Objectives of SI 122 still valid — Dongo
Following recent price hikes which have led to panic-buying and hoarding, Government suspended Statutory Instrument 122 of 2017 (SI 122), to protect consumers and give manufacturers time to restock for the festive season and beyond. Here, Herald Senior Writer Elliot Ziwira (EZ) speaks to Zimbabwe National Chamber of Commerce (ZNCC) vice president for Mashonaland Region, Archie Dongo (AD) on the effect of the lifting of imports ban on business and product availability.
EZ: As ZNCC, how do you react to the suspension of SI 122-2017, considering that some of your members had the bulk of their product lines in local stock? AD: SI 122 of 2017, which replaced SI 64 of 2016, was put in place with the objective of ring-fencing the local market for recovering domestic industries on the premise that local manufacturers were able to fully supply the local market, but were unable to compete with cheaper, sometimes subsidised imports. It was a temporary, emergency measure meant to increase capacity utilisation, which at the time was below 30 percent and dropping. It was meant to result in cost reduction and improvement in competitiveness through economies of scale; creation of additional jobs locally; increased uptake of local inputs, and reduction of the country’s gap between imports and exports. It was also meant to create space for the Government and business to come up with more comprehensive measures to encourage industrial development. The first key consideration for inclusion on the list was the ability for producers to satisfy local demand, thus it follows that when this was no longer the case due to changed circumstances, a decision had to be made to salvage the situation in the interest of consumers, particularly in the short term. We understand the concern in the short-term. But going forward, we still believe that the objectives behind the promulgation of SI 122 are still valid and noble, thus this suspension should enable us to take a step back, and derive lessons from the two years that industry has been protected through the instrument; and use those lessons to design an improved approach to industrial development, and job creation in contribution to our quest to be become an upper middle income economy by 2030. The economy still needs to generate more local jobs, improve in competitiveness and reverse the balance of payments deficit. What we perhaps need to refine is the approach, and as business, we will continue to work with Government to achieve this. EZ: Since the announcement was made, has there been any positive shift in the supply chain? AD: Influx of imports on the major lines, whose supply has been constrained, is yet to be become significant, but it is still too early to say. EZ: Prior to the suspension, there was an outcry in the public space that business was up to fleece citizens. In your view what should be done to achieve win-win outcomes? AD: The public rightly requires consistent product availability at the right price and quality. The outcry was a result of inflationary pressures that have been building up in the economy due to currency distortions, and the effects of the budget deficit, which Finance and Economic Development Minister Professor Mthuli Ncube is now tackling. We don’t believe business would deliberately set out to fleece consumers. Rather, measures taken by businesses to ensure survival and continued viability in a difficult economy, will tend to affect the public. On the other hand continued existence of local businesses is to the advantage of the public through protection of jobs and income generation, so it’s perhaps a catch-22 situation. To ensure a win-win outcome it is important to have a conducive environment for business characterised by stability and certainty, for instance. EZ: In the long term, what should be done to ensure that the local market is self-sustaining, instead of relying on protectionist policies? AD: SI 122 was arguably in violation of international trade statutes and had generated tension with neighbours, so going forward, there is need to have a more acceptable, more comprehensive, and more targeted approaches to encourage industrialisation; taking into account lessons learnt from the past two to three years. One key ingredient to that is the development of Local Content Regulations, which the business sector and Government have been working on for some time now. Zimbabwe also has to consider integrating into regional value chains as part of the wider African industrialisation agenda, which is anchored on increased and less restricted intra-Africa trade. You will note that even the most developed economies in the world have some level of protection for selected industries, as shown by the recent trade spat between the United States of America and China with regards to iron and steel products, and the farming subsidies that are prevalent in Europe under its Common Agricultural Policy. EZ: The opening up of borders through the suspension of SI 122 will lead to an influx of foreign products onto the market, how best can local stockists, producers and retailers respond to the possible glut? AD: The opening up is meant to plug the supply gap that has resulted from excess demand influenced by money supply growth and uncertainty, while according local industry time to recover from recent market shocks. Local businesses must, therefore, continue to work together to defend as much of their shelf space as possible. They should ensure market preference by staying engaged with each other, and cooperate with the objective of achieving growth through generating customer satisfaction as a chain. The opening up is an opportunity to test local business’ progress in achieving preference and loyalty
for their brands. It is also imperative for business to stay engaged with Government, through organisations such as ZNCC, in order to jointly address their itchy points such as forex shortages, export promotion, currency distortions, and money supply growth. Business must contribute to the development of the pending Industrial Development Policy, and the implementation of the Local Content Policy recently adopted by Cabinet as these have the potential to be game changers, if all stakeholders put their heads together for the betterment of our economy. Dialogue is key EZ: In your opinion, which model works better, shielding local products through import legislation or opening up the space? and Why? AD: I would suggest a combination of the two according to appropriateness. Opening up contributes to innovation, consumer choice and competitiveness, while protection can be useful in incubating underdeveloped or recovering sectors. Some sectors can be targeted for temporary protection. For instance, in our endeavours to integrate agriculture into the industrial value chain through production of raw materials for agro-processing and eventually exports, it may be necessary to discourage the importation of unprocessed produce that we have potential to grow for ourselves, such as groundnuts and soya beans. It would be ideal, however, to quickly become competitive in any such protected sectors to enable opening up so that trade, including exports, can flourish unhindered. In a number of instances it is difficult to come up with a successful export product without first satisfying your local market. Our economy will only develop in a sustainable manner if all stakeholders work together and share the pain of recovery and development in pursuit of a common objective. A silo mentality will result in tears. It is imperative that we work for the good of each other, and the generations that will follow us. Correction and growth will induce pain, but in the end the results will be worth it. The business sector is committed to contributing to Zimbabwe’s development through strengthening the private sector as a consequence of satisfying all stakeholders, and ZNCC will be a key player in this endeavour.