1 January 2013

Zimbabwe: 'Protection Not the Answer'

In an economy dogged by serious liquidity constraints, access to affordable finance remains the biggest headache which Zimbabwean industries carry over into 2013 as they will remain exposed to cheap imports while they struggle to retool.

The failure to access cheap capital means that many companies will continue to limp while competition intensifies, resulting in growing cries for protection.

Protection though, which in the 2013 National Budget was extended to the poultry industry, is not always the answer to woes facing manufacturers.

As experience has shown in most countries, protection breeds laxity on the part of industry and is ultimately not the best prescription.

Finance Minister Tendai Biti aptly summed it up when he said: "We have tried to protect our industry but protection does not work.

"We cannot protect the industry forever, the answer is to produce and produce quality goods."

Delta Beverages is probably one of the best examples of local companies that have managed to withstand fierce market competition.

Even Minister Biti has testified that the blue-chip firm has not knocked on his doors as have the majority of companies seeking Government intervention against the invasion of foreign products.

The beverages manufacturer has held its fort, investing over US$250 million since 2009 opening new bottling plants and a carbon dioxide processing plant in its bid to protect and possibly increase its market share.

This is probably what most local manufacturing companies should have done in the past few years of economic stabilisation in order to withstand aggressive competition from cheap imports.

On its part, the Government has strived to assist through the Zimbabwe Economic Trade Revival Facility and the Distressed Industries and Marginalised Areas Fund which together have availed US$220 million to local manufacturers.

While this was a drop in the ocean compared to the needs of industry estimated at over US$2 billion, the drawdown of the facilities does not mirror the desperate situation in Zimbabwe's manufacturing industry.

It is imperative that industry and representative bodies such as the Confederation of Zimbabwe Industries and the Zimbabwe National Chamber of Commerce work out deals with the Bankers' Association of Zimbabwe to avail cheap funding.

Finding ways of unlocking offshore finances and other alternatives will also provide possible avenues for industry to boost its capacity and be able to go head to head on the market with imported products.

At the current rate, where imports stand at US$7 billion while exports are almost half at US$3,42 billion, Zimbabwe continues to export jobs and all its recovery potential to other countries especially South Africa, which is benefiting from the crisis in the local manufacturing sector.

In a globalised world in which it is becoming increasingly difficult for the Government to shield the economy, local industries do not have an option besides competing.

The Government, industry and the public at large are obliged to "Buy Zimbabwe" to promote growth in the local industry and get it back into the race.

Cheap imports are here to stay and the only alternative that Zimbabwe, one of the few economies in Southern Africa with a diversified manufacturing base, has is to out compete foreign products to survive.

Companies should take a leaf from Delta Beverages whose products are competing with foreign brands like Amstel, Heineken, a whole group of ciders such as Redds, Smirnoff, most recently the more potent and illegal Zedd, Double Punch and many other illicit brews.

This is evidence that if the local manufacturers have access to affordable long-term finance to re-invest in their businesses, they can upgrade their technology and be able to go head to head with foreign products. -- New Ziana.

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