Forex shortages, cheap imports weigh down companies

Source: Forex shortages, cheap imports weigh down companies – NewsDay Zimbabwe September 13, 2017

ALL economic sectors in Zimbabwe are facing serious challenges, chief among them the lack of access to foreign currency and influx of cheap imports, the Confederation of Zimbabwe Industries (CZI) has revealed.

BY MTHANDAZO NYONI

In its update, CZI revealed that all sectors in the economy were struggling to make ends meet. Below is the update, sector by sector.

Personal care sector
The sector is facing two major challenges which include lack of access to foreign currency and issuance of import permits by government for the importation of some of the products under Statutory Instrument (SI) 64 which is undermining local industry. Some companies in the sector have not received any foreign currency allocation in the past weeks. The sector representatives have since written to the Reserve Bank of Zimbabwe governor John Mangudya to seek his intervention on the matter. The sector reported that lack of allocation of foreign currency has affected the flow of raw materials required to keep the industry running.

Some of the products that were restricted by SI 64 of 2017 are still seen flooding the market thereby affecting the local industry. While some of these products are coming through as a result of corruption and leaky borders, some are reported to have been issued with import permits.

The sector reports that since SI 64, there has been no improvement on a selected few products as a result of such products still being imported. The sector has written to the ministry of Industry and Commerce, but they are still waiting for a positive response.

For such products, the government through the relevant ministry carried out an exercise to evaluate the capacity of local companies and it was proved that there is adequate capacity but the importation of such products are still going on.

The sector is calling upon the Ministry of Industry and Commerce, as the main drivers of SI 64 to address this challenge.

There are some companies being given licences to continue importing some of the concerned products under the pretext that they are setting up plants locally. The sector alleges that some such companies have presented fake plans to the ministry to set up factories so that they can be allowed to continue to import.

Retail sector
The sector at the moment is depressed due to low demand and cash shortages. Disposable income for consumers continues to shrink due to loss of employment. Access to money is another challenge being faced by the sector and there is a need to implore relevant authorities to find a real solution to the problem.

Stock feeds industry
The sector produces 522 metric tonnes of feed per year, with the bulk of it being chicken feed. The high maize yield as a result of good rains is one of the main positives for the sector this year. Soya meal is one key components for the stock feed sector. However, local soya bean production was reported to be around at around 20 000 tonnes and is only sufficient for two months of supply. As a result the sector is to be applying for import license so as to cover the soya deficit. The sector also reported to be affected by foreign currency shortages.

Plastics sector
Similar to other sectors; foreign currency shortages remain a challenge to this sector as well. This sector comprises of mostly small companies that cannot access foreign currency from banks. This is leading them to rely on third parties who are expensive as most of them charge 35% premium on foreign currency, thereby making the plastic industry even more uncompetitive.

The sector association is trying to work with a suppliers to go and apply for forex for common raw material under one umbrella with the involvement of CZI. The sector is not involved in any significant exports as pricing is quite high and unable to compete even after factoring in 5% export incentives.

The other challenge is the government levy on power paraffin which moved from 60c to 120c and yet it is a key ingredient for some in the sector. They also have a challenge on duty affecting flow of raw materials and pricing.

The sector relies on raw material from America, Asia and Europe. However, these raw materials are levied high duty, hence making the sector to alternatively import duty-free finished products from South Africa.

The sector recommended the absolute removal of import duty particularly on their main raw materials, thus Polyvinyl Chloride and General Purpose Styrene. This will play a part in reviving the local plastic manufacturers thereby seizing South Africa’s monopoly as it will make the local market competitive.

Motor industry
Foreign currency remains a challenge for the sector. Importation of spare parts has been a challenge and the absence of the required resources has led to an increase in the supply of spare parts that are not genuine.

The sector was also affected by the pressure of cheaper, low quality tyres on the market. On the fuel supply side, the industry reported that fuel that has been declared as goods-in-transit is being fraudulently offloaded and sold in Zimbabwe, thereby evading the taxes and creating an unfair playing field. The sector believes that fuel marking, — which the Zimbabwe Energy Regulatory Authority is set to introduce — can be the only solution to the fuel issues.

Fresh produce sector
Fresh produce sector relies on local farmers for apples and onions. They are battling to get import licences. The Agricultural Marketing Authority (AMA) refused to let the sector import apples and this has been causing a lot of smuggling. At the moment most onions are being imported because farmers do not have the required machinery that is used for drying the onions. Cash shortages have worked to their advantage as people that used to buy from Mbare Musika are now purchasing from formal companies as there are no point-of-sale machines at Mbare.

This sector relies on local farmers for 80% of local produce. They are having challenges in accessing import permits for apples which are not adequately produced locally. Locally, Zimbabwe can only supply 4 000 tonnes, while demand is around 60 00 tonnes. The sector reported that AMA had refused to support the issuance of import permits on apples and this has seen an escalation in the level of smuggling to satisfy the market.

The other challenges are on supply of onions. Onions are seasonal in Zimbabwe hence during certain times, they have to be imported from Cape Town. However, no import permits were being issued and, hence, smuggling was rampant thereby prejudging government and local formal players. Shortage of money has however, seen formal business performing better as people that used to buy from vegetables form informal markets were coming to formal companies where they can make payment through point of sales.

Construction sector
The industry is currently working on the Construction Contractors Bill, which has been recently handed to the parent ministry. The Bill has been in discussion for more than 20 years now, which is negatively affecting the construction industry in the country. The Bill seeks to bring various positive changes to the construction sector.

It will ensure the registration of construction companies as well as drafting laws and regulations to monitor and regulate registered construction companies and construction projects carried out nationwide. Several construction works have not been completed while others are completed below expected standard.

However, the Bill will introduce committees to monitor all construction projects ensuring the compliance of construction companies to the standards set.

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