Zimbabwe is lifting restrictions on the import of basic goods and paying maize farmers partly in US dollars.
These two moves, announced by Finance Minister Mthuli Ncube on Saturday, may cheer traders and farmers, but it desecrates the government’s own gospel on backing local products and supporting the Zimbabwe dollar.
“To further ensure that citizens have access to affordable basic commodities in the face of recent substantial price increases in the shops, the Government hereby opens up imports of basic commodities by citizens through the lowering import tariffs and other accompanying measures,” Ncube said in a statement.
“Those with free funds are, with immediate effect, permitted to make use of these funds and other resources to import basic commodities.”
Impact on industry
Zimbabwe has over recent years restricted basic goods imports to protect local industry. Import restrictions were imposed in 2009, and removed two years later. The impact was telling on local industry; capacity utilisation fell from 57% in 2011, to 44% in 2012, and then to 36% in 2014.
In 2016, government banned basic goods imports, allowing industry to start recovering.
The ban was lifted in 2018, but Government has maintained restrictions on imports through import licences and tariffs.
Government has boasted that 70% of the goods on shop shelves are now locally sourced, up from as low as 5% in 2017. Authorities credited their policies to protect local industries and provide forex to manufacturers for this recovery.
The CZI reports capacity utilisation in 2021 at 56.25%, the best it has been in a decade. Manufacturing output rose 30% last year as most manufacturers reinvested in their business, putting in a combined US$147.1 million to increase production.
But allowing unrestricted access of foreign goods is likely to disrupt this recovery, according to Andrew Beasely, whose company manufactures a range of household goods.
“Zimbabwean companies face a complex mix of unique local conditions, like high inoit prices,” he says from his company, based in the Ruwa industrial park. “Around the whole world, economies are looking within and protecting their industries right now. Here we are, doing the opposite.”
The new measure may also increase demand for US dollars, hurting government attempts to shore up the Zimdollar, he said.
The US dollar has strengthened, reaching its highest level in two decades last week. This means imports will be cheaper than local goods. It also means that local manufacturers have to pay more for imported inputs, such as raw materials and equipment.
But the move to allow more foreign goods is good news for some cross-border traders, according to Augustine Tawanda of the Zimbabwe Cross Border Traders Association.
“This will force local producers to reduce the prices to regional parity levels,” he says.
More pressure for Mthuli: USD for farmers
Maize producers will also now get part of their payments in US dollars, government says.
“Government has taken the decision to pay maize farmers 30% of the amount due on grain delivered in United States Dollars and 70% in domestic Zimbabwe dollars. The US Dollar payment will be calculated at the prevailing willing-buyer, willing-seller rate published by the Reserve Bank of Zimbabwe on the date of delivery. The payments will be backdated to the date of the first deliveries of this season’s maize to GMB,” Ncube said.
GMB is currently paying $75 000 for a tonne of maize, which farmer groups say is not enough to cover rising costs and make farming profitable.
Zimbabwe produced 2.72 million tonnes of maize last year, its best harvest in years. But this year’s harvest is expected to be 43% lower at 1.56 million tonnes, according to projections by the Ministry of Agriculture’s latest crop assessment.
The new concession for maize producers will set a precedent for farmers of other crops to demand the same.
In Parliament last week, Ncube came under pressure from MPs from across the divide who demanded that farmers be paid more for their produce.
With no foreign budget support and no access to credit, Ncube is already under pressure to find US dollars from taxes to pay civil servant allowances. He also needs more US dollars to pay debts, now more expensive because the USD is now stronger. The government also needs more USD to import essentials, given that the prices of goods has increased in US dollars globally, pushing up Zimbabwe’s import bill.