Press Statement No. 5 of 2016: EMCOZ on SI 64 of 2016

INTRODUCTION

The recent requirement  by Zimbabwe for import permits for a number of products starting on July 1, 2016 was met with strongly differing reactions across the economic spectrum. EMCOZ has been accused of collaborating with Government in bringing about the policy framework and needs to put the record straight as none of its structures were consulted in coming up with the subsidiary legislation.

To establish understanding, SI 64 removes from the open general import licence a number of products such as cosmetics, cereals, coffee creamer, canned fruit and canned vegetables and building materials, among others.

The Government of Zimbabwe claims the restrictions are necessary to support the development of local industries and reduce the trade balance which has become unsustainable. The measures have been supported by the Manufacturing Sector[1] while Organised Labour has condemned them.

EMCOZ would like to analyse the situation.

ANALYSIS OF THE GOVERNMENT’S AND MANUFACTURING SECTOR’s POSITION

That the economic situation is dire and government is under heavy pressure to do something is not debatable. That Business needs any assistance it can get is common cause.

In favour of this common position the following can be cited:

  • Government did consult some stake-holders and that they acted on the advice proffered is evident;
  • That the advice was given in good faith is not doubted because in a normal economic environment, protecting local industry against “dumping” is positive and sustainable. The market has the capacity to pay a premium to sustain their economy.
  • Events after the publication of  SI 64 of 2016 show that Government has been receptive to constructive criticism.

[1] CZI Statement in Support of SI 64 of 2016  (Page Extra 5 in the Sunday Mail of 10 July 2016)

  • Government is working at re-engaing the rest of the world to improve Country Risk Perception and promote “Ease of Doing Business”

Against the common position, the following can also be said:

  • It is glaring that the consultation was not inclusve hence the strong local reaction against the SI and there could also be ramifications of on the various treaties binding Zimbabwe as a member of the SADC. One hopes this has been taken into account.
  • Protecting of local industry is noble as admitted above but very contextual. The State should aim to sustain aggregate demand because this is what will drive economic activity. Zimbabwe’s economy informalised five years ago and it is estimated that as many as three million people could be dependent on Cross Border Trading. We agree with the CZI position that consideration should have been given to how Cross Border Traders sustain their purchasing power. (Number 9 on CZI Statement In Support of SI 64 of 2016)
  • Where the market is resorting to foreign products because of a lack of capacity to buy local, removing the cheaper foreign products gives the consumer the difficult choice of either reducing consumption or doing without completely.There will therefore be little benefit to the local industry because aggregate demand will decrease while the population is thrown into dire poverty.
  • A lot of Zimbabweans working in South Africa find it better to send groceries rather than money back to their families. Remitting Rands into Zimbabwe’s high cost environment will have dire quencequences on the families.
  • Imposing restrictions on imports under current circumstances has the effect of removing competition and no amount of legislative fiat will prevent prices from increasing.

WILL SI 64 OF 2016 RESULT IN SUSTAINABLE ECONOMIC ACTIVITY?

If the positive and negative impacts have been correctly articulated, the above question becomes legitimate. If not, we will be only too glad to apologise.

EMCOZ’S RECOMMENDATIONS

  1. Zimbabwe must develop a culture of inclusive social dialogue. Leaders must lead but collective wisdom will always be better.

 

  1. Systemic conditions that impede our economic activities (corruption, policy inconsistency, stable supply of utilities and many others ) must be addressed first to prime our Industries for growth. Creating  cartels will not achieve sustainable development.

 

  1. Zimbabwe’s Poverty Rate of 62.6 cannot be wished away. The poor have to be part of the National development narrative if we are to achieve sustainability.

 

  1. Nobody should want to see Zimbabwe descending into what is happening in Venezuela today.

 

 

 

  1. Kahwema

President of EMCOZ.