuscitation and growth of local industries”.
An overflow of imports, estimated at about US$7 billion per annum against exports of about US$3 billion, has been aggravating de-industrialisation in Zimbabwe and widening the current account deficit.
The current account is projected to rise to US$2,8 billion this year, from US$2,5 billion last year, largely due to the rising trade deficit.
Government must, however, prepare for a backlash against its protectionist policies.
Industry and Commerce Minister Mike Bimha has been dragged to the courts by former vice president, Joice Mujuru, who is now leader of the opposition Zimbabwe People First over SI 64 of 2016.
Mujuru is arguing that the ban on imports was escalating poverty levels in the country.
Zimbabwe is also in the midst of delicate talks with its bilateral trade partners miffed by its regression towards a closed economy.
SI 64 has particularly shaken South African exporters who sell products in Zimbabwe.
Zimbabwe’s southern neighbour has retaliated by requesting the revision of numerous tariffs on Zimbabwean imports.
Products that have been removed from the open general import licence under SI 64 include fertilisers, plastic pipes, wheel barrows, roofing frameworks, tinned fruits and vegetables, dairy products, furniture, coffee creamers and petroleum jellies.
Previously, government had gazetted a ban on the importation of batteries, candles, floor polish, tobacco twines, second-hand clothing, blankets, 23 pharmaceutical products, milk, potatoes, onions, biscuits, sugar, poultry, meat products and yeast.
Cairns Foods Limited chief executive officer, Nancy Guzha, recently said significant progress has been achieved in companies that have benefited from government’s interventions.
“SI 64 is giving us a chance to resuscitate,” she told the Financial Gazette’s Companies & Markets.
“The Ministry of Industry and Commerce has seen that this can work. We are seeing companies starting to manufacture. This has helped the milk and cooking oil industries. We need to convince our customers that we have the capacity (to meet demand) and prices have been readjusted,” she added.
Source: Phillimon Mhlanga, Financial Gazette