Taking Stock Kudzanai Sharara
This month and probably the previous one was not Zimbabwe’s finest — by any means.
From over-pricing madness to crippling shortages, from the 2 cents tax to corruption allegations levelled against senior RBZ officials, the market has had many things to digest.
Then the latest one, the indefinite repeal of Statutory Instrument (SI) 122 of 2017 to allow companies and individuals with offshore and free funds to import specified basic commodities that are in short supply due to the “speculative behaviour of local retailers and panic-buying by consumers”.
Finance and Economic Development Minister Professor Mthuli Ncube, said the Government’s decision was aimed at improving the supply of basic commodities.
“All we are doing is increasing supply of commodities and allowing those with offshore funds and free funds to buy whatever they want to buy and bring it in. What’s wrong with that?” he asked.
What’s wrong with that, therein lies the question.
Busisa Moyo, whose company, United Refineries is one of the beneficiaries of (SI) 122 of 2017 previously (SI) 64 of 2016, will tell you the latest move by Government, is a threat not only to jobs among oil expressers, but also the backward value chain including farmers.
It comes at a time, his company, has been rallying farmers, the youth in particular, to venture into soya bean farming.
The initiative, which runs under the banner Soya Bean Outgrowers Alliance (SOBOA) involves other multi-sectoral partners to boost soya bean production in the country. The SOBOA team has been going around the country to interface with farmers with regards to soya bean farming.
But the move, which leaves manufacturers open to compete with established players from South Africa, is a sad day, according to Moyo.
SOBOA might have to be reviewed as it is an infant re-industrialisation process that needs to be natured, but to open it to full on competition from mature countries is “irresponsible and a sad day for farmers and a sad day for productivity”.
Moyo’s story is, however, different to what retailers would tell you. All retailers care about is a reliable product supply. Sparsely stocked shelves send a message that the shop is not doing well and that tends to be self-fulfilling.
Retailers would also tell you that an empty shelf is a cost to business. In addition to fixed costs that still have to be met, empty shelves mean missed sales. Repeated out-of-stocks at the same store could also force consumers to migrate permanently from that store.
But with the new measures, most retailers with good supply lines and those with export operations will be able to increase supplies.
The challenge for retailers, however, comes if they can’t access foreign currency at rates that allow them to price better than individuals who cross the border with the same products without paying duty.
There is no guarantee that retailers will benefit, it could be increased competition. Unless everyone competes in the same market for the foreign currency then that distortion is going to affect them as they are going to get RTGS and bond notes when they sell the products.
When policy changes were announced, disapproving noises were made by manufacturers, citing concerns on industry’s inability to compete with the outside world.
But from a product availability point of view, consumers will probably benefit from this. Although one cannot entirely guarantee this, consumers are likely to be the biggest winners in the short-term from price stability.
Consumers will still reap from the benefits of opened borders whether or not they will buy imported products. Lower prices, will force local manufacturers to cut costs of production as they attempt to keep up with imports.
Competition from the outside world, will require local corporations to adapt, or else go out of business.
As part of his Zimbabwe is open for business mantra, President Mnangagwa has emphasised the issue of job creation.
“We are all Zimbabweans . . . we need peace in our country and jobs, jobs, jobs,” President Mnangagwa would say. But latest developments, could come as a threat to job creation if Moyo’s sentiments are anything to go buy.
Local industry is arguing that it has invested in building capacity and what is only lacking is the availability of foreign currency. The cooking oil and the dairy processors industry added upwards of five companies each since SI64 was introduced an indication that given time, local industry can create jobs and products.
But depending on how long the temporary measures would be in place, there is risk of some industries collapsing.
Moyo has already alluded to this: “Most likely we will join importation band wagon to keep businesses open and also retrenchments are imminent. Contract farming is at risk and may be abandoned by our members.”
Government can, however, try and cushion local producers by reducing cost structures. Since the repealing of SI 122 is mostly about making sure product is available, maybe Government should consider giving affected local companies’ tax breaks or reduce other Government related costs to cushion them from collapse.