GOVERNMENT needs to explore measures aimed at formulating tariffs that reduce the cost of importing raw materials in order to make local industry more competitive, a local commerce body has said.
Industrialists argue that the current trade deficit of $1,7 billion was largely attributable to one-way trade as the few remaining local factories cannot compete due to high costs which industry cannot factor into final product price.
They say certain categories of raw material imports are expensive to import into the country whereas imported and finished commodities are cheaper to bring into the country.
Zimbabwe National Chamber of Commerce vice-president David Norupiri said government needs to review tariffs on raw materials and protect local industries on the exact basis of the products which they manufacture.
“For us to become more competitive, we should allow products that are used as raw materials to enter the country unhindered. The main challenge pertains to tariffs and how they should be applied and we believe this matter should be looked at seriously,” he said.
Norupiri referred to the situation of oil imports as an example and said a lot could be done to change the situation for the better of local industry.
He said a few companies currently have the capacity to produce competitively priced products due to the expenses incurred in sourcing raw materials.
The de-industrialisation of the Zimbabwean economy is leading to the closure of companies that produce secondary goods as low-priced imports, some of which are subsidised continue to enter the country.
Some imports which should not qualify under the certificates of origin and the fact that Zimbabwean companies are operating in a high cost environment were factors contributing to local industry’s demise.
“Cooking oil that is used for domestic purposes and palm oil largely used for industrial purposes are both qualified under the same tariff regime and charges. There is a disparity here, as the palm oil used as a raw material lands at a higher price,” he said adding that local players incur a 60% duty charge plus transport costs.
Norupiri said government should not adopt a “blanket approach” in as far as determining tariffs is concerned.
In his 2014 National Budget, Finance and Economic Development minister Patrick Chinamasa reviewed rates of customs duty upwards on particular goods, further increasing duty for certain products imported under the Sadc agreement.
This move was meant to promote consumption of locally produced goods and protect the manufacturing sector.
Despite this measure, more industries continue to fold up operations citing a difficult business environment and a shrinking market base.
However, Zimbabwe is a member of Sadc and Comesa and is presently participating in Tripartite Free Trade Area negotiations.
Both regional groupings aim to promote intra-regional trade by substantially reducing or altogether removing import tariffs.
Trade experts argue that by so doing imposing duty on goods imported under Sadc, Zimbabwe is moving in the opposite direction as regional groups and its trading partners may also react negatively.
They also argue that government and the few remaining industrial players should adopt a holistic approach and address the key structural causes of lack of competitiveness.