EFFECTIVE implementation of local content thresholds in the fertiliser, packaging and pharmaceutical sectors needs capacitation of various sub-sectors, a recent government-commissioned study has shown.
According to the Development of Local Content Thresholds for Fertiliser, Packaging and Pharmaceutical Sectors draft report submitted to the Industry and Commerce ministry, a number of capacity needs should be addressed in the named sectors.
“There is plant and equipment re-tooling, research and development, technical know-how development, infrastructure development, capacitation of local tertiary institutions, production (manufacturing) of quality and affordable inputs and affordable prices,” the report prepared by economic consultant Albert Makochekanwa said.
The report also calls for incentives that encourage local manufacturers from the three sectors to utilise local inputs ahead of imports.
“The following are some of the major incentives that were enumerated: tax relief or tax incentives or tax rebates or long tax holidays or tax-free zones, financial incentives and or affordable credit lines, lower importation costs for inputs, local preferences during tenders and export incentives, among others,” the report said.
“There is a need for local content strategy sensitisation where the various stakeholders including industry and customers are made aware of the importance of buying locally produced (manufactured) products, instead of importing.
“Sensitisation can be implemented through quarterly stakeholder forums where each sector reports on the progress it had made in the preceding quarter with regards to procuring local products.”
The four guiding principles of the local content strategy are local resource utilisation and service provision, beneficiation and value addition of local resources, import substitution and sustainable consumption of local products.
The average manufacturing and or production capacity utilisation for the year 2022 in the fertiliser sector was 52 percent, while the figure ranged between 80 percent on the upper bound and 38 percent on the lower bound, according to the study.
In the case of the packing sector, the average capacity utilisation was 59 percent, with an upper bound of 72 percent and a lower bound of 40 percent for the pharmaceutical industry.
The average capacity utilisation was 48 percent with an upper bound of 70 percent and a lower bound of 30 percent.
A number of challenges emerged from the study as significant hurdles to the effective implementation of local content across the three sectors.
“These include unavailability of raw materials locally, poor or inconsistent quality of locally produced inputs, higher local prices for inputs when compared to imports, unreliable local suppliers, unavailability of technology, credit constraint, limited knowledge/skills, limited technology and capacity constraints, among others,” the report said.
Zimbabwe started implementing a local content strategy in 2019 with three main objectives; to increase average local content levels in prioritised sectors from levels of approximately 25 percent to 80 percent by 2023; to increase capacity utilisation in prioritised sectors from current levels of approximately 45 percent to 75 percent by 2023; and to increase manufactured exports in prioritised sectors by at least five percent annually between 2019 and 2023.
Local content covers the procurement of goods and services, employment that covers issues around skills development, and corporate social responsibility.
The motivation and key elements of local content can be summarised in terms of geographic location, participation, value addition from the development of local industries, and technology transfer from labour market development through knowledge and technical skills transfer.
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