Will the election answer industry’s woes?


HARARE – As the country hurtles towards the July 31, watershed election, the economy is being touted as the ‘key’ issue to win the hearts and minds of the electorate.

Over the years, little has been done to address concerns and expectations of business.

President Robert Mugabe’s Zanu PF is hammering on the indigenisation policy as the key to unlock economic emancipation for the country’s general populace.

The revolutionary party has promised to deliver a $2 trillion economy.

On the other hand, the MDC led by Prime Minister Morgan Tsvangirai through its economic blueprint: Jobs, Upliftment, Investment, Capital and the Eenvironment (Juice), undertakes to initially deliver one million new jobs by 2018 and a $100 billion economy by 2040.

Although none of the two major protagonists of this year’s crunch plebiscite provide details of exactly how their documents would get the economy back on its feet, business says it will remain guided by the politics of the day.

“Whatever position the politicians adopt we continue to call for dialogue and unity of purpose because we know this is possible and all countries which have succeeded have a wide area of common interest among the main political players.  We are no different,” said newly-elected Confederation of Zimbabwe Industries (CZI) president Charles Msipa.

The Schweppes Zimbabwe boss, who took over the reigns of the country’s largest industrial organisation from Kumbirai Katsande, however, says a peaceful election will be critical for the recovery and growth of the sector which has seen its capacity utilisation decline to 44,4 percent in 2012 from an average of 57 percent in 2011.

“We continue to advocate for peace before, during and after the elections and that the elections should be credible. This is clear to all,” he said.

Msipa added that the organisation would still continue with its engagement approach with government despite some short-comings over the strategy.

“True, we have not achieved as much as we expected, but then the whole economy has under-performed.

“The last 12 months have been overshadowed by electoral politicking and this makes lobbying for sensible business-friendly policies most difficult,” he said.

“If you look at some of the work done by some industrial associations affiliated to CZI, such as the Zimbabwe Clothing Manufacturers Association, you begin to see that business associations do play a meaningful role.”

"The Dairy Processors Association continues to be active in giving financial support for the provision of services by government through the Zimbabwe Dairy Industry Trust.

"As you can see from above CZI is an active participant in policy formulation and implementation.”

Zimbabwe which is battling a power deficit, generating an average of 1 200MW against a national peak demand of 2 200MW and augmenting the balance through imports, has seen the issue of its electricity charges becoming a bone of contention for business.

According to the CZI’s manufacturing survey report, about 10 percent of industrial firms say power is a major constraint to the viability challenges they are facing.

Already national power utility Zesa Holdings and the Zimbabwe Electricity Regulatory Authority (Zera) have been forced by a court judgement to reverse a 31 percent tariff hike effected in 2011, after CZI took the latter to court arguing the power tariff increase would seriously affect business and that, as stakeholders, had not been consulted as required by law. 

“We have been engaging Zera, Zesa and the ministry (of Energy) on tariffs and power supplies over the last two to three years and we are pleased that we are being taken seriously in our proposals.

“Studies are underway by Zera to see that local tariffs are comparable to regional trends,” said an optimistic Msipa.

“We have agreed at the last AGM to set-up a separate Standing committee on Energy given the importance of energy to manufacturers.

“So we are quite active on power policies.”

He however admitted challenges lay ahead for the struggling sector, operating in an economy which is forecasted to slow down to a  5,4 percent  growth rate this year compared to a high of 9,4 percent in 2010.

“We are seeing a reversal of recent trends, as the economy has been showing definite signs of weakening.

“There are really no set targets as such. What is important are the trends.

“Right now we all accept that we have hit some rough patch in the economy with cash shortages all-round.

“Government does not have money to spend on local purchases and the private sector is going through a difficult time with very low consumer confidence,” Msipa said.

He said despite a sad tale of the industry in Mutare and  Bulawayo  — which has resulted in more than 87 companies closing shop and more than 20 000 people losing jobs — a holistic economic solution was required  rather than to focus on a particular town.

“We have always said that the whole country is facing a big crisis for the manufacturing sector.

“Cash shortages, power shortages, water supply shortages, unfair import competition, and shortage of local raw materials …all these affect the whole country.

“If you look into the detail you will see that it is that whole country which is suffering.

“However, in some areas for instance, the shortage of raw materials is felt more in the outlying cities than say in Harare,” the Schweppes boss said.

Msipa lamented on the four-year delay in the implementation of a $76 million Botswana government line of credit facility for industry, saying the country’s economic fundamentals were providing a challenge for his members to secure any required funding.

“It is sad that Botswana facility has so far come to nothing. We are talking to African Development Bank, the European Investment Bank, but the truth is that the political uncertainty casts a dark shadow on any willingness by banks to support the economy.

Our own banks here have tried as much as they can, both local and foreign, but there is a limit to what can be done until as a country we deal with certain economic fundamentals,” Msipa said.

With industry still facing a mammoth task of raising an estimated $2,5 billion required to recapitalise according to the Industry ministry’s assessments and government still clueless on availing the funds, economist Eric Bloch said reconciliation with the international community will be key in unlocking much needed investment into the sector.

“The prerequisites for any substantive industrial recovery are: Access to capital investment, needed in order to replace the capital lost during the 2008 hyperinflation era, compounded by capital losses upon the 2009 currency demonetisation and by Reserve Bank of Zimbabwe retention of export revenues of industries, and the diminution of capital resources from operational losses sustained by most industries progressively since 2005,” he said.

“Restoration of money-market stability and growth, thereby enabling industrial access to money-market funding facilities at tenable interest rates; Introduction by Government of meaningful export incentives; Discontinuance of customs duties and allied imposts on imported manufacturing inputs not available from Zimbabwe sources,” Bloch said.

He said the creation of an investment-conducive environment would also be critical for the sector.

“Ensuring maximised preservation of law and order, inclusive of unequivocal respect for property rights (reinforced by absolute compliance Bilateral Investment Promotion and Protection Agreements (Bippas) and containment of corruption).  

Modification (not repeal!) of Indigenisation and Economic Empowerment legislation, enabling non-indigenous investors to select their indigenous partners, and to have equity participation commensurate with funds invested,” the economist said.

“Constructive taxation measures, inclusive of: Introduction of export incentives, removal of customs duties and allied imposts on imported manufacturing inputs, save and except for such inputs as are locally produced and the substantive alignment of taxation legislation with that prevailing in most of the Region,” Bloch noted.

He said protectionism which has been mooted by Deputy Prime Minister Arthur Mutambara to achieve industrial growth ,would only achieve such a result if its “level the playing field with imported products”, as greater protectionism, minimises competition, would undoubtedly result in substantial price increases, and hence reversion to intensifying inflation.

Industry protectionism is a politically-motivated strategy, mainly used by countries when they think their industries are being damaged by unfair competition by other countries.

According to the Finance ministry, Zimbabwe remains a net importer of South African products with a trade deficit of $3,53 million after it imported goods worth $3,207 billion against exports of $2,674 billion in 2012.

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