EDITORIAL COMMENT : De-dollarisation opens doors for industry

Among the positive results of de-dollarisation and the switch from using the US dollar to using our own Zimbabwe dollar has been the substantial boost given to local industry.

During the multi-currency era, industrialists frequently complained that imports were flooding the country, crippling their operations and that the use of a currency that was stronger than that of their regional competitors was giving those competitors a competitive edge.

They were looking for statutory protection from the Government and greater efforts to combat smuggling so that they could fill a greater share of the local markets.

They had a point.

With dollarisation, factories closed or production declined dramatically because imports became easy and cheap and there are large groups of Zimbabweans who tend to go for global brands or who prefer imports over local goods simply because they are local.

A stroll through any supermarket 18 months ago would have found that for most products, imports predominated, and the same was seen in many other businesses where there were high quality local products at competitive prices.

The simpler process of procuring foreign currency for imports of raw materials did not really compensate for the same ease that retailers had in buying foreign-made goods.

Efforts by the Government to give some protection by limiting the scope of the open general import licence did not help as much as was hoped, although it did offer some temporary relief.

Since the reintroduction of the  Zimdollar and the liberalisation of exchange rates, the situation has changed.

Local products are now usually significantly cheaper than imports and local suppliers have that advantage; an advantage that comes from market forces, not from fiat by politicians.

And that sort of advantage is important because it is a natural advantage and one that arises from following the laws of economics.

Even smugglers cannot overcome this; cheating is often impossible as a result.

This is not to say that industrialists do not have complaints.

They are almost as bad as farmers. But their complaints are different.

They complain about Zesa and load-shedding. They complain about delivery trucks stuck in fuel queues.

They complain about the sometimes cumbersome interbank foreign exchange market, despite the improvements that are continuously being made.

And quite a few are not complaining because they are too busy managing their business and looking for new markets and new customers.

The same stroller in the supermarkets will now notice that for many product lines there are only Zimbabwean products, and consumers will be pleased to note that there is growing competition, which tends to help reduce inflation rates since monopoly premiums are rarer.

There are still whole blocks of products where local manufacture is weak or non-existent.

Shelves for personal toiletries and hair products, for example, and laundry detergents are now dominated by a range of locally-manufactured goods.

So there are gaps that need to be exploited by local manufacturers. And some of these gaps were once filled by local production or packaging, in the days when the Zimbabwean economy was largely a closed economy with imports strictly controlled by licence. So in many cases, it needs businesses restarted or reopened.

The dollarisation era did bring home some valuable lessons.

There were local manufacturers who in the closed economy reckoned they could sell rubbish at high prices. They deserved to go when imports became readily available and few will regret their passing.

Others survived and rebuilt their businesses and production lines, stressing quality and value for money.

These are the people who have been able to expand as imports dry up. They still need to remember the really bad days, and remember that the Government’s new stress on making it easy to open a new business will make it easy for a competitor to move in if they produce low quality at high prices.

But this time, the correction will come from market forces, neither from Government intervention nor restrictions on markets.

Consumers are now price conscious.

Brand loyalty is fast declining as more and more consumers are at least willing to try a new and cheaper brand, and if the quality is acceptable to then stay with new brand until an even newer one comes onto the shelves at a lower price, encouraging further experimentation.

There are still in the small Zimbabwean economy near monopolies and potential, or even actual, cartels. It is difficult to understand, for example, how the three major bakeries can all charge exactly the same price without some sort of deal, even an implicit deal rather than some secret handshake on a golf course by three chief executives.

But cartels can be broken by increased competition, which is why it is so important that efforts to make it ever easier for new businesses to open are pursued and the Government agencies responsible for hunting down restrictive practices work harder.

But, generally, by becoming a more normal country Zimbabwe is on the way to productive growth, rather than being just a consumer.

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