Zimbabwe: Govt Seeks to Boost Manufacturing Sector

8 August 2019

Government has put in place a host of measures that can stimulate the local manufacturing sector.

Industry competitiveness in the country has been generally undermined by reliance on ageing and often obsolete equipment with frequent interruptions to production and high maintenance costs.

And the influx of imports and working capital constraints are other major factors eroding competitiveness, as capacity utilisation has largely remained below average.

However, announcing the Mid Term Fiscal Policy Review last week on Thursday, Finance and Economic Development Minister Mthuli, said going forward, the authorities will "focus on improving competitiveness."

"During the last half of 2019 and beyond, production and productivity enhancement in all sectors will receive due attention to complete the transformative framework of the TSP (Transitional Stabilisation Programme).

"This will entail deepened focus on improving competitiveness, investment mobilisation underpinned by the current re-engagement efforts that are aimed at resolving the external debt overhang and improving relations with other nations," he said.

One of the key intervention pronounced by the Finance Minister is the introduction of dry ports within the country, a development that will have the double positives of making Zimbabwe a regional transitional hub; but more importantly for the local productive sectors, dry ports will act to reduce the cost of essential raw material imports.

"Government is also considering establishment of dry ports within Zimbabwe borders. These ports maximise Zimbabwe's potential as a transit regional economy and also facilitate efficient and cost effective supply of essential imports into the economy," he said.

The Government has also moved to introduce a customs duty on motor vehicle filters so as to encourage local production of these units.

"The country's motor vehicle population has increased over the past couple of years. This presents an opportunity for companies to localise the manufacture of spare parts, thereby enhancing linkages within the motor industry value chain," said Minister Ncube.

Experts say it is the role of the Government to put in place policies and regulations that focus on the effective operation of the manufacturing industry because it is the wealth-generating sector of the economy.

They add that it is important to appreciate that the effective management of such an important sector as manufacturing begins with the implementation of broad-based economic policies.

And the increase in the electricity tariff is one such measure, although the tariff has remained below what the Zimbabwe Electricity Supply Authority (Zesa) had requested, it's a step in the right direction insofar as a consistent supply of electricity is critical for the operations of industry.

Zesa is on record indicating that it was seeking to convert its old 9,83 cent per kilowatt hour to RTGS dollars at the interbank rate. This means that customers would pay at the interbank rate equivalent of the 9,83 US cents per kilowatt hour (kWh) tariff.

But the proposed new tariff rate for domestic customers and agricultural customers translates to only 3 US c per KHW, while that for non-exporting businesses translates to 5 US c per KWH.

Some of these initiatives come in the light of successful measures that were put in place for the local manufacturing sector, for instance, the Electrical Manufacturers Rebate, which was introduced in 1999 that provides for duty free importation of Completely Knocked Down parts by approved electrical manufacturers.

In view of the above it has been acknowledged that some local manufacturers have made inroads into the manufacture of electrical appliances, as well as solar products, in line with the Government policy thrust for use of alternative sources of energy.

Confederation of Zimbabwe Industries (CZI) president Henry Ruzvidzo says limited Government interventions to improve the country's doing business environment for the productive sector is required.

"There is no perfectly free market, a policy environment that encourages the free operation of the market as far as possible has been shown to be very effective," he said.

"The focus ought to be on creating an efficient low cost environment for businesses.

"Zimbabwe has its special historical challenges, which require some incubation policies to allow time for companies to catch up with technology and to re-establish export markets."

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