The government’s decision to ditch trade protectionism measures on several imported goods could have devastating consequences to an already ailing local industry, captains of industry and economists have warned.
They said it is the greatest risk to Zimbabwe’s economic outlook.
There are growing fears that there will be massive company closures throwing thousands of workers onto the streets.
In fact, business leaders warned there will be drainage of forex out of the country. They also expect a 15% job cut by year-end and 30% drop in locally manufactured goods.
This week, the government abandoned trade protectionism policy, which was meant to protect local industry through trade barriers such as high tariffs on imports, among many. Trade protectionism is also meant to protect employment of workers. Because of the protectionism policy local industry was marginally recovering from economic meltdown
However, President Emmerson Mnangagwa’s administration, liberalised trade by allowing the free importation of 15 goods without government restrictions , interference or hindrance ,saying it was part of efforts to curb price hikes , which have been ravaging the economy.
The government was mistrusting businesses suspecting economic sabotage.
Recently, the government had a public spat with the business with the former accusing the industry of sabotaging with the latter accusing authorities of flouting the forex auction system and driving inflation through payment of road and agriculture contractors.
Captains of industry and multiple economists said the move by the government would cripple the already ailing industry.
Zimbabwe’s largest business lobby group, the Confederation of Zimbabwe Industries president, Kurai Matsheza, told Business Times that the government should reverse the trade liberalisation policy in order to achieve 2030 goals as it reverses the gains made by the industry so far.
“We have been battling with foreign currency shortages from the auction system. Industry capacity has also been affected due to limited availability of forex and high cost of inputs due to surging inflation among other challenges,” Matsheza said.
“Now, the new dimension of competition from imports will result in some of our companies not going to recover. In fact we are actually exporting jobs caused by that move.”
He added: “Some companies may be forced to retrench.
“If the government continues with this move, certainly capacity utilisation will also go down.”
He said industry was engaging the authorities to find common ground .
The Zimbabwe National Chamber of Commerce president, Tinashe Manzungu, concurred with Matsheza saying the new measures by Finance and Economic Development Minister Mthuli Ncube will do more harm to local industry than good.
“The allowing of imports into the country will result in the drop of capacity utilisation, reduction of locally produced goods by a huge margin, job losses and closure of companies. Currently, we boost of 65% of locally manufactured goods but if we continue on that path, by the end of this month , we will have a 50% share of local goods and imports and by end of the we will have 35% locally produced goods and 65% imports,” Manzungu said, while adding that, by December 15% job losses would have been recorded.
Economist Gift Mugano said the move will destroy the industry as the manufacturing sector was not competitive enough at the moment.
“… At a time when our industry is not competitive, over and above you remove duty on the same products that we manufacture, this will result in company closures as companies are not viable. Remember we are coming out of Covid-19, if anything they must protect our industry.”
Added Mugano: “We are just coming out of the suspension of lending where our companies were choking with debts and disruption of production.
On opening up or liberalisation of the market, the government wants to create availability of goods and cheaper goods on the back of the view that industry is sabotaging.
“This is a decision that was made out of anger and emotions which must be reversed. Not long ago we were bragging about having 65% to 70% of locally produced goods on the shelves, now we are reversing that.
“This means that we are creating unemployment,” he said.
He said the move is going to see drainage of forex out of this country, instead of authorities providing forex to the local companies, it is the local companies that are taking elusive forex to the south of Limpopo.
Mugano said allowing people to import their own goods is fine but when the authorities open this to huge retailers it becomes a huge problem as this will leave the local industry exposed.
Other analysts said Zimbabwe is a signatory to the African Continental Free Trade Area , which connects almost 1.3bn people across the continent.
They said Zimbabwe industries should compete with the other nations.
But Matsheza said: “There are many things that the country has to get right which include forex availability, power supply issues and currency issues. And for your own information these countries that some would want us to compete with have no problems like we are facing on a daily basis this side.
“Until the playing field is levelled we cannot compete. The other member states’ business operating environment is normal and they don’t grapple with the issues we are seized with daily.”