Love for imports our big downfall
Our problems are rooted in poor competitiveness, low levels of local content in most of products, low productivity, love for imports and Government’s failure to reign its expenditure.
SO ZIMBABWEANS have been embroiled in a major panic, which has worsened our already fragile economic situation while bringing back dreaded fuel queues and triggering a profiteering mentality by a greedy business elite. Sadly, instead of directing the conversation where it should rightly be pointed to, all swords have been aimed at the Reserve Bank Governor, Dr John Mangudya, whose well intentioned export incentive scheme and bond notes are now cited as the cause of where we are.
Since the introduction of the multi-currency regime, which frankly is a misnomer, given the fact that the dominant currency has been and still is the United States Dollar, we have persistent trade deficits.
At its formation in March of 2010, Buy Zimbabwe made an obvious warning.
Then as in now, the message was that if we continued with our love of imports, at some point, our system would crush.
Over the past nine years our cumulative import deficit is estimated to be in the region of USD27 billion.
This is simply a staggering figure for a country whose Gross Domestic Product is said to be around USD14 billion.
The import bill is also about the entire national income of Zambia whose average economic growth has been 6 percent over the past 10 years.
Put differently, Zimbabwe’s target for gold deliveries in 2017 is 27 tonnes which would amount to a record breaking income of USD1 billion in foreign receipts.
As impressive as this is, the sum is lower by a whooping 27 times, the amount of hard currency we have thrown outside our borders to bring in some cases, water and ‘fat cooks’.
Is it not tragic that in just under 10 years we have ‘donated’ twice our gross domestic product to foreign nations whose economies are performing better than our own.
Our problem as a country is thus simple. It all boils down to the love of imports and the failure to recognise that the United States Dollar, never mind how we view it locally, is an external currency.
Without exports, foreign direct investments, diaspora remittances and external loans, there is no way the USD can suddenly appear under our pillows. This should be straight forward.
In 2016 the Ministry of Industry and Commerce enacted SI 64 to manage the seemingly unquenchable thirst for imports.
Despite protestations that visited this move, it is now manifestly clear that without this intervention our industry would be on the verge of total collapse. Instead a number of companies have been brought to life, employment has been retained and some new companies have emerged.
The just ended Harare Agricultural show broke records for the exuberance of local companies who were all too proud to showcase their products.
The same companies were loud in announcing their intention to break into the export market and enhance competitiveness.
That is good news. Nevertheless the script is marred by a lot of bad news.
For the significant number of companies that claim to produce in Zimbabwe, fact is, most are excelling at packaging foreign made products. Instead of taking advantage of the bumper harvest in cotton, maize and groundnuts to produce cooking oil and related products, the queue at the Reserve Bank for imported oil that comes as raw material keeps growing.
Herein lies the dangers of protectionism. If not well structured it conceals poor performance while undermining long term sustainability and competitiveness.
At best, protectionist measures must be a short term stimulant to an ailing or infant industry.
While the Ministry of Industry and Commerce has called on the private sector to lead in the formulation of a local content policy, the excitement from intended beneficiaries appears very muted.
Some analysts have even postulated that the Ministry of Industry and Commerce should have known better than to arm proponents of a scheme that benefits a privileged business minority at the expense of the mass of consumers.
Our business associations, especially the Confederation of Zimbabwe Industries, must be warned that this thinking is gaining traction and they are best advised to take proactive measures to avoid long term damage.
The danger for our manufacturing sector is that by failing to lead and showing a keenness to transform from a protectionist era to developmental and broad based local content agenda, gains accrued so far may be lost forever.
It is not a secret that when gongs of elections are ringing, alliances always shift to the consumer.
What a sad day it would be for Zimbabwe that instead of recovering, we suddenly find ourselves back to square one.
For any fair minded analyst the signs of the times are ominous for the local industry.
Any attempt to point fingers at the Reserve Bank of Zimbabwe and rationalise the market failure as simply an inability by the central bank to allocate foreign currency may backfire in a very big way.
Our problems are rooted in poor competitiveness, low levels of local content in most of products, low productivity, love for imports and Government’s failure to reign its expenditure.
The current cash challenges are merely symptoms of a bigger problem.
It about high time Government and business had a serious conversation over their responsibilities.
The Reserve Bank may also need to be more proactive in the resolution of this issue and participating in shaping a national agenda.
Being on the sidelines of the local content discussion is clearly not helping in the quest to increase foreign currency availability.