Influx of imported goods hits local companies

LIVINGSTONE MARUFU

The influx of imported goods is threatening  the future of local industry  and placing increased pressure on competitiveness, the president of the Zimbabwe National Chamber of Commerce, Mike Kamungeremu has said.

It comes after the government recently suspended duty on imported goods. The move means that anyone can now import the gazetted goods  into Zimbabwe duty free.

Kamungeremu  said the import bill will rise unsustainably, and further widen the trade deficit by at least 10%.

“By removing import controls, and exposing those prioritised sectors to unfair competition, it reverses the gains hitherto accrued. There is a need to reconcile the two goals to align,” he said.

He added: “The current 80% shelf space of local goods is likely to shrink as local capacity utilisation is forced to decline to levels of around 50%.

“The informal sector is the biggest winner simply because they don’t play by the rules. They can import and sell in foreign currency, while the formal players are forced to sell in local currency at a rate that does not allow them to acquire enough foreign currency to restock.

Kamungeremu said the move would therefore promote deeper dollarisation, which can affect exports.

“As the need for foreign currency is further heightened, pressures are exacerbated on the Zimbabwean dollar to deteriorate further.

“US$ prices on the informal sector will remain unchanged or even go down while on the formal market, ZWL$ quoted prices will continue to rise by at least 10% on a monthly basis.

“Through the auction system, the government has been giving priority to productive sectors such as manufacturers to become competitive, and there have been signs of improvement.

Economist Gift Mugano concurred saying the move will destroy the local industry and reverse the gains made thus far.

“The move will promote the dumping of cheap and substandard imports in the country. This will also affect the strides made by local industry in increasing local  goods shelf space,” he said.

In its latest report, ZNCC said the removal of import controls is promoting excessive hoarding of cheaper basic goods from abroad, especially by those who anticipate that the controls might be returned later, as they intend to take advantage of importing duty free and quota free regimes.

“This hoarding for future supply will result in a long term supply of imported goods that will continue to affect the local industry for a longer period of time and will render useless some of the tools that were spelt out to promote industrialisation in the Zimbabwe Industrialisation Development Policy.

“Even when the controls are returned later, they will have no effect as the hoarded supplies will continue to be distributed and pose serious competition to local producers. For example, when the SI 98 of 2022 expired in November 2022, some warehouses were still filled with goods that could supply the informal and formal sector for the next three to four months,” ZNCC said.

The businesses said customs and value added tax revenue from imported basic commodities constitute a significant contribution to the government’s total revenue collection.

“The move to import goods duty free will reduce government revenue collections, at a time when the national budget has already been eroded by inflation.

“By removing import controls on basic commodities, this might also reduce demand for local raw materials that feed into local industries. As demand for more cheaper imported finished products grows, the market for locally produced goods’ will contract, which will also reduce local production and demand for raw materials used in their production, especially in the agro-processing sector, which is a key value chain in Zimbabwe,” ZNCC said.