HARARE – The Confederation of Zimbabwe Industries (CZI) says government must address the country’s ballooning current account deficit to facilitate revival of the economy.
The industry body noted that despite commitment to protect local manufacturers through imposing tariffs and surtax, imports continue to rise.
According to the African Development Bank (AfDB), Zimbabwe’s current account deficit widened to almost $2 billion in the first five months of the year due to falling exports.
“We understand that blanket approaches have not shown success in other countries and that a targeted strategic approach is required,” said CZI in its contribution to the 2014 national budget.
“We recommend that a task force be set up within government to analyse imports and identify constraints that prevent local companies making these same products competitively. This analysis would be sector by sector staring with priority sectors. Targeted policies can then be implemented by sector.”
CZI said this strategic approach has been successfully used by Asian countries to develop their local industries.
“The decrease was mostly caused by the sluggish performance of exports, which generally decreased compared to the same period in 2011 and 2012,” noted the AfDB in its latest country update.
In the year to May 2013, exports fell by about two percent from prior comparable period.
AfDB said Zimbabwe’s exports continue to be dominated by primary products, constituting about 62 percent of total exports.
Tobacco makes up about eight percent while sugar constitutes around four percent of the exports.
“This demonstrates the potential that the country can have in value-added exports, harnessing the competitive advantage it already has in these primary products in the export market,” said the AfDB.
Imports, on the other hand, increased by about 23 percent in the period under review compared to the same period in 2012.
AfDB noted that the increase in imports implied the crowding out of locally manufactured products from the local market, at a time when they are also struggling to gain a foothold on the export market.
The main drivers of imports included fuel, which constituted about 20 percent of total imports, followed by motor vehicles at about seven percent while basic food imports such as maize, wheat, rice, millet, oats and barley constituted about five percent.
In its other submission CZI recommended government to postpone the implementation of the new tax bill and give more time for resolving the outstanding items.
“It had previously been agreed that surtax revenue will be ring-fenced and re-invested in industry. We recommend the implementation of the ring fencing and the use of these funds to recapitalise industry,” said the industry body.
CZI noted that porous borders were costing the government revenue and undermining industrial policy.
“Modern technology such as number plate recognition and satellite tracking can help reduce smuggling. We recommend that Zimra redoubles their efforts to cope with this problem,” said CZI.