Buy Zimbabwe, a local lobby group, has implored Government to introduce tax breaks and incentives to local firms and manufacturers that source locally made raw materials to encourage the domestication of value chains.
Locally manufactured products now occupy more than 65 percent of domestic retail supermarket shelf space.
Capacity utilisation in the manufacturing sector grew to over 60 percent in 2021 from 47 percent a year earlier.
However, most raw materials are being procured outside the country.
The food manufacturing sector is importing over 70 percent of its raw materials, making it one of the biggest consumers of scarce foreign currency.
Buy Zimbabwe says incentivising companies that use local resources would help reduce foreign content in locally produced products and in the process save jobs and foreign currency.
In an interview with The Sunday Mail Business, Buy Zimbabwe chairperson Mr Munyaradzi Hwengwere said if procurement for key sectors such as mining and tobacco was done locally, this would have a significant impact on local value chains.
“What is needed is incentivising the local product. We need to make sure that the mining industry in the next five years has a minimum of 50 percent local content; right now its 30 percent or below, and yet we are trying to drive the sector towards US$12 billion, which means we somehow have little to benefit. It pretty much means we are generating commodities here and exporting that money to external markets,” he said.
“Also, tobacco is wealth, but we are only retaining 30 percent of value and so we have these distortions that despite the amount of money the country makes, it is losing out. We need to look deeper and say for every dollar, how much do we retain?”
He said authorities need to make sure local products are prioritised and more competitive.
Considering prioritising companies that source locally to access money from the Reserve Bank of Zimbabwe (RBZ)’s foreign currency auction is one such proposal that is being made by Buy Zimbabwe.
Countries such as South Africa reportedly give tax breaks to all companies that source locally.
“We need to do two things: We need to give similar tax breaks to reduce the cost to local products and incentives, including the access to foreign currency on the auction market for those that prioritise local products and raw materials,” added Mr Hwengwere.
University of Zimbabwe economics lecturer Professor Albert Makochekanwa said procuring locally was a move in the right direction as it provides a platform to stimulate local economic activity.
It also reduced pressure on foreign exchange reserves and other import-related bottlenecks.
Manufacturers of products in the tobacco sector, Prof Makochekanwa added, should enhance their production to match demand that comes during the cropping season.
“Minerals and tobacco are 90 percent of the total exports and the main source of our foreign currency. On tobacco, the opportunity is there to procure locally as farmers only need fertilisers and chemicals if we have local producers who can produce.
“As for mining, unfortunately it is a bit tricky because some of the inputs and machinery needed are not available, so sometimes they are forced to procure outside. Besides these two sectors, I would want to emphasise on the issue of quality in Zimbabwe across various sectors,” he said.
“. . . the idea why one buys outside is the price differential and quality, so local suppliers should price competitively to meet international standards and supply enough quantity to meet demand. If they can price competitively and produce good-quality products, there is no need to look beyond the borders.”
Finance and Economic Development Minister Professor Mthuli Ncube is on record saying the Government will continue to extend incentives to local industry to drive domestication of value chains while diversifying the export revenue basket.