Bernard Bwoni Correspondent
The argument that Zimbabwe does not have any industry to protect, thus protectionism will not work, is an unfortunate and a very reductionist argument.

The Zimbabwe Government has been making bold, but very unpopular decisions to help stimulate domestic manufacturing and enhance exports.

The anti-protectionism dialogue in Zimbabwe has been mainly centred on the argument that the country’s industry is not in its infancy, but simply operating at way below capacity, thus does not require any protection. However, the fact that Zimbabwe’s industrial capacity utilisation has declined to below 50 percent in effect means that most companies have no capacity at all and thus technically in their infancy.

They would require a period of protection and promotion to allow them to build capacity and to be able to absorb new technologies to enable them to compete with those countries which benefit from much large economies of scale. The two sides of the protectionism debate in Zimbabwe need to be sincere and factual and not simply driven and determined by emotions alone.

There are many who challenge the quality and pricing of the domestic product and that is a valid and necessary argument. Local producers have in the past been notorious for producing low quality products, charge very high prices or create artificial shortages or scarcity to increase the prices of goods.

Many consumers in Zimbabwe are very sceptical of domestic products and it is now up to local producers to reassure consumers with ethical and professional standards of doing business. The emphasis should be put on quality to be able to compete with products from more technologically advanced economies. Their niche should be the quality and the price to win over suspicious Zimbabwe consumers.

The prices of domestic products have always been a sticking point with consumers preferring cheaper options from abroad. Domestic producers have always argued that their production costs are often higher and hence the pricing structure of their products.

Because many are producing at a much smaller scale, their production costs are initially considerably higher. Thus to make a profit or break even, they have to charge accordingly. However, the tendency of Zimbabwe producers and businesses in general of wanting to make a killing with massive profit margins is unsustainable.

There is need to start looking at volumes rather than these unrealistic prices to make profits. This however, does not diminish the fact that domestic industry in Zimbabwe requires a period of protection. In 1791, the then American Treasury Secretary, Alexandra Hamilton argued successfully for American industries to be given the cushion of an initial period of protection against foreign manufactures. Hamilton argued that local industries would be hampered during their infancy if exposed to direct competition from the more developed economies who had started benefiting from much larger economies of scale.

The US, Great Britain, Japan and most advanced nations of today developed on the backdrop of heavy protectionist policies to cushion domestic industries when they were in their infancy.

Zimbabwe producers and manufacturers have always argued that they are failing to build capacity due to the unrestricted influx of cheap and non-essential imports into the country. They have repeatedly called on the Government to provide them with a period of protection so as to enable them to build their capacity. The Government recently responded through the Statutory Instrument 64:2016 placing a ban on certain specific non-essential imports into the country.

The response from the South African retailers was unprecedented but predictable. This reaction from across our southern borders reveals the complexities of the one-sided nature of the trade relationship between Zimbabwean cross border traders and South African retailers. The retailers in South Africa demonstrated against the import ban as it drastically impacted on their livelihoods.

The whole value chain, backward and forward linkages, was severely disrupted by this ban. The Zimbabwe cross border traders demonstrated as their livelihoods were inextricably linked to these imports from the south. The timing of the ban is not exactly convenient as the country’s economy is very weak and many rely on importation of goods for resale in Zimbabwe to make ends meet.

The demonstrations, valid as they were, do not diminish the equally valid case for domestic industry protection and promotion. The country is importing very basic products that can be easily manufactured locally. The less unnecessary imports into Zimbabwe, the better for domestic products and manufactures.

However, as already indicated, domestic producers ought to be realistic when it comes to quality and pricing. The Zimbabwean consumer of recent years has been spoilt for choice with a variety of imported goods. The quality of goods produced locally has to compete with what local consumers have gradually got accustomed to.

The key to a successful relationship between the Zimbabwean consumer and locally-produced goods is the price and quality primarily.

The consumer has to be convinced that moving from the imported product to a local one will not mean compromise on quality and price.

They need to have a good quality product which is competitively priced.

The products that fall under Statutory Instrument 64:2016 are products that are being produced locally and are available. The ban on imports will create opportunities for local firms and producers to start producing or making these products. There is a likelihood that exports will increase and with increased exports comes economic growth.

Economic growth means employment opportunities and employed people have money to spend in the economy. There are some who have argued that the timing of statutory instrument 64 of 2016 was probably ill-conceived and that is a fair assessment. The country is currently going through a difficult economic period; people have no other sources of income and buying and selling imported goods sustains livelihoods for many. This was a tough decision that had to be taken, timing or no timing.

The country has to start creating formal employment opportunities to support tax revenue generation for public services delivery. With formal employment, a middle class will eventually emerge and a bigger middle and working class in formal employment paying taxes will enhance revenue collections through taxes to fund public goods and services.

To create regular formal employment requires a sound and fully operational manufacturing sector. An increase in exports facilitates a sound manufacturing base, and to enhance exports may in some cases mean a reduction in imports.

The Government is reportedly considering regulating the numbers of haulage trucks on the roads to help revive the National Railways of Zimbabwe (NRZ). This is not entirely an ill-advised move and it will definitely help stimulate the ailing national rail system. There are pros and cons to the move.

The haulage trucks sustain livelihoods for the individuals who own those trucks and one or two drivers they employ. On the negative side, the haulage trucks have had a disastrous record on the country’s roads. Many accidents and deaths have been due to these monsters on the roads.

They cause the most wear and tear on the country’s roads. The NRZ on the other hand will potentially employ more people, directly and indirectly and this is for the greater good of the country and economy. The timing of this would be very inconvenient due to the disabling and difficult economic conditions in the country.

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