Zimbabwe: The case for commodity imports
Following the announcement of the suspension of import duties on certain commodities by the Permanent Secretary of the Ministry of Finance and Economic Development, Mr. George Guvamatanga, on May 16, there was a great outcry from expected quarters, which raised fears of a decision affecting the industry.
The reaction demonstrated that those who cried the most did not have a full appreciation of the challenges facing Zimbabwe and were being selfish or outright dishonest with the nation on the matter.
The main commodities which led to the suspension of import duties were salt, cooking oil, rice, flour, sugar, margarine, flour flour, milk powder, preparations for infants, tea, petroleum jelly, toothpaste, bath soap, laundry soap and detergents. powder. People use these goods in their daily lives.
Among the organizations that were unhappy with the move was Buy Zimbabwe, whose chief executive, Alois Burutsa, said “the development has the potential to reverse the industrialization gains made by local industry in the supply in commodities”.
Other stakeholders questioned why the government opened the floodgates to imports at a time when locally produced goods took up 75% of available retail space.
It was only last week that the Confederation of Zimbabwe Industries (CZI) announced that last year the country’s capacity utilization had reached 56.25%.
It was the highest since 2011, when the figure hit 57%.
It is in this context that many have clung to the rhetoric to emotionally criticize the government over this decision without much thought.
A background of embezzlement
Many have chosen to conveniently forget the context of the decision. Over the past few weeks, consumers have watched helplessly as commodity prices skyrocket.
No self-respecting government would sit back and watch its citizens suffer predatory pricing from manufacturers and retailers.
The case for government intervention was even more compelling, especially since most manufacturers benefited from the Reserve Bank of Zimbabwe (RBZ) affordable foreign exchange auction to source raw materials. only for them to price their products at black market rates. . This has made commodities unaffordable.
Other manufacturers have starved formal retail chains, which price their products mostly in local currency, in favor of small informal traders known as matuckshops in downtown Harare and other towns and villages.
These traders only invoice their goods in foreign currencies. This is despite the fact that Zimbabwe uses a multi-currency system, which includes the local currency.
Malpractice is also despite the fact that most Zimbabwean employees are not paid primarily in foreign currencies. The attractiveness of the US dollar has caused shortages of certain products in the traditional retail supply chain.
Correcting a culture of greed and profit
The decision to allow commodity imports came a week after the government suspended lending from financial institutions through a speech delivered by President Mnangagwa on May 7, 2022.
This was necessitated by the fact that some businesses and individuals were borrowing from banks to fund their demands for affordable foreign currency from the RBZ.
Upon receiving the foreign currency, they would dump it on the black market and make a decent profit.
Some would use these borrowings to buy foreign currency on the black market as a store of value and repay loans that would depreciate in value due to inflation.
The effect of so much excess money chasing the US dollar in the market caused the exchange rate to rise. The price spike was then used by manufacturers and retailers to justify their unaffordable high prices.
The loan ban was lifted on May 17, 2022 to allow the economy to operate normally while the RBZ continues to deal with the culprits.
It is against the above that the government has suspended import duties on some commodities to avoid shortages. It appears that the only stakeholder who seemed to understand the government’s position was the Confederation of Zimbabwe Retailers (CZR).
Its chairman, Denford Mutashu, correctly explained that “the exemption (of import duties on certain commodities) is intended to bolster the supply of essential commodities that retailers and wholesalers find difficult to access from local suppliers. Most of the shelves were empty of products like sugar and cooking oil, a scenario that left our sector in limbo.”
Considering the greed and propensity for profit displayed by some manufacturers despite government support, it is laughable that CZI Chairman Kurai Matsheza has said that the government should have suspended import duties on raw materials instead of the 15 commodities.
“Imported goods will be on our shelves. So the productive sector there will be very busy filling our shelves here. So if you look at the value chains involved, they are killing our economy. So I don’t think that helps the everything,” Matsheza said.
Some players in the economy are notorious for abusing arrangements such as the currency auction initiative. What is the point of rewarding these entities with concessions such as reduced import duties on raw materials for their economic sabotage, outright greed and indiscipline?
It is time for the RBZ and other relevant bodies to blacklist these organizations so that ordinary Zimbabweans, who are the intended beneficiaries of initiatives such as the foreign currency auction, benefit.
Misunderstanding of the Russian-Ukrainian conflict and its effect on the economy
It seems that most Zimbabweans, including industrialists, underestimate the effects of the ongoing Russian-Ukrainian conflict. One of the commodities that has been affected by the conflict is cooking oil, which most of Zimbabwe and other countries have imported from Ukraine as raw cooking oil.
This has seen the price of the product rise to between US$5 and US$7. In some countries like the UK things are worse. Retailers limit quantities sold to customers to ensure there is enough product for everyone. In India, the government has banned the export of the goods.
The fact that the war has not yet affected Zimbabwe as much as elsewhere does not mean that things will not get worse.
If other economic players choose to prioritize profit and look myopically to the future, the government will not subject Zimbabweans to the avoidable effects of war through short-sighted planning.
No one can say when the conflict will be over or how long it will take Russia and Ukraine to resume normal production to once again supply the world with essential raw materials.
The decision to suspend duties on certain imported basic products is therefore relevant because it allows citizens who have foreign currency to supplement local products with imported products until the end of the global crisis caused by the Russian-Ukrainian war. .
The outcry over the suspension of import duties on certain commodities has been disproportionately loud, as if the import of certain products is new.
The uproar was hollow and hypocritical as local retailers depend on distribution companies to import certain product lines. For example, since Bulawayo-based textile company Merlin Limited went bankrupt a few years ago, Zimbabwean mothers have started using disposable nappies.
Different brands of the product are imported by a number of distribution companies which supply them to different retailers.
The products, which are supplied by the distribution companies to the local market, range from basic necessities such as toothpaste and diapers to luxuries such as perfumes and jewellery.
Distribution companies are an integral part of the country’s supply chain of different products and product lines.
Following the closure or intermittent production of some products by some multinational manufacturers like Unilever, distribution companies are playing the key role in ensuring that popular brands remain available.
In 2005, Colgate Palmolive Zimbabwe, which was known for brands such as Choice beauty soap, Colgate toothpaste and Cold Power washing powder, among others, moved its operations to South Africa citing “macro-circumstances”. declining economies.
Eight years later, another overseas fast-moving consumer goods manufacturer, Reckitt Benckiser, which was popular for household brands like Cobra floor polish, Nugget shoe polish, Jik bleach and shoe polish Sunbeam ground, closed its Southerton plant.
Today, the brands of these two companies, minus the Choice soap, are readily available in Zimbabwean stores thanks to distribution companies importing them mainly from South Africa.
It is therefore hypocritical for manufacturers and other stakeholders to cry foul when consumers are allowed to import a few cases of certain products from a basket of 15 basic products for their own use when there is a whole thriving industry that is in place to import products.
The outcry was as if consumers were getting licenses from distributors. The way distributor imports complement locally produced products is the same way consumer imports will fill the gap when manufacturers fail to meet demand.
The call to work together
Industrial sentiment and recent government action point to a manufacturing sector that is benefiting from initiatives to rebuild the economy, but is not ready to play its part.
After the events of the past two weeks, Zimbabweans expect industrialists and other actors in the economy to play their part by being honest and scrupulous actors.
If any of them were greedy and sabotaging the government’s efforts to fix the economy and improve people’s lives, it’s time they partnered with the government to work for the good of the country.
It is only those in the opposition who openly and shamelessly brag about their wish that Zimbabweans continue to suffer. Only businessmen who believe in the “cause” of the opposition are sabotaging the government to improve its electoral fortunes ahead of next year’s elections.
The choice remains in the hands of business to work with the opposition and its destructive tendencies or to work with the government which continues to provide a stable environment for businesses to thrive.