Financial Gazette (Harare)
Munyaradzi Mugowo
27 June 2009
Harare — THE government may extend the statutory instrument providing for duty-free importation of fast moving consumer goods, but grant targeted tariff protection to a few industries on its Common Market for East and Southern Africa (COMESA) and the Southern African Development Community (SADC) sensitive lists, it has emerged.
Introduced on May 1 last year for an initial period of six months, the statutory instrument was extended in December to June 30 this year to counteract shortages resulting from a price war that erupted between the government and private sector in May 2007.
"The era of tariff protection is over," a source within the Ministry of Finance said. "The regional thrust is to eliminate all tariff barriers and promote free trade in southern Africa. We have to meet our obligations. In fact, we cannot continue to offer tariff protection to our producers any more. So, it is time that our companies here build their competitiveness on factors other than tariffs."
The Confederation of Zimbabwe Industries (CZI) has set up a taskforce chaired by its Trade and Investment Sub-committee to engage the government over the issue of tariff protection and accompanying measures such as import licenses.
Though essential for stimulating capacity utilisation in key sectors of the economy, the tariff protection measures tend to undermine Zimbabwe's commitments under the SADC free trade area (FTA) to zero-rate all goods produced in the 14-member regional economic community by August next year.
In the bloc's asymmetrical tariff-phase-down schedules, Zimbabwe is one of the five countries that are obliged to comply with the rules by next year to facilitate the FTA's transition to a customs union the same year.
Already, 85 percent of goods deemed duly originating in SADC must enter the local market duty-free with the remainder due for similar preferential treatment in about 13 months, while those produced in COMESA member states must by now be enjoying free circulation in the country.
The statutory instrument, which covers goods such as cooking oil, flour, rice, maize flour, soap and tooth paste, has been blamed for triggering an influx of low-cost imports from South Africa, thus undermining the recovery of local producers.
"By relying on imports, we are damaging our capacity to recover key sectors of our economy on our own," Kumbirai Katsande, the president of the CZI and chairman of the Business Council of Zimbabwe said. "We are putting ourselves at the risk of reducing ourselves to a trading nation and a market for other producers. We have engaged the government to look into our concerns and are still awaiting the feedback."
The list of factors affecting local private sector competitiveness includes undercapitalization, skills loss, power and water shortages, high utility costs and suppressed aggregate domestic demand.
Concern has, however, grown that at current low plant capacity utilisation - which increases average costs of production - local producers may not be able to successfully substitute imports at the same level of prices or meet demand.
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