Cheap imports choke local industry

HARARE - Local industrialists are crying foul over the influx of cheap imported commodities into the Zimbabwean market.

Stephen Chikomba, a business development manager with Mallcrest Enterprises, said local products were being pushed out of the market because people prefer cheap, foreign goods imported from Asia.

“It’s difficult to penetrate European markets, which leaves the domestic market as the only option. Unfortunately, customers prefer imported goods to locally-made products,” he said.

However, some customers told the Daily News that they preferred imported goods because they were of better quality, a factor Chikomba disputes.

“The problem is that we think that anything from Europe, Dubai or China is of high quality compared to locally-made products. That’s why some people will buy dresses or shoes that will tear after a few weeks,” said Chikomba adding that “by consuming local goods, we support manufacturers as well as the economy.”

Chikomba however, noted that there was a need for government to protect the local manufacturing industry — still suffering from the effects of hyperinflation — from stiff competition until they are strong enough to compete internationally.

Last week, Industry minister Mike Bimha indicated that government had approved measures to support local producers by setting up a new Standards Regulatory Authority to regulate the quality of locally-produced as well as imported goods.

The measures come at a time when local manufacturers have lobbied government for protection through prohibitive import taxes and a regulatory framework that discourages importation of locally-available products.

“At the moment, we have a Standards Association of Zimbabwe (Saz) which sets standards but does not have powers to enforce,” Bimha said. “Last Tuesday, Cabinet approved the principles for a regulatory authority for imported products in terms of quality, price, health and safety.

“We want to support local industry by ensuring that they get imported raw materials at zero or reduced duty so that we assist to reduce production costs.”

Zimbabwe has removed a number of items from the Open General Import Licence regime, introducing import licences which can only be issued after satisfaction that such products are not locally-available in the right quantities and quality.

“That will make our local producers competitive on the international market,” Bimha said. “We apply duty to some imported products which we can produce locally as government and within the constraints of the agreements we have with other countries.

“But we do not want to over-protect our industry so that they sit on their laurels and produce low quality goods.”

Battery, oil, fats and textile manufacturers have been the hardest hit by cheap imports, with most of the products originating outside the Sadc Free Trade Area but attracting reduced duty when they should be subjected to prohibitive import rates.

Economic commentator Kumbirai Makwembere noted that there was need for a holistic approach to revive the manufacturing sector, which is currently saddled by lack of new capital and old equipment among other things.

“Unfortunately, the much talked of protectionist measures are not the way to go as they are short term in nature. Globalisation has enabled easy movement of goods and services across geographical boundaries,” he said.

Makwembere highlighted that such measures tend to protect inefficiencies within companies.

“These measures again force consumers to settle for sub-standard, expensive products that will be coming from these local companies. There has also been talk that labour costs locally are expensive,” he added.

The Confederation of Zimbabwe Industries (CZI) in its 2013 edition of the manufacturing sector survey proposed a raft of measures to government aimed at stimulating activity in the sector to grow capacity utilisation from the current 39,6 percent level to above 80 percent.

Some of them include establishment of Special Economic Zones{Sez} which would have tax incentives for sector players, provision of affordable funding and protectionist measures to shield companies from import competition.

Industry experts say a number of companies will fail to continue operations this year due to a cocktail of challenges which include high utility bills, high interest rates, lack of competitiveness and shortage of working capital, compounding the unemployment situation the country is currently grappling with.

A July 2013 National Social Security Authority (NSSA) Harare regional employer closures and registrations report for the period July 2011 to July 2013 shows 711 companies in Harare closed down, rendering 8 336 individuals jobless.

In addition, many companies are down sizing and have retrenched many employees.

Major companies that have retrenched include platinum miners Mimosa and Unki; Bindura Nickel Corporation, Spar supermarkets, Dairibord, Cairns, Olivine Industries and PG Industries.

According to the NSSA report, 330 companies in Harare in the retail and other business services category, closed while administration-related businesses also suffered a huge knock 59 companies closed, with the construction and baking industry losing 42 and 32 companies respectively.

It also indicated that 47 companies shut down in the farming sector while 20 players went under in the printing industry.

More than 35 companies have been placed under judicial management since 2010. Nearly 20 other companies were placed under liquidation last year. Ten were placed under judicial management in 2010 while eight companies faced a similar fate in 2011. In 2012, more than six companies were placed under judicial management.

Last year, Zimbabwe Stock Exchange listed Phoenix Consolidated voluntarily applied for judicial management, Steelnet was placed on final liquidation while Valley Technologies, which was not listed, was placed under provisional liquidation.

The list of companies that shut their doors include Karina Textiles, Cairns Foods, Pine Products, PG Safety Glass, G&D shoes, National Blankets, Belmont Leather, Textile Mills, Archer Clothing, Security Mills and Mutare Board and Paper Mills, which used to be the country’s only manufacturer of newsprint.

The list also includes Radiator and Tinning, Safety Africa, Lion Matches, Hunyani Mill and Baobab Industries.

The African Development Bank says most Zimbabwean firms were highly geared and lacked creditworthiness, leading to their failure to access credit lines,

The regional lender said while there are bank facilities created to bail out the distressed companies, most of them “generally fail the due diligence test”.

Comments (4)

FOR SALE HP TONER CARTRIDGES 05A, 10A, 12A, 13A, 15A, 24A, 35A, 36A, 49A, 51A, 53A, 55A, 61A, 64A, 70A, 78A, 80A, 85A, 90A, AND MANYMORE 0772 678 311

ORIGINAL - 19 May 2014

Local labour costs are not expensive as claimed but rather low levels of productivity. Antiquated production methods & old equipment also contribute negatively

saundy - 19 May 2014

Its high time the min of industry came up with policies to protect our local firms. imagine what revenue zim will get if companies like Dunlop are protected. not only will zimra smile but we have NASSA also and other organisations. These imports are let into the country because the top chefs own some of these companies. we need policies that benefit the country not indivuduals, we hear top officials talking of indigenizing banks what will it benefit industry.

mzondiwa - 20 May 2014

As much as we cry foul on cheap imports let us also revisit our pricing model as a nation. two examples of my experience come to mind,a reailer buys a 4 plate stove at Belmont for $415 and resells it along five street 2 km away for $550 while a hardware merchant buys a 3,6mx 0,4mm IBR zinc for $15 at Belmont again and sells it at Railway avenue for $29. Those who do not know Belmont will simply go and buy in South Africa and at some shop that has imported these goods from South Africa.

junior - 21 May 2014

Post a comment

Readers are kindly requested to refrain from using abusive, vulgar, racist, tribalistic, sexist, discriminatory and hurtful language when posting their comments on the Daily News website.
Those who transgress this civilised etiquette will be barred from contributing to our online discussions.
- Editor

Your email address will not be shared.