By Bernard Bwoni
The argument that Zimbabwe does not have any
industry to protect, thus protectionism would not work, is an unfortunate and a
very reductionist argument. The Zimbabwe government has been making some bold,
but very unpopular decisions to help stimulate domestic manufacturing and
enhance exports. The anti-protectionism dialogue in Zimbabwe has been mainly
centred on the argument that the country's industry is not in its infancy but
simply operating at way below capacity, thus did not require any protection. However,
the fact that Zimbabwe's industrial capacity utilisation has declined to below
50% in effect means that most companies have no capacity at all and thus
technically in their infancy. They would require a period of protection and
promotion to allow them to build capacity and to be able to absorb new
technologies to enable them to compete with those countries which benefit from
much large economies of scale. The two sides of the protectionism debate in
Zimbabwe needs to be sincere and factual and not simply driven and determined
by emotions alone.
There are many who challenge the quality and pricing
of the domestic product and that is valid and necessary argument. The local
producers have in the past been notorious for producing low quality products, charge
very high prices or create artificial shortages or scarcity to increase the
prices of goods. Many consumers in Zimbabwe are very sceptical of domestic
products and it is now up to local producers to reassure consumers with ethical
and professional standards of doing business. The emphasis should be put on
quality to be able to compete with products from more technologically advanced
economies. Their niche should be the quality and the price to win over the
suspicion Zimbabwe consumers.
The prices of domestic products have always been a
sticking point with consumers preferring cheaper options from abroad. The
domestic producers have always argued that their production costs are often
higher and hence the pricing structure of their products. Because many are
producing at a much smaller scale, their production costs are initially
considerably higher. Thus to make a profit or break even, they have to charge
accordingly. However the tendency of Zimbabwe producers and businesses in
general of wanting to make a killing with massive profit margins is
unsustainable.
There is need to start looking at volume rather than
these unrealistic prices to make profits. This however does not diminish the
fact that domestic industry in Zimbabwe requires that period of protection. In
1791, the then American Treasury Secretary, Alexandra Hamilton argued
successfully for American industries to be given the cushion of an initial
period of protection against foreign manufactures. Hamilton argued that local
industries would be hampered during their infancy if exposed to direct
competition from the more developed economies who had started benefiting from
much larger economies of scale. The USA, Great Britain, Japan and most advanced
nations of today developed on the backdrop of heavy protectionist policies to
cushion domestic industries when they were in their infancy.
The Zimbabwe producers and manufacturers have always
argued that they were failing to build capacity due to the unrestricted influx
of cheap and inessential imports into the country. They have repeatedly called
on the government to provide them with that period of protection so as to
enable them to build their capacity. The government recently responded through
the Statutory Instrument 64:2016 with a ban on certain specific non essential
imports into the country. The response from the South African retailers was
unprecedented but predicted. This reaction from across our southern borders
reveals the complexities of the one-sided nature of the trade relationship between
the Zimbabwe cross border traders and the South African retailers. The
retailers in South Africa demonstrated against the import ban as it drastically
and significantly impacted on their livelihoods. The whole value chain,
backward and forward linkages, was severely disrupted by this ban. The Zimbabwe
cross border traders demonstrated as their livelihoods were inextricably linked
to these imports from the south. The timing of the ban is not exactly
convenient as the country's economy is very weak and many rely on importation
of goods for resale in Zimbabwe to make ends meet.
These demonstrations as valid as they are, do not
diminish the equally valid case for domestic infant industry protection and
promotion. The country is importing some very basic products that can be easily
manufactured locally. The less unnecessary imports into Zimbabwe, the better
for domestic products and manufactures. However, as already indicated, domestic
producers ought to be sincere and realistic when it comes to quality and
pricing. The Zimbabwean consumer of recent years has been spoilt for choice
with variety of imported goods. The quality of goods produced locally has to
compete with what local consumers have gradually got accustomed to. The key to
a successful relationship between the Zimbabwean consumer and locally-produced
goods is the price and quality primarily. The consumer has to be convinced that
moving from the imported product to a local one will not mean compromise on
quality and price. They need to have a good quality product which is
competitively priced.
The products that fall under Statutory Instrument
64:2016 are products that are being produced locally and available locally or
can be made locally. The ban on imports will create opportunities for local firms
and producers to start producing or making these products. There is likelihood
that exports will increase and with increased exports comes economic growth.
Economic growth means employment opportunities and employed people have money
to spend in the economy. There are some who have argued that the timing of
statutory instrument 64 of 2016 was probably I'll-conceived and that is a fair
assessment. The country is currently going through a difficult economic period,
people have no other sources of income and buying and selling imported goods
sustains livelihoods for many. This was a tough decision that had to be taken,
timing or no timing.
The country has to start creating formal employment
opportunities to support tax revenue generation for public services delivery.
With formal employment, a middle class will eventually emerge and a bigger
middle and working class in formal employment paying taxes will enhance revenue
collections through taxes to fund public goods and services. To create regular
formal employment requires a sound and fully operational manufacturing sector.
An increase in exports facilitates the sound manufacturing base, and to enhance
exports may in some cases mean a reduction in imports.
The government is reportedly considering regulating
the numbers of haulage trucks on the roads to help revive the National Railways
of Zimbabwe (NRZ). This is not entirely an ill-advised move and it will
definitely help stimulate the ailing national rail system. There are pros and
cons to the move. The haulage trucks sustain livelihoods for the individuals
who own those trucks and one or two drivers they employ. On the negative side
the haulage trucks have had a disastrous record on the country's roads. Many
accidents and death have been due to these monsters on the roads. They cause
the most wear and tear on the country's roads. The NRZ on the other hand will
potentially employ more people, directly and indirectly and this is for the
greater good of the country and economy. The timing of this would be very
inconvenient due to the disabling and difficult economic conditions in the
country.
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