Our borders are so porous that goods levied with import duty are making their way into the country without paying duty. In most cases, the goods are illegally smuggled or the certificates of origin are forged in order to benefit from free trade. Some goods are being corruptly brought into the country. People bribe border officials or undervalue the goods they declare. Border systems should be strengthened as a matter of urgency.
Tariff protection
With a view to sustaining industrial capacity utilisation, the government granted tariff protection to a number of sectors; these include textiles and food processing. The protection should ideally discourage imports from unfairly competing with local products. Most foreign products accrue enormous subsidies from their countries. With the need to level the playing field, the government introduced these countervailing measures to insulate our reviving industries from ruthless international exposure.
Although export subsidisation is not compatible with the rules and regulations of the World Trade Organisation, it is typically difficult to prove. However, several cases of dumping have been proven in the country and a quick example would be that of Grain Millers Association’s complaint that Mozambique was exporting its wheat to Zimbabwe at a price lower than it was on the Mozambican market.
We cannot applaud the fact that we have protected our industrial sectors in principle, if we cannot put it into practice. Protection should effectively achieve its purpose.
Putting it into practice
Many people do not actually understand why our industries should be incubated. At the moment, local products cannot compete with cheap imports. Once you put a local product on a shelf to compete with a cheap substitute import, you are giving a consumer the option of buying the imported product.
Since Zimbabwe is a low income country, where most workers’ salaries are way below the poverty datum line, consumers will always go for what is cheaper.
Therefore, we need to protect and incubate our industrial sectors so that they grow and enjoy economies of scale as well as implement strategies earmarked at becoming competitive. The protection may require a number of years to bear fruit and can only work if our borders are insulated.
I would also like to encourage the government to only grant protection to companies that have a concrete plan to become competitive. There is a tendency that once protection has been granted, the local company will then close shop and smuggle the same product in from abroad. Protection must be granted alongside effective real time monitoring and evaluation.
Computerise borders
If it means computerising the border posts, so as to reduce the interface between border officials and importers, then that should be urgently done. We have lost our capacity to produce competitively, due to a decade of economic chaos. Most manufacturing firms closed shop and narrowed their operations.
Manufacturers are still using antiquated machinery and they are incurring high input costs, especially in labour.
Zimbabwe must also not quickly rush into committing itself to regional integration. Joining the COMESA Customs Union, for example, will cripple us from using instruments of the industrial policy to develop our industrial sectors. Joining the customs union of COMESA means that we should not be able to increase import tariffs to protect the local industry.
In fact, we would be required to phase down our tariffs. The government and the industrial firms must work hand in hand to ensure that the issue of porous borders is dealt with and that the local industry is significantly boosted.
Post published in: Business