LIVINGSTONE MARUFU
Zimbabwe is mulling localising the production of raw materials amid concerns that local goods remain highly uncompetitive in the export market as a bigger market under the African Continental Free Trade Area (AfCFTA) beckons.
This comes as the economy’s cost of production and cost of doing business is very high compared to other regional peers.
Finance and Economic Development minister Mthuli Ncube told Business Times that the government will begin the facilitation of domestication of raw materials to improve the industry’s competitiveness.
“Having realised that our goods remain uncompetitive, we are now considering the localisation of the raw materials to ensure raw materials are produced at relatively cheap prices. This will be the first step towards removing high costs,” Ncube said.
“Government will also avail more tax rebates and Value Added Tax (VAT) deferment to manufacturing, mining, tourism, agriculture, transport, energy and health sectors to lower production costs.”
Experts say local goods are pricey as compared to other goods on the African continent hence this makes the country’s exports uncompetitive when one compares with the amount used to produce those goods.
Ncube will also reduce tax on fuel for productive sectors to ensure production costs are lowered.
Presenting at the National Trade Tariffs Workshop last week, ZimTrade client manager Kupakwashe Midzi said Zimbabwe should reduce its cost of doing business to be competitive.
Midzi said competitiveness should be addressed for Zimbabwe to enjoy the benefits of the AfCFTA.
“If we don’t address the competitiveness of our industry and products, AfCFTA will give us a rude awakening as we will not be able to compete with our counterparts due to high cost of production,” Midzi said.
“As we speak, the local companies don’t see the reason for exporting a commodity to Dubai or the United Kingdom at a price of around US$3.50 when an entity can sell a product at US$10.”
He said given the dual currency system in the country, companies don’t see the motivation of exporting and this speaks volume to the high costs of doing business which will be made worse by the export costs.
Midzi said industry does not want to remit 20% forex to the government hence local companies do not want to export as they want 100% forex retention to retool.
Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza said the country’s economy should be anchored on three key pillars which are industrialisation, competitiveness and regional integration.
“These pillars take into consideration the need for local industries to improve on competitiveness in line with demands from the Africa Continental Free Trade Area,” Matsheza said.
“To achieve the 2030 aspirations, a number of imperatives come to mind and these include currency and macroeconomic stability, policy alignment towards the tenets of the vision, improved access to capital, local value chain development and improvements in the business climate to attract investment.”
He said there is a need to increase manufactured exports to the SADC and COMESA regions and the rest of the world and to promote utilisation of available local raw materials in the production of goods.
“As efforts to increase regional integration gather pace, Zimbabwe should not be left behind on the AfCFTA train as that will cost the country millions, if not billions in lost market share, potential export earnings and tax revenues among other gains,” Matsheza said.
“Government policies towards sustainable economic growth, poverty alleviation and macroeconomic stability can only be realised through efficient production from the industry through policies that improve the ease of doing business in the local market.”
He added: “As businesses we remain committed to playing our part in recommending policy, creating jobs, investing and promoting local content across various subsectors.”
In last week’s budget presentation, Ncube said growth of the manufacturing sector has slightly been reviewed downwards from the initial projection of 7% to 6.2% during 2021 on account of Covid-19 national lockdown measures instituted towards the end of the second quarter, delays in access to foreign currency on the auction system and intermittent supply of electricity during the third quarter.
The growth is being sustained by relatively high consumer demand mainly from increased incomes from agricultural activity, infrastructure spending, increased mining activity and general reopening of the economy.
In 2022, manufacturing growth is expected to remain positive and firm at 5.5%, underpinned by continued macroeconomic stability and improved access to foreign currency on the formal market.
“The budget, therefore, seeks to facilitate a shift towards production of high value manufactured products which contribute more to output, export earnings and create decent jobs,” the finance minister said, adding that a provision of ZWL$3.9bn has been allocated to the Industry and Commerce ministry.
Ncube said some of the resources will go towards the capacitation of the Industrial Development Corporation of Zimbabwe.
Subsidiaries of the Industrial Development Corporation which span across the sectors of mining, car assembly, real estate, fertiliser manufacturing, cement production and food processing presents an opportunity for the government to directly drive the value addition agenda by growing locally manufactured products.
For the period to September 2021, an amount of ZWL$525.7m has been released towards capacitation of some of the companies. An amount of ZWL$2.3bn has been set aside for the Industrial Development Corporation to provide medium and long-term finance to enable companies across the agricultural, mining and service sectors implement value addition activities, following the addressing of outstanding governance issues.
Ncube said it is imperative that industry adopts the Fourth Industrial Revolution which encompasses the two vital elements of upgrading and modernisation.
