Zimbabwe lifts import ban to ease shortages, but this may hurt local industries

Desperate to ease commodity shortages, Government has suspended restrictions on basic goods imports, but the move might increase demand for foreign currency and halt the slow recovery that local industry was making.

Government had “noticed the pain of citizens hence the temporary free importation of basic commodities”, acting Industry Minister Sekai Nzenza told a press conference on Tuesday.

A Cabinet statement said Government had noted that basic goods “continued to be in short supply despite increased production by suppliers, thereby reflecting persistent panic and speculative buying of the commodities by members of the public.”

Government, the statement said, would therefore now allow companies and individuals with offshore and free funds to import goods that are currently in short supply, “pending the return to normalcy in buying patterns of the public and adequate restocking by manufacturers”.

Finance Minister Mthuli Ncube, who had hinted at the move at the weekend, said Government had taken this decision because its priority was making sure that Zimbabweans had food on the table. He insisted that the suspension of Statutory Instrument 122, under which imports were banned, would only be temporary until the economy stabilises.

Among a long list of goods that can now be freely imported is cement, flour, cereals, potato crisps, cooking oil, fertiliser, stock feeds, soap, crude soya, packaging materials, sugar and coffee creamers.

A deepening foreign currency crisis has seen the country running short of fuel, while shoppers have queued up at shops to buy basic commodities, fearful of a repeat of the shortages brought by hyperinflation in 2008.
In 2016, Zimbabwe gazetted Statutory Instrument 64, which required traders to get an import licence for basic commodities.

S1 64 was in 2017 consolidated with various other import licensing measures under SI 122.

The import restrictions in 2016 drew violent protests from traders at the Beitbridge border post, but were was welcomed by the Confederation of Zimbabwe Industries (CZI), which said local industry needed protection from foreign imports as it recovers from years of decline.

And CZI has the numbers to back it up. Industrial capacity utilisation stood at 57.2% in 2011, two years after Zimbabwe dollarised. But after Zimbabwe opened the economy up to a flood of cheaper imports, Zimbabwe’s factories, already weakened by old machinery and high costs, began to fail. Capacity utilisation slid to 44.2% in 2012, 39.6% in 2013, 36.3% in 2014 and 34.3% in 2015.

CZI began to lobby Government to restrict imports, saying local manufacturers needed space to retool and recover without having to compete with cheaper foreign goods. After SI64, capacity utilisation immediately recovered, rising to 47.4% in 2016, before easing off to 45.1% in 2017 as forex shortages worsened.

For this year, CZI president Sifelani Jabangwe had forecast capacity utilisation to grow by up to 6%. Despite forex shortages, industry is currently operating at 20% above its levels last year, Jabangwe says.

Zimbabwean manufacturers have, over the past two years, secured foreign lines of credit from funders on the back of the protection that they had under SI 122. That credit helped many of the companies modernise their factories and raise production, resulting in the return of local products that had disappeared from shop shelves.

According to latest data from ZimTrade, the country’s trade deficit narrowed by 44% between February to August 2018 as Zimbabwean companies began to export more, while import growth slowed. The suspension of the import ban is likely to see the trade deficit widening as traders import more goods. Demand for US dollars may also increase.

Retailers have been pushing for the import ban to be suspended, but United Refineries CEO Busisa Moyo has warned that this would hurt local manufacturers, increase demand for the US dollar and drive up commodity prices even higher.

“If government accedes to their request we will create more pressure on the parallel markets and ‘street rates’ will hit 10 on the back of increased demand to satisfy new import lines,” Moyo said.

On whether the new measure will not damage industry, Ncube said there were “Barbarians at the gates”, referencing a Wall Street novel to stress that immediate steps had to be taken to contain inflation.

“Of course we’re concerned about jobs, but at the moment the issue of price increases is the issue we have to deal with right now as we head into the festive season to make sure there’s enough supply of basic commodities at reasonable prices and to make sure there’s no wage pressures,” Ncube says.

Ncube said Government would not control the prices of imported goods. And, in a further sign of Zimbabwe stumbling towards liberalising its currency market, Ncube also said Government “doesn’t want to know” where companies source their forex.