Companies to procure 50 percent of goods locally

Hon Chizema Cleveria Farai (13)

Senator Cleveria Chizema

Herald Reporter—
ALL companies operating in the country will have to buy 50 percent of their goods and services from indigenous suppliers if ongoing amendments to the Indigenisation and Economic Empowerment Regulations are approved. Section 12 of Statutory Instrument 21-2010, as amended in March, required that all public institutions procure at least 50 percent of their goods and services from indigenous suppliers.

But appearing before the Parliamentary Thematic Committee on Indigenisation and Empowerment yesterday, officials from the National Indigenisation and Economic Empowerment Board said they were now targeting the private sector as well.

Zanu-PF Senator Cleveria Chizema chairs the committee.
“We are currently working on amending Indigenisation and Empowerment regulations so that the requirement that companies procure at least 50 percent of their goods and services from indigenous companies spreads or covers private companies as well,” said Nieeb chief executive officer Mr Wilson Gwatiringa.

“Currently, the regulations talk about those companies which procure their goods and services in terms of the State Procurement Act which then means the public institutions.

“But what we have been doing over the years is to engage all the companies that we deal with as we assess indigenisation implementation plans to have them procure at least 50 percent of their goods and services from locals so that we get business for indigenous companies.

“It is pleasing to note that a lot of the big companies, particularly in the mining sector, are actually doing exactly what we asked them to do.
“They are procuring locally as much as possible except obviously for those specialised services which maybe are not available in the country.”

Mr Gwatiringa said his board was engaging the State Procurement Board to ensure there was bias towards buying local goods and services.
In an interview after the meeting, Mr Gwatiringa said the 50 percent procurement threshold was sustainable despite statistics from the Confederation of Zimbabwe Industries showing that industrial capacity utilisation was below 40 percent.

“If a company invites suppliers, those with capacity will be able to supply,” he said. “We are regulators who want to see local companies being empowered and we believe it is sustainable.

“The State Procurement Board will be very much involved in ensuring this is adhered to.”
Mr Gwatiringa said about 1 470 indigenisation plans had been processed, with the mining and manufacturing sectors leading with 464 and 401 respectively.

On financial institutions, Mr Gwatiringa said, Government did not intend to “indigenise depositors’ money”, adding that negotiations with the financial institutions on indigenisation mechanisms were still underway.

He said a taskforce had been set up to inspect all retail shops operating in the country to establish if all of them complied with the Indigenisation and Economic Empowerment Act on reserved sectors of the economy.

Mr Gwatiringa said they received about 1 300 indigenisation compliance certification applications, with about 600 others having been issued.
The applications are in compliance with a May 17, 2013 Government Gazette regulation making it mandatory for all local and foreign firms in reserved sectors to apply for indigenisation compliance certificates by January 1, 2014.

He said out of 61 registered community share ownership trusts, 16 were operational across the country.
He said companies in community share ownership trusts pledged about US$116,4 million, but only US$30 million had been disbursed.

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  • Fghh

    Excellent. Very well done. This is going to exacerbate the confidence/liquidity crisis and make things worse. One thing you can always rely on is the ability of this government to do the wrong thing

    • Jotham

      How?. May you kindly elaborate . We should give a detailed analysis. as far as I am concerned you have said nothing

      • mwanawevhu

        He is saying they are idiots the whole lot of them

  • Nyika yedu

    While it makes sense to support local business people one wonders which ones are these, the cross boarder traders and expensive ones. It is obvious that the local manufactured goods are expensive because as a country we compete with companies that enjoy economies of scale. If you are to buy a fabric from the local textile industry running on equipment of 1940 -1980s you can imagine their costs to produce and it means they will price it to make a profit. Who suffers the ordinary man you are trying to assist. Rather assist the local companies to reach high efficiency levels. I want to give a practical example, I worked for David Whitehead Textile, the machinery is as old as you can imagine. We had serious challenges with electricity, each time you have electricity the first thing to do was start your boilers, it takes at least 3 hours to get enough pressure to start production and many times electricity would go off when you are ready to start and that would mean loss on burnt coal couple of tonnes. From where do you recover such losses, the result is you can not compete at all.
    I believe the most important thing to give every citizen better life, this legislation will assist a few to reap from the poor as they will cover their ineffecincies.

    • priska

      wonderful contribution Nyika

    • uMkhonto

      The government is its own worst enemy. The government is responsible for this mess.

      THE SOLUTION TO THIS MESS IS AS FOLLOWS;

      1. The government should stimulate investors into the country so as to open factories, companies for people to get employment. In turn these companies will pay tax to the government and hence be able to afford service delivery.

      2. The government should STOP SCARING AWAY INVESTORS. The government is shooting its own foot, and guess what, South Africa is benefiting from this. Now investors prefer South Africa over Zimbabwe. The government is indirectly campaining for investors to go to South Africa instead of Zimbabwe. Example, China build a huge complex to sell goods to Zimbabweans, but this complex was not build in Zimbabwe but rather in Mussina South Africa. The Chinese in Mussina are even enticing customers through speaking in Shona and Ndebele.

      3. South Africa is thriving because it does not scare investors. There are even many Zimbabwean investors in South Africa mainly because our government is scaring them with its contradicting policies. The Zim government tounge is forked like that of a reptile, it tells investor to come and voetsek (go) in the same breadth.

      4. The so called indegenisation policy is not unique to Zimbabwe, its also there in our neighbouring Botswana. The Zim government should ask itself this: Why is theindegenisation policy working nicely for the Botswana people while ours is SCARING INVESTORS. The Zim government should emulate DEBSWANA (a company partnership between DEBEERS and Botswana government).

      5. The Zim government should create an enabling working environment for business so as to maximise tax revenues.

      6. The Zim government should be open to constructive criticism.

      • Jotham

        You are preoccupied with South African Issues. We need our solutions here right now and not tomorrow. This issue of coping others is not sustainable at all.

    • Keith

      so will u rather the current system continue??

      • Jotham

        That is not correct. A good deed must be supported and be improved as we go along.

    • Jotham

      Your(Nyika yedu) analysis is very reasonable in economic terms. I salute your wisdom because you have highlighted the positive aspect of this proposal , whilst at the same time acknowledging the problems faced by local industries ie ZESA power availability, and old machinery and also looking at costs incurred by local producers versus developed nations that enjoy subsidies and cheaper raw materials. There are those who oppose for the sack of it. Your last sentence though i am not agreeable to it. Lets us condemn after rather than before.

  • Moyo Chirandu

    ..are there companies with that capacity to provide the 50%. You guys need to be serious

    • Jotham

      The truth is that 50% threshold can be attained, the problem is that local goods have no takers at all. Imports are dominating the supply chain, this will result in a large import Bill. In my view this is the most reasonable proposal ever. My wish is that all local companies be considered. Foreign companies have by and large sold the 51% shareholding to locals or are in the process of achieving that mark. The 50% proposal is a welcome move though I would have prefered 65%. This will afford local companies to expand their operations , thus creating employment. For those opposed to this suggestion or proposal, I beg them to be economical minded. Imports have generally improved the availability of goods at cheaper prices but at the same time making sure all local companies are decimated. The country will save a lot of foreign currency, currently all the incoming money is flying back to South Africa and other countries. The goods that we are able to manufacture should never , never be imported eg Chicken meat/Beef, potatoes, maize meal, cooking oil, both bath and washing soap. Stationery eg school exercise books etc must be produced local. How can we grow the economy?. The usual excuse is we should allow foreigners to dominated the economy. May Zimbos believe in themselves. This proposal will bring better results for everybody. We can’t be cry babies always.50% of all the money being paid to Botswana and South African companies will be saved. All companies(including retailers) should be made to pay 20times at the borders if they exceed the 50% import threshold.

      • masvukupete

        At the same time the local companies need electricity to produce enough to meet the demand. May even be shooting our left foot. The right foot we have already shot it through mismanagement of many many many many aspects of out economic system. The strategy is too haphazard. We need to look at what is it that should be done to ensure reduction of imports. Using the 50% route is like plugging the holes instead of repairing the source. We need to start assessing how we can strategically start the process of growth. Due to limitation on space I will list my perceived list. First and foremeost reduce the civil service wage bill. Retrench them and give them land as retrenchment packages. 2 Transform the parastatals into public companies and give those who do not want land shares to sell or manage the cooperates as public co-operations. The saved money can be used to make power available. It is the most viable infrastructure that is in short supply. Magetsi akamirirwa nemaziso matsvuku. Once magetsi avapo we now saving money on magetsi import bill. Give farmers bankable titles and that will most probably sort itself out. No more raw food imports. From there we can start rescucitating the Ziscos, Batas, Blue Ribbons, Victoria Foods etc, after which we can then go into the textiles, higher grade steels etc. Project timeline for all these accomplishemnts 30 years +. My point the implementation should be systematic. We did it with land reform and we are repeating the same mistake again. Systematic implementation. In 30 years we could be having a 30-40billion economy. Allow dual citizens diaspora kids to come back and use their western skills to implement what the grew up with.

  • Power

    This will just kill the economy, because TM and OK will have less stock or will have them at higher prices after sourcing them from local indigenous guys who would have imported them, its disgusting.

    • Jotham

      No to imports . The goods being referred to are local manufactured goods.

  • Kholiwe

    No problems if indigenous suppliers can provide the same goods with the same quality and for the same prices or less? Anything that pushes up inflation and unachievable PDL wage rises is unaccepable, just another example of incompetent Government legislators shooting themselves in the foot!

  • Jackie Dube

    Grow the economy first this is like putting the cart before the horse simple maths grow the economy stop stealling money and put your country first no your pocket

  • nine

    Most products we get from these so called suppliers have inflated prices. Who are we supporting really? When one crosses Limpopo, you get the goods at almost half the prices we get from these so called indigenous people in Harare. They really need to think twice before they push such a bill into motion.

  • Mupinyu Wasvotoka

    Honestly everything happening in this country beats me.
    When industry is closing left right centre , why insist on Indeginization of the few remaining companies when what we need is more companies opening up. ?Everyday at least five companies are closing. Which business can procure at inflated prices when they can import at one-fifth of the cost, and remain in business? You honestly think this makes sense.? Why do you want to force established businesses to close? Every business has a procurement Model and by forcing them to change that strategy you are simply asking those businesses to CLOSE. This Zanu pf govt is bankrupt of ideas.

    • Keith

      in SA and other countries u musty procure locally whether u like it or not

      • Nays

        Is it so???? Not necessarily. If the goods are available at reasonable prices then locally but if not then importing will be a good business decision.

        • Jotham

          The problem is that you are an import.

      • masvukupete

        In SA its not even close to what you are saying. If you purchase locally or employ locally or train you get BEE points which help in getting government contracts. However its not a given that just because you buy locally then you get government contracts. They use a point system, although not perfect but much better than the proposals above. In the USA, they are getting a lot of their goods from China partner companies that the US set up in China to cheaply manufacture. Uchenjere kutaura zvemasanctions zvakubuda mufashoni kudhara.

      • Mupinyu Wasvotoka

        Keith i also run a business in RSA and i import my goods in containers from China. At times for small orders i buy from local RSA producers but where volumes affect cost considerably i import esp from RSA and China. No one in RSA forces me to buy locally although i am a Zimbabwean. True Capitalism works like that kwete zveku trya ku diverta attention from Corruption Issues zve ZANU PF to a confused Indeginization policy

  • Skende

    …..local companies importing from sa and china? Lets get our facts right or we will force the companies affected by this directive to fold.

  • concerned

    this is a nonle idea but wat i have seen of late is that zimbabweans dont respect other zimbabweans. i would like you to investigate how many people are 1) cheated of goods supplied. 2) how many invoices are being paid or how many are now bad debts. unless we have a watchdog who can blacklist people we cant impliment this and really nake it work. you saying 50%. what is that which you are saying 50% do we still have in zim. i dont like it when people go into an office and try to change things without really investigating the mordalities. in the previous years we saw the poultry industry come in the open lie to us saying they can meet demand so ban imports. when the imports where banned see wat they did they increased the price of the commodity. so who is fooling who here. i want a law that can safeguard me as a consumer from greedy opportunists. first put in place legal frameworks to help people so that they are not robbed, exhorted, manipulated etc when such things are in place then we go to put laws of 50%. the truth is some of us dont trust each other and its better to do business elsewhere

  • bodo_kwete

    in my view business doesn’t work that way. You can’t force people to swallow poor services from undercapitalised local companies whose ethics leave much to be desired!

  • Gandadema

    A foreign company operating and producing locally, importing the material and exploiting local labor, is that the locally produced goods we are talking about?// and do we have enuff of those to enforce such laws, i don’t think so???

  • Chenhamo

    Look at the number of jobless people. Look at the levels of crime, People being robbed mumakombi etc. What people need now are jobs not indeginisation. We do not have the capital or technological capacity to rebuild our country on our own. Indeginisation will never work. Many African leaders act as if they support our radical empowerment policies but the real reason is that they realise that Zimbabwe is a threat to their economies and would rather have us implement disastrous policies which they will never implement in their countries.

  • Gandadema

    Moderater ko maisepi comment yangu, i was just saying with the state of our economy at the moment we cant enforce such laws. The success of the indeginization itself is still questionable, so lets put such laws when its possible to do so.

  • Zimbabwe United

    How is 50% of a business’s imports measured?

    1. Is it 50% of imports per week, month or year? How is the 50% to be measure in cases where the balance of production inputs are to be purchased at some future date, at which date the prices of the imports compared to the value of domestic purchases are not known in advance?

    2. Is the value measured in volume terms or in dollar terms?

    3. Which price is used for measuring the value of domestic purchases? Is it the price prevailing at the most price competitive supplier either internally or externally.

    4. What happens in cases where the domestic suppliers want upfront payment whereas foreign suppliers accept long term payment plans?

    Just thinking loudly of course.

  • NIgel Mavunga

    My question is when
    is the real Indigenisation and Empowerment going to take place? We are aslways hearing the same song with nothing tangible. We have read how stocks valued in
    billion set aside for Indigenisation, how certain industries have been reserved for Indigenisation, Now we have people legislating
    the demand and supply of goods. When is the action going to begin?

  • Zimbabwe United

    What?

  • Mimi

    Indigenization itself is a noble idea but it is the putting it in practice that is the biggest hitch. For starters the very people that campaign for indigenization are the ones that will grab or take the given opportunities and so the circle goes round and round. Instead of the government ensuring that the unemployed at least get a change to be Indigenized the same Ministers, MP’s, Big Fishes from the so many Parastal Boards are the ones given the priority. Zimbabwe is fast becoming a bourgouisie kind of country where the rich get richer and the poor get poorer. The looses being suffered by local business people are immeasurable. So long as the normally expected services like ZESA, water are hard to come by the nightmare will continue unabated.

  • Mushenairi

    Procuring locally sounds good on paper, but which goods are still made in Zimbabwe? Which local manufacturing industries are being protected?