The Sunday News
Dr Bongani Ngwenya
READING an article that came out during the week titled, “Business leaders conflicted over imports ban” reminded me of the article I wrote for this paper in November 2016, titled, “Is Statutory Instrument 64 of 2016 working?”
The statutory instrument has since been consolidated to SI 22 from last year.
If I may refresh my readers’ memories, I posed some rhetoric questions in that article. Is Statutory Instrument 64 of 2016 working or achieving its intended objective?
Are we seeing our local manufacturing industry gaining that capacity to meet domestic supply of goods? Are we seeing an improvement in the balance of trade?
I reiterated by then that maybe it was still premature to want to assess the impact of the SI, which had just been put into effect.
However, it was clear that some individual manufacturing companies were already being positively impacted by the introduction of the import restriction measure.
My argument was that the marginal positive impact of the import restriction measure on the capacity utilisation improvement of some individual companies could not be attributed to the country’s industry as a whole and the claim that heavy and unsustainable import bill was and which still is, a result of the influx of cheap goods from South Africa and the rest of the world, could not have been true by then and it is not true even today.
I attribute and still attribute this structural problem to lack of industrial domestic production capacity and competitiveness to meet local demand of goods.
As a result, to fill the gap, there would always be an influx of cheaper imports until a certain level of import substitution has been reached in the domestic market and economy.
It is when that level of import substitution has been reached that protectionism or import restriction can achieve the intended purpose, the intended purpose of increasing domestic competitiveness because of the effect of tariffs that make the domestic products more price competitive relative to the foreign products in the home market.
This gives rise to a process of import substitution in domestic production and consumption.
Thus, domestic production would be expected to be at levels that would be able to meet domestic consumption demand.
In light of the developments in the economy with the resurfacing of commodity shortages from the supermarket shelves, and some of these commodities being available at exorbitant prices, in my opinion, justifies the loud call by the business leaders for the suspension of the import restriction measures in the form of SI 22 to counter the growing shortages of commodities in the market.
It is quite interesting to note the shift in line of thinking by some of these industrialists and to me that is a positive development and vindication of some of us, who have always thought that the entrenched industrial capacity utilisation challenge in the Zimbabwean economy cannot be solved by imposition of import restrictions.
The country’s industry requires massive capital injection and bailout to finance the required industry resuscitation that would push the industrial capacity levels substantially enough to meet the domestic demand for goods.
In the interim, I strongly believe that the calls for the suspension of the SI 22 are justified as an immediate measure to counter the growing shortages of commodities.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive Mr Christopher Mugaga suggested during the week that the Government revokes the SI 22 that prevents the importation of certain goods into the country in order to reduce pressure on locally manufactured goods, which are now in short supply, while those available are selling at exorbitant prices.
From an economics point of view, such developments are bound to take place in free competitive markets as I alluded in my last instalment.
Quoting the ZNCC chief executive officer, “As ZNCC, we are calling for the liberalisation of current account because in the short to medium term it might have an impact to dampen the general price of goods and services. We are saying it is not wise to block the importation of goods when there is no forex to equip our local industries but, we can open up to players with forex in the informal market to import these goods. So let us suspend it for the next 18 months,” he said.
The ZNCC chief executive officer’s thoughts were echoed by an official with Zimbabwe Cross-Border Traders Association (ZCBTA), Mr Augustine Tawanda, who reiterated that the move would stop the disappearance of commodities from shelves.
He said: “ZCBTA urges Government to urgently suspend Statutory Instrument 22 and relax other duties and taxes governing the importation of commodities in order to make it easier for traders and other travellers to import groceries and the bulk of the much needed basic commodities.
“This will go a long way in bringing in competition, improving price stability which will ultimately force the situation to transform.”
The article I read listed the following products as falling among the currently regulated imports that is, baked beans and potato crisps, cereals, mayonnaise, salad cream, peanut butter, jams, mahewu, canned fruits and vegetables, pizza base, yoghurts, flavoured milks, dairy juice blends, ice creams, cultured milk and cheese.
The argument is, if the economic situation and developments are making it difficult for the local industry to produce these commodities, it makes no economic sense to continue regulating these imports.
I would reiterate what I said in my article in 2016. Let us resuscitate the local industry first.
Let us have a stakeholders’ realigned focus on industrial needs and build a strong and vibrant industrial base once again.
Then we can impose as much local industry protection measures as we can provided our regional and other trading partners do not retaliate.
In conclusion, the prevailing economic developments in the country could be vindicating some opinions that maybe there was never anything yet to protect in the form of local industry by imposition of import measures.
Are there any really much gains that could be reversed by temporary suspension of the SI 22, for the good and sack of the consumers?
Dr Bongani Ngwenya is currently based at UKZN as a Postdoctoral Research Fellow and can be contacted at [email protected]
