Finance Minister Tendai Biti this week unveiled a cocktail of measures aimed at protecting the local industry from cheap imports and to give it room to recover from the decade-long economic crisis.
Since the introduction of the multiple currency system two years ago, and a relaxation of import duty, the country has seen an influx of imported foodstuffs thereby posing a risk to the existence of the local industry.
Presenting the Mid-Term budget review on Tuesday, Biti said the economy has been slowly recovering, hence there is need to provide space for the local industry to maximise production capacity, especially in the face of unfair competition from cheap imports.
“The re-instatement of duties on maize meal and cooking oil will improve the value chain from the farmer to the industry through contract farming, increase capacity utilisation, stimulate local production of stock-feed and also enhance employment levels,” said Biti.
Duty on salt, flour and rice, however remains suspended until December.
He said government would continue to monitor the supply of cooking oil and maize meal in order to ensure availability at competitive prices.
Biti announced the introduction of a $40 million Distressed and Marginalised Areas Fund (DiMAF), in collaboration with Old Mutual to bail out ailing companies.
He said government will set aside $5 million, which is being complemented by $10 million from CBZ Bank ($5 million) and the Arab Bank for Economic Development in Africa ($5 million).
In a development that is expected to stimulate the construction industry Biti said government plans to set up an Insurance & Pensions Sector Housing Fund from resources mobilised from the pension and insurance industry.
Following an outcry over the cost of borrowing, the finance banks will be mandated to lend up to a maximum of 10% interest rate plus 3% handling and other charges of not more than 2%, bringing maximum lending costs to 15% per annum.
He said this will provide a huge relief to industry who will be able to access working capital at affordable terms.
In order to ensure recapitalisation of the tourism sector, rebate on capital goods was re-introduced effective September. Duty on motor vehicles used by safari operators was suspended for six months beginning September 2011.
He said appropriate measures will soon be introduced with regards to taxation of raw materials and capital goods following concerns raised by industry.
Biti removed travellers rebate on shoes, blankets and stoves with effect from August 2011 and proposed protection measures for the agro and food processing sub sectors.
He said companies in the agro and food sub-sectors have been operating at low capacity utilisation levels, to the extent that some have since closed and as a result, about 70% of the food retail shelf space is stocked with imports.
In order to support small-scale garment producers to maximise production, Biti reviewed upwards the rates of customs duty levied on imported uniforms to the general rate applicable to clothing and textiles, from 25% to 40% plus $1,50/kg with effect from September.
Turning to agriculture implements, Biti said customs duty on selected imported agricultural implements will be re-introduced in order to encourage local production of agricultural implements