eBusiness Weekly
Government will continue to avail various protective measures to the local industry, albeit noting that it has contravened some of its obligations to regional trading blocs. Finance and Economic Planning Minister Patrick Chinamasa highlighted in the 2018 national budget that as a signatory to the SADC Trade Protocol, Zimbabwe committed itself to offering preferential tariff rates to other SADC Member States and also eliminate import restrictions.
“Government has, however, been implementing a tariff regime that balances the sustainability of industry, balance of payments, regional and multilateral trade obligations, thereby partially contravening the Free Trade Area obligations”, noted Chinamasa.
While he argues that the interventions have enabled resuscitation of some industries, enhanced capacity utilisation and competitiveness of locally produced goods, Chinamasa hinted that “in view of the progress realised, the support availed to the local industry will be reviewed”.
The 2017 Budget has however extended protection for a number of sectors in the manufacturing sector, with a view to consolidate gains while growing the local industry. According to Minister Chinamasa, the textile industry continues to face competition, due to the influx of dumped cheap imported fabrics. He proposed to increase customs duty on cotton fabric from the current 10 percent to 30 percent plus $2.50 per kilogram with effect from 1 January 2018. On top of that, a Specification Declaration Form will now be used in the verification of fabrics to deal with importers who have been declaring imported products under tariff codes which attract lower rates of duty. Clothing manufacturers will also benefit from an extended rebate for two years, with effect from 1 January 2018, in a move aimed at supporting procurement of raw materials at a lower cost.
To support production of lower cost locally manufactured soaps, the budget also extended the list of raw materials covered under the existing duty concession to take account of advances in production formulae.
“The concession will benefit such new investment in soap manufacturing. Already, investment to the tune of US$50 million has been made into soap manufacturing, based on new production formulae. The 2018 Budget, therefore, proposes to include under the rebate scheme selected inputs such as caustic soda, sodium carbonate and silicate, among other base chemicals”, said Minister Chinamasa in the budget statement.
Further to the furniture manufacturers’ rebate which was introduced last year to enable duty free importation of key raw materials; the budget also proposed to actually extend the list of raw materials that can be imported under the rebate to include paints and vanishes, nails, canvas, plates, sheets, films and a dozen of other items. According to Chinamasa, the extension of rebate of duty has been guided by facilitating access to goods that are not produced by the local industry. He also removed mattresses from the Open General Import Licence.
Local powdered milk producers will however have to contend with the extension of the suspension of duty on imported powdered milk for another 24 months, as Treasury argues that domestic production of raw milk remains lower than the requirements of the local dairy industry. The suspension is therefore aimed at augmenting insufficient domestic production of raw milk. Government suspended duty on imported powdered milk to complement inadequate supply of raw milk three years ago.
It has been also proposed to ring-fence importation of white cement used in the production of tile adhesive by approved manufacturers at a reduced duty rate of 5 percent as government believes that tile adhesive manufacturers have potential to grow and meet increasing demand from the construction industry. Government highlighted that the industry however faces competition from imported finished products. Currently, import of white cement attracts customs duty of $100 per tonne.
The budget is also proposing to remove ton clinker from the Open General Import Licence in order to support local production; indicating that the local industry has capacity to produce adequate ton clinker.
Also benefiting from an extended rebate are luggage ware manufacturers who have been given a further 24 months as Treasury pointed out that players faced challenges in accessing the facility. Most of the companies have not been able to raise the bond security, which is required to secure duty on raw materials in a bonded store. — FinX.
