‘SI64 saved local industry’

Source: ‘SI64 saved local industry’ – DailyNews Live

Blessings Mashaya      7 July 2017

VICTORIA FALLS – Zimbabwe’s manufacturing industry was saved from total
collapse by the imports ban policy implemented by the government exactly a
year ago, a new study has shown.

The country, through Industry minister Mike Bimha introduced Statutory
Instrument 64 of 2016 (SI64) to help resuscitate local industry, but the
move sparked international debate after South Africa and Zambia threatened
to isolate Zimbabwe from regional trade.

However, a study conducted by economist Gift Mugano titled The Impact and
Shortfall of SI64 and Defining the Local Content Alternative: From SI64 to
Local Content revealed that following the implementation of the
legislation, local manufacturers have reported an increase in orders and

“In our 2016 state of the manufacturing sector survey, we recorded an
increase in capacity utilisation from 34,3 percent to 47,3 percent.

“Companies in the furniture sector have registered a 15 percent increase
in the demand of flush doors whilst those that manufacture mattresses and
bedding products have registered a 35 percent increase in the demand for
products,” he said.

A report prepared by Mugano on behalf of Buy Zimbabwe also revealed that
yeast industry, which was almost closed, was revitalised by the imports
ban and is now operating at 90 percent, while biscuit manufacturing sector
has gone up from 35 percent to around 75 percent.

The furniture sector improved capacity from 45 percent to 70 percent,
detergent industry has moved from around 30 percent to 60 percent and tyre
manufacturers have increased their capacity utilisation from 30 percent to
50 percent following the ban on second-hand tyres.

With the exclusion of CAPS Holdings, the pharmaceutical sector witnessed a
growth from 30 percent to around 60 percent.

Mugano also noted that some local companies have taken advantage of the
policy space and upgraded their machines and equipment.

“The import management measures have resulted in an increase in Foreign
Direct Investment mostly by companies that used to export products to
Zimbabwe coming to set up factories in Zimbabwe,” he said.

This was after Willowton Group of companies has proposed to build a $40
million factory in Mutare to produce cooking oil and soap, while Trade
Kings Zimbabwe is putting up a $15 million state-of-the-art detergent
plant in Harare.

“Varun Beverages is also building a $30 million Pepsi bottling plant in
Harare, and a number of South African companies have expressed interest in
investing in Zimbabwe,” he added.

The Zimbabwe Ezekiel Guti University Dean of Studies further indicated
that a combined increase in employment was realised from 2 663 to 3 423
workers due to SI64.

“The importation of low value raw materials as opposed to importing high
value finished goods has reduced the trade deficit by over 20 percent,”
Mugano said.

The survey, however, noted that SI64 protected few products – about 43
lines out of 10 000 products.

“The SI64 was not crafted from a value chain perspective, for example,
cooking oil sector still imports soya beans and crude oil in the region of
about $220 million per year – at the end of the day there is insignificant
local content,” read part of the report.

Mugano further indicated that production capacity, foreign exchange and
quality issues were not addressed under the imports ban measure.

“The instrument also flouted regional and multilateral trade agreements
and did not accommodate cross-border traders,” he said.