‘Protectionist measures may hurt economy’

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A PUSH by local industry for government protectionist measures to shield the struggling sector from growing competition could further hurt the economy, a local brokerage and advisory firm has warned.

BERNARD MPOFU

In its weekly research note, MMC Capital said government should instead craft policies which make local firms competitive both locally and globally.

Official figures show that imports were almost trebling exports as local companies remained in doldrums.

“Our view is that the policy, if not well crafted, can be inflationary and might end up failing to achieve its intended purpose.

“Contrary to the protectionism economic theory, under the principle of comparative advantage, gains from free trade outweigh any losses as free trade creates more jobs than it destroys because it allows countries to specialise in the production of goods and services in which they have a comparative advantage,” MMC Capital read.

“The country needs to craft policies that facilitate the creation of comparative advantage by local manufacturers instead of protecting inefficient processes.

“The ideal thing is to refine the processes and make them competitive. This, in our view, will better the standards of living in the country and enhance economic growth as resources will be best used instead of creating dead weight losses.”

Protectionism is the economic policy of restraining trade between economies through methods such as tariffs on imported goods, restrictive quotas and a variety of other government regulations designed to allow fair competition between imports and goods and service produced domestically.

Following a decline in capacity utilisation due to undercapitalisation of the manufacturing, government recently announced that it may introduce a raft of measures aimed at reversing de-industrialisation.

Capacity utilisation for the manufacturing sector this year declined to 33% from 49% last year as local companies continued to struggle under the post-dollarisation era.

Zimbabwe’s gross domestic product is this year expected to grow by 3,4%, down from 4,4% in 2012.

The slowdown in growth, according to experts, was largely on the back of subdued performance in mining and agriculture.

In its submission to the Parliamentary Portfolio Committee on Industry and Commerce last week, Zimbabwe National Chamber of Commerce (ZNCC) said industrial policy should mainly focus on agriculture to ensure availability of inputs.

“The quality of the food being imported into Zimbabwe is unknown and, therefore, it is imperative that we safeguard the quality of products coming into the country and regulators such as the Standards Association of Zimbabwe and Food and Drug Control Council should be active.

“Whereas protectionism may not be right for regional integration, the ministers responsible for commerce and finance should introduce ‘smart tariffs’ to restrict all unwarranted manufactured imports,” ZNCC said.

9 COMMENTS

  1. The move by the government to protect local manufacturing industry is a very good idea and we have been waiting for this.Some of the imported goods are being manufactured locally by many companies and they can meet the demand for the local consumers and why shold we import if we can manufacture locally.For example chickens and other cosmetics like petroleum jelly a lot of companies are manufacturing those locally.

    • @Belingwe- Of course we would like local industry to start producing locally, but the protection will come at a price as we will be forced to make consumers pay through the nose and this will take us back to square one. After getting this protection how does industry propose to pay pack to government for this protection? Will they cap salaries of management where one guy earns more than all the workers producing the goods? Will they raise prices through the roof to mantain their Hollyhood lifestyles? We have to set the ground rules for companies as well as this is a three legged animal, government, industry and cosnumers..we have to march in step as one..What is the CZI view on this???

  2. When the government try to introduce measures to restore things back.We start to hear some forces.Who is this MMC CAPITAL.I have got some questions.They must answer.
    1.Should we continue importing cooking oil?
    2.Should we continue importing used underwear?
    3.Must Willovale Mazda die?
    You are talking about no protection why? There was no protection for a long time where were you?Today you start shouting.We want Zimbabwe to move forward dont pull us back we a tired.Othewise some people are benefiting from the crisis.

  3. Weak companies should be left to die. Adapt or die. There’s no point in subsidising other people’s inefficiencies. If a local business can’t be innovative and find ways of making cheaper underwear there’s no amount of government legislation that can force me to buy my wife an expensive locally made g-string when other alternatives exist. Protectionism leads to other vices such as smuggling and incompetent business leaders. Don’t get me wrong, I have no qualms about buying local as long as it’s cheaper than the next alternative and serves the intended purpose.

    Government has no business micro-managing the economy to that extent. Our taxes can be better employed.

    • @Vakuru Chaivo.What we are saying is we need solutions not to pull us back.This MMC CAPITAL is not giving any solutions.If they are talking about government to craft policies.In their own opinion can they help to revive Zimbabwe’s Industry.They must tell us how to do it not say policies.It should be a government’s initiative to do that.There are some strategic companies like ZISCO STEEL it can bring billions of cash into the country and some other group of people are saying let it die dont protect it.

  4. Guys. Be realistic! Those companies that are demanding protection measures used to make a killing out of the crisis. Where are our products? How come imported products are cheaper than locally made ones. They want shortages so that they will make more.fight for duty free raw materials first then protection when warehouses are full.

  5. Concerned usadaro. My brother industry suffered over the past 12years. Imagine being not being able to get funds to buy spares or new equipment because the government put unrealistic exchange rates then till the Zim dollar collapsed.
    Imagine having your foreign currency account where all your proceeds from exports are being wiped clean without even being told about it?
    Zimbos forget too soon I think.
    Of the few manufacturers that are left, they are running on outdated equipment, can’t even afford to retrench because our labour laws are pathetic and anti investment, our banks are offering no credit whatsoever. You know Zimbabwe is one of the only countries in the world where a fired employee can be paid whilst seated at home???
    How then do you expect them to compete with S.A firms that have been upgrading and streamlining their processes over the past decade? The are getting raw materials on 3month credit and can get long term credit (by long term we are talking a minimum of 10years) from their financial institutions.
    Go for a drive through Willowvale, Southerton, Graniteside, Msasa or even Bulawayo and see for yourself. Most of our vibrant firms have since shut down and some Asian guy is now using the premises as a warehouse.
    Zvakawoma veduwee, our industry needs protection or we will soon have no industry to speak of.

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