Industry misses Statutory Instrument 122

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INDUSTRY has suffered significantly from the suspension of Statutory Instrument 122 of 2017 with a Confederation of Zimbabwe Industries (CZI) survey showing that its amendment has reversed gains attained since 2016.
In October last year, government suspended sections of the law to increase the flow of basic goods into the market after panic and speculative buying left some shelves empty, triggering shortages of some commodities.
According to the CZI “State of the Manufacturing Sector Survey”, industry’s capacity utilisation declined by 6,2 percent to 42 percent in November 2018 compared to 48,2 percent in August 2018.
Tafadzwa Bandama, CZI’s chief economist, last week said the decline was in part, “a result of policy inconsistencies, such as the suspension of SI 122”.
Even though there were other factors causing economic decline during the period, such as intensifying foreign currency shortages, the survey shows that industry had made considerable strides on account of the law.
Bandama said competition for markets had shifted to the domestic front during the period September 2017 to August 2018.
“In 2018, 46,6 percent of respondents faced competition from domestic enterprises compared to 26,8 percent in 2017.
“The import substitution instruments that government put in place in the form of SI64 of 2016 and SI122 of 2017 helped divert competition from imports to the domestic frontier,” Bandama said.
Consequently, capacity utilisation rose by 3,1 percent from 45,1 to 48,2 percent during the period under review.
“In August some companies were operating at very high capacity utilisation levels, which were above 80 percent.
“Capacity utilisation rose on account of import substitution and export promotion policies that were implemented starting from 2016,” she said.
Statutory Instrument 122, which replaced SI 64 introduced in 2016, had removed a range of products from the Open General Import Licence in a desperate bid by government to protect the local industry.
Meanwhile, CZI said most businesses reported the cost premium of accessing foreign currency increased by more than 20 percent.
The industry body called for the encouragement and support of value addition and beneficiation in order to boost value.
“We should liberalise the foreign exchange market in order to minimise foreign exchange transactions on the parallel market.
“Companies also highlighted the need for transparency in foreign currency allocation by the Reserve Bank of Zimbabwe,” Bandama said.
“This will enable, product availability, price stability and business viability,” she said.