Cheap imports choke local industry

via Cheap imports choke local industry – DailyNews Live by John Kachembere  19 MAY 2014

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

WORDPRESS: 8
  • comment-avatar

    Cheap imported goods are supporting the informal sector. The Government thought it could base the economy on the informal but no economy can work that way. There are no new jobs been created. No meaningful investment is coming in. Given these factors the Government is in a predicament of their own making. Protect the local products and kill the informal sector= more people without a means of survival.Allow the foreign products and the formal sector suffers.Is there a solution? Yes, forget about the indigenization in it’s current form.Leave the banks and foreign companies to operate without interference. Encourage foreign companies to come in and give them tax breaks for a limited time. Support your indigenous entrepreneurs with better tax incentives so they can be active in the economy. This will create jobs which in turn will put money into the coffers of the taxman. The companies that come in will assist in getting services back to normal. IN SHORT GET BACK WHAT THE NEIGHBORING COMPANIES HAVE TAKEN AWAY FROM US BECAUSE THE GOVERNMENT LET THEM.The knock on effect will be reduced crime rate. Return of people who left the country because of the economy. And many more benefits that were lost along the way.

    • comment-avatar
      roving ambassador. 7 years ago

      Its far much easier to manipulate a poor electorate with aid hand outs. Zanu is happy with the situation as it is. As long as they are the rich ones looking down on us and us calling them Chefs, they are quite happy. They have created this situation.
      Solution;;; Zanu must go.

    • comment-avatar
      Reader 7 years ago

      In other words Dr. let the government govern and the business people do business as in normal countries.
      there has never been a government in the world that has been able to operate a viable business because civil servants are not trained in business nor are they trained in people management, i am not saying they are stupid no way but they are usually just very handy with a stamp and that is all power.
      Business trained people see into the future and plan for that.

      lets put round pegs into round holes and so forth.

      • comment-avatar

        Reader you are absolutely correct. The problem is also that t Government Ministers and MPs are also involved so deeply in the business industry that the even award tenders to each other or businesses that they have interests in. This in turn encourages corruption and even if they think their intentions are good they end up struggling. It becomes like a motor mechanic trying to run a Doctors surgery and vice versa. They put people who will follow their instructions as to who to award tenders to in the Tender Boards. That being the case tenders are often given to people or companies that will service on a trial and error basis thus producing poor results.

  • comment-avatar
    Old Man River 7 years ago

    My possibly cynical impression is that local industry has been sheltered from the chilly winds of international competition since about nineteen-voetsak and simply doesn’t know – or isn’t willing to learn – how to cope. Must the MD of every SME really have a Mercedes? The ZAR/US$ rate has changed dramatically – do we see this reflected in lower supermarket prices? And don’t all the pundits bemoaning the “spectre of deflation” realise that the man in the street might actually think it’s a damn good thing amnd about time too? Let’s see cuts in obscene management salaries and decent pay for workers, for starters. Knee-jerk Zimbabwe reaction: oh dear, turnover is falling, we must increase the price!

    • comment-avatar

      I think it is more Local industry will not make the necessary investments to upgrade the factories. Understandable when they face the threat of indigenisation.

  • comment-avatar

    “The problem is that we think that anything from Europe, Dubai or China is of high quality compared to locally-made products…”

    By “we” I take it you mean our President and his lot. Show me one who is wearing even socks made in Zimbabwe? Check the tags on their suits. Watches? shoes?The President even gets his eyes checked by foreign doctors. Although he caps thousands of indegenous doctors year in year out, THEY ARE NOT GOOD ENOUGH. His daughter’s wedding was hosted by foreign companies. Their children learn in foreign institutions….

    need I go on?

    To them foreign is lekker!!!!

    Besides if you want to invest locally you need to verify how idegenous you are first otherwise you will receive a knock on the door when you least expect and be told to cede your company to someone so why bother!

    lets all go foreign (cynical)

  • comment-avatar

    Doctor you said it all. So the first step to fix this is Zanu pf must stop leaving in denial and stop rigging and just resign.