The ManicaPost
Kudzanai Gerede Business Correspondent —
Captains of industry say the state of the country’s manufacturing sector remains fragile despite the introduction of Statutory Instrument (SI) 64 as an interim measure to boost the local firms’ footprint on the domestic market while highlighting the need to retrace the manufacturing value chains that used to sustain industry during its peak.
Most of the industries in the country have been completely shut down while a few survived have been operating at very low capacity. The reindustrialisation agenda has seen most industries struggling to regain lost markets.
Despite government advocating for buy Zimbabwe campaign, the local market remains very contracted as a result of a combination of low aggregate demand and shunning of locally produced items such as the clothing sector, which has seen most clothing manufacturers struggle to remain viable.
Clothing bales continue to be smuggled into the country and cheaper Chinese wears dominate the local market. Discussing at the breakaway session on the manufacturing sector dubbed “SI64; ITS IMPLICATIONS ON MANUFACTURING,” during the Inaugural National Economic symposium in Harare last week industrialists agreed that the manufacturing sector was under performing despite being cushioned by SI64 highlighting that aggregate demand was still low on the market hence the need for innovative ways to regain lost external markets.
“Nascent companies don’t have sufficient economies of scale that their external competitors posses in order to be competitive. It’s a major challenge for most of our emerging local firms even those that had been around for some time still face the same challenge owing to low output,” Mr Davison Norupiri, Zimbabwe National Chamber of Commerce president said.
Following years of deindustrialisation, most of the country’s manufacturers lost markets both locally and externally hence it destructed most of the manufacturing value chains which had been in existence.
“The economy was a network of value chains. We therefore need to trace which ones were the heads of a particular value chain. The CZI has identified 18 value chains but we cannot afford to resuscitate them all because of lack of resources and some have since lost relevance so we can only prioritise,” Mr Busisa Moyo president Confederation of Zimbabwe Industries (CZI) said.
He however said some of the products would still find it hard to penetrate external markets as there is intense competitive against established brands hence local manufacturers should consider manufacturing under license from established clothing manufacturers.
“We have challenges of quality and for us to compete we might as well revisit manufacturing-under-license model like we used to do. At some point we had Lee jeans being manufactured locally and such global brands can assist in boosting uptake,” he added.
With the country’s manufacturing sector operating under 34 percent capacity utilization from 57 percent in 2011 industry stakeholders also called for tax rebates on importation of raw materials in order to spur productivity.
Economist Professor Ashok Chakravarti also emphasised the importance of the manufacturing sector on the economy suggesting an even higher export incentive package of 10-15 percent to manufacturing exporters from the 5 percent export incentive scheme arguing that the extractive sector already has the majority of its produce reaching external markets hence could sustain itself.
“SI 64 alone is not enough although it’s not the best we could have done to facilitate growth of the local manufacturing sector. The manufacturing sector still needs a lot of support and if we could focus on revamping productivity through an increased 10 to 15 percent incentive it will be better. Manufacturing industries in dire need to recapitalize and retool,” he said.
Zimbabwe Investment Authority Chairman, Mr Nigel Chanakira was also sentimental about expanding the country’s export receipts proposing an incentive for incremental exports.
“Giving export incentives will definitely assist businesses and the country’s foreign earnings but I was with the opinion to further incentivise incremental exports so that companies don’t relax but endeavour to increase volumes of exports which have more economic benefits for the country in terms of employment creation as well,” he said.
It was also argued that government’s lack of clarity over the life span of the SI64 is now becoming a threat to local industry as it impacts on long term planning. They said while the incubation measure was needed to cushion industry it was also supposed to inform local producers on when they could expect the opening of competition from various import products again.
“We risk losing all that have been gained since the introduction of SI 64. Industry is unaware when the import restrictions will be lifted and it might come as a surprise when government suddenly decides otherwise and this could take us back to where we were in the first place.
“Government needs to set the time it assumes local industries will have gained footing and become competitive, there must be a national plan to assist industries to stabilise through policy which will be supported by set targets and time frames because the world is not stopping, economies are further stepping their competitive edge,” said Mr Kipson Gundani from the Zimbabwe Investment Authority.
SI64 has been however applauded as the country has witnessed several investment flows into the country as foreign companies that were tapping from the local market have since opened branches locally to avert import restrictions.
