eBusiness Weekly
Martin Kadzere
Lifting of import restrictions on some commodities will help improve product availability and price stabilisation but short term policy measures to complement the Transitional Stabilisation Programme are needed to stabilise the economy.
This week, Government removed import restrictions of various commodities after the amendment of the Statutory Instrument (SI) 122 of 2017 to allow companies and individuals with offshore and free funds to import basic commodities.
Zimbabwe is facing a wave of shortages of commodities, which producers have blamed on foreign currency shortages needed to import raw materials.
Some of the products that are in short supply include beverages, cooking oil, four, sugar, rice and soap.
The shortages have partly resulted in the spike of prices that have shot beyond the reach of many.
Lauded as one of the policy measures that the Government put in place to help revival of the industry, the restrictions saw many companies enhancing capacity utilisation up to 60 percent or more.
For instance, the restrictions resulted in the opening up of companies that had been supplying finished products to Zimbabwe.
Economist Dr Gift Mugano told Business Weekly that while the rationale of removing the restriction was noble, the “approach is piece meal considering the fact that we are now chocked by the decade long economic melt-down which was characterised by trade and fiscal imbalances which has reached a point of explosion.”
“In as much as I was against the SI 122, in particular, on the back of the fact that it flouted the regional and multilateral trade agreements of free movement of goods and services, I appreciated the importance of the Instrument as it made significant contribution to the survival of our local companies, which were under threat.”
“So, as far as I am concerned, the question of removing SI 122 is neither here nor there,” he said.
“Rather, we would like to see the Government coming up with a short term stabilisation programme, that is, six months programme which compliments the TSP.
“The short term stabilisation programme among others should deal with measures aimed at supporting the agricultural sector in this current season in the face of high cost of doing business for our farmers, liquidity enhancement measures through the mobilisation of substantial lines of credits and currency reforms.”
Mixed feelings
United Refineries Limited chief executive and former Confederation of Zimbabwe Industries president Busisa Moyo said the suspension of SI 122 will have downside on the economy.
“The Statutory Instrument was meant to help industry and protect it from unfair competition from imports,” he said.
“Although the suspension will help stabilise prices, I do not see this working in the long run.
‘‘Prices of basic commodities will go up, this will worsen the foreign currency situation in the country.
“Mind you the supply gaps being experienced are a result of foreign currency shortages, so if SI122 is suspended, this will create more overheads for companies,” he said.
Buy Zimbabwe chief executive, Munyaradzi Hwengwere weighed in saying the move was potentially disastrous.
“Government should immediately introduce a local content programme and align local producers such as miners and farmers to the value chain,” she said.
“Local producers failed to fully supply the market because we had not deepened linkages with the value chain.”
“In cooking oil, we should have increased soya, cotton seed production with the RBZ allocations directed to companies growing their uptake and lead top job creations.
“We have just opened up borders with the risk that this will not only cause de industrialisation, but also job losses.”
Another analyst that declined to be named said although it is a noble social objective for the government to protect incomes, doing so through wholesale blanket subsidies that do not pay attention to the fiscus’ ability to stomach the same has dangerous inflationary consequences.
“Equally, it is illogical to subsidise private consumption through offshore borrowings when it’s so clear that the country has no capacity to service the debt considering our fragile current account balance.
“Therefore the only logical macroeconomic policy that rewards productivity whilst preserving jobs and incomes in the long term would be to allow market based pricing on one hand with government adopting prudent fiscal management on the other hand,” said the analyst.
