RYAN CHIGOCHE
The Confederation of Zimbabwe Industries (CZI) says it will take time to successfully establish backward integration with local suppliers of raw materials.
This comes after the government urged industry to get key raw resources locally, as part of efforts to stabilise the prices of essential goods.
Backward integration refers to a process in which a company acquires or merges with other businesses that supply raw materials needed in the production of its finished product.
“‘For backward linkages to be successful it will take time. It will take like 10 more seasons from now to make sure that we can safely say we are now okay,” CZI president Kurai Matsheza said.
He said some of the raw materials are not available locally hence the need to import adding that it is “still work in progress” on backward integration.
“Although it is (the way to go) it’s also not as simple because a company must pre-fund for example if it’s the cooking oil value chain as an oil expresser must give feed chemicals fertilisers it requires funding upfront. It means there is a huge cost. It requires a deeper focus in terms of financing packages,” Matsheza said.
He said the government must also intervene by providing necessary infrastructure in all the value chains, specifically land.
Currently the industry also is facing huge working capital challenges emanating from an increasing allotment backlog at the foreign currency auction system.
This is leaving them with no other option but to source foreign currency from the parallel market where it is trading at ZWL$700:US$1.
At the auction system, the Zimbabwe dollar is trading at ZWL$379: US$1.
This has led to rising prices as economic agents are benchmarking their prices using the parallel market rate so as to cushion themselves against inflation which raced up to 191.6% in June.
A few months ago the government temporarily allowed ordinary citizens with access to the U.S. dollar to import basic commodities for their own use to counter “substantial” price increases by retailers in hopes that prices would stabilise.
