Zimbabwe to protect local industry
ZIMBABWE’S Finance Minister, Patrick Chinamasa, says government will protect critical industrial sectors from cheap imports, as the country struggles to stem de-industrialisation, which has undermined the economy and worsened a liquidity crunch.
Speaking at a conference for on procurement organised by Buy Zimbabwe a day after Tata sought government protection in London after running into problems with imports, Chinamasa said industries with the potential to expand into the region would be protected from foreign competition.
He, however, said local companies had to demonstrate their capacity to produce fairly priced, high quality goods before approaching government for protection.
“We have said we are under sanctions; we need to protect the local industry, those which show capacity to expand to other countries to avoid de-industrialisation,” Chinamasa told the conference on Thursday last week.
“I will go on to protect local capacity to produce goods (but) convince me that you can produce a product that is worth protecting, then I give you protection,” he said.
On government business, he said public procurement must be transparent and efficient to avoid prejudice to the State.
Chinamasa said government, the biggest consumer for local products, would make sure that responsible companies would be awarded tenders.
The Finance Minister’s position reiterates the view expressed by Industry and Commerce Minister, Mike Bimha, last year after South Africans raised concern over increasingly protectionist policies by Zimbabwe.
South Africa, Zimbabwe’s major trading partner, lodged a formal complaint to government over import restrictions.
Zimbabwe has imposed duties on South African imports to protect local producers, violating trade agreements between the two countries.
There has been an upsurge of imports from South Africa since the rand started losing traction against the United States dollar last year.
The depreciation of the rand has made the landed price of South African products lower than those produced in Zimbabwe, and consumers have switched to imports, triggering an outcry from domestic manufacturers.
The complaint by South Africa, presented to Bimha during a conference of Southern African Development Community (SADC) Ministers of Trade in Botswana to review the region’s industrialisation policy, followed a raft of tax measures that have cut competition by South African products on the local market.
In September 2014, MAQ, the South African producer of a washing powder that was popular in Zimbabwe, ceased exports to Harare after government introduced a 40 percent surtax without prior notice.
The review translated into a 30 percentage points increase surtax from the previous charge of 10 percent.
The effect of the increase was to raise the price of South African washing powder brands in Zimbabwe, making them uncompetitive against domestic products, and possibly violating the SADC free trade agreement.
The SADC Protocol on Trade has established a free trade area for the 15 nation bloc, whose membership includes South Africa and Zimbabwe.
Bimha told a retailers conference in Harare recently that the South Africa trade minister had personally expressed his reservations against Zimbabwe’s protectionist measures during the meeting in Botswana.
He said he had defended the hikes.
“South Africa has complained that we have put in place protectionist policies,” he said.
“Our argument with South Africa was that our industry has gone through a bad patch and we want them to grow,” he added.
On companies that will be given tenders to supply government, Chinamasa said last week that these were companies with a good track record of producing financial accounts, have been paying the National Social Security Authority dues and with a clean bill of health from the Zimbabwe Revenue Authority.
He, however, said government had little say in projects funded by foreign banks.
Offshore loans extended mostly by Far Eastern economic giants come with strings attached, which Zimbabwe has had to accept even if it felt arm-twisted.
“Local procurement has limitations because most of our infrastructure projects are funded by foreign banks,” Chinamasa said.
“They insist that goods must be sourced from their countries, which tie us to sourcing equipment from, say, China and India. They insist that we will not give you a loan unless the project is implemented by a contractor in those countries. We have generally engaged the contractors to sub contract local suppliers,” said Chinamasa.
Financial lifelines from India and China have seen Zimbabwe carrying out road projects and power plant refurbishments.
Follow us on Twitter on @FingazLive and on Facebook – The Financial Gazette