Import substitution answer to foreign currency problem
Oliver Kazunga, Senior Business Reporter
THERE is a need to speed up industry revival efforts to restore adequate domestic consumption that will ease pressure on foreign currency requirements and stabilise the economy, economic experts have said.
Since liberalisation of the economy in 2009, there has been an influx of imported products, which have to some extent affected the competitiveness of the local manufacturing sector, prompting the Government to embark on a number of import management initiatives.
Prominent industrialist and member of the Presidential Advisory Council, Mr Busisa Moyo, said since 2009 Zimbabwe has imported goods worth about US$60 billion.
“Lest we forget, before there was S.I.64 and S.I.122, the private sector was rallying ‘moral suasion’ on conscious consumerism. Zimbabwe has imported US$60 billion since 2009. We shouldn’t be surprised about unemployment if we don’t make local and buy local,” he posted on his Twitter account.
“Making local and buying local includes using local law firms, local insurance services, local banks, local skills and localising agricultural produce. There may be fancy lawyers, insurers, potato farmers in SA but we choose our local producers because it’s right.”
His views generated a lot of interest with some stressing the need to produce more locally and increasing exports. Others concurred saying Zimbabwe’s economy will thrive fully when the supply and value chain is localised as opposed to relying on imports for major raw materials.
In an interview, economic analyst Dr Davison Gomo also said the recent rise in inflation was a result of foreign currency shortages linked to domestic production gap and rising costs.
“The other factor causing inflation to rise is the shortage of a number of very critical goods, be they consumer goods or goods that feed into the production processes. We buy them from outside and this generally puts pressure on the pricing structure and therefore in the end reflects in what you are seeing in the market,” he said.
“There is demand for foreign currency and the trading of currency right now is not located in the formal sector as the bulk of it is taking place outside the formal sector. In other words, the bank intermediation market is very weak, therefore, a lot of people buy forex on the parallel market and thus pushing up prices. It is difficult to see how you can contain the rise in prices.”
Buy Zimbabwe chief executive officer Mr Munyaradzi Hwengwere said his organisation in partnership with the Ministry of Industry and Commerce has launched a nationwide campaign to promote local production and consumption.
“Today (yesterday) we are actually launching our nationwide campaign on Buy Zimbabwe. We are launching the campaign in partnership with Government,” he said.
Mr Hwengwere said the Buy Zimbabwe campaign was aimed at promoting local production and consumption of locally produced goods to enhance competitiveness of domestic industries and create employment as well as stabilising the run-away inflation.
He said increased domestic production will ease the desire for imports.
“It’s something that we must keep saying because if we want prosperity and jobs, we must attend to issues of local productivity,” said Mr Hwengwere.
He, however, noted that it was encouraging that in the last quarter of 2018, Zimbabwe registered a 110 percent decline in imports although the trend was still way lower than what the country needs.
“We are starting a nationwide campaign in partnership with the Ministry of Industry and Commerce and we are hoping that after that, the Local Content Policy (LCP) will be passed, it has also taken a lot of time,” said Mr Hwengwere.
In May 2017, the Government said it had started formulating LCP, which will stipulate percentage thresholds for goods that will qualify as locally produced to support domestic production.
It is hoped that local content regulations will form a key part of Government broad industrialisation initiatives and will be considered as “smart” protectionism measures.