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Parliament recently gave the green light for Zimbabwe to join the Africa Continental Free Trade Agreement (AfCFTA) which will see improvements in intra-trade activities across the continent. This has been projected by experts as a key step in ensuring focused growth in participating economies, our Features Writer Leroy Dzenga (LD) interviewed Industry and Commerce  Minister Mangaliso Ndlovu (MN) who unpacked the benefit of the move. He also spoke on other issues. Below are excerpts from the conversation:

LD: The Zimbabwean Parliament recently okayed the ratification of the Africa Continental Free Trade Agreement (AfCFTA) which is left with one signature to be implemented. How will that benefit the Zimbabwean industry once in effect?
MN: Twenty-one countries have ratified and I think we are country number 21. As per the agreement, once 22 countries ratify and then the agreement is implemented. The basic tenets of this really speak towards opening borders. We are saying within Africa we need to take deliberate strides to improve intra-trade. You find that as it stands, African intra-trade stands at about 15 percent, Africa trades with Europe up to about 59 percent and that is a major cause for concern. Africa has huge potential, moving forward we are currently about 1,2 billion population, which is not tapping into its potential. Forecasts are saying that by 2050 we will be having the highest population around 2,5 billion. As it stands, we have the youngest population so from a business point of view this presents numerous opportunities. We looked at this and said, Zimbabwe only has 16 million people therefore we cannot confine our industry to focus on Zimbabwe only. Opening up borders will give us access to a bigger market.

LD: At a time when we are trying to tap into all possible revenue areas, how does the AfCFTA tally with those efforts?
MN: As Zimbabwe, we have battled under sanctions for far too long which has negatively affected our industry. Some of our companies have failed to retool to keep up with technological changes. We had to request that we are given reprieve in complying with the tariff regime that the AfCFTA is coming up with. That reprieve was originally given only to least developed countries and by definition Zimbabwe is not. It is the only country which is not a least developed country which is part of that. What is means is that we will only comply fully with the provisions of AfCFTA after 15 years and complying fully means 90 percent of our products would have removed tariffs. Between now and 15 years, we have this window period for us to rebuild, retool and build key competences while accessing the African market. They will be accessing the African market but we will still maintain our tariff regime at least for 15 years.

LD: With our current currency issues, how competitive will we be against countries that have relatively more stable currencies on the continent?
MN: Liberalising our currency, the RTGS dollar its devaluation has made us slightly more competitive because most of our local production costs are in RTGS dollars. Not all of production costs have increased as of now, but we know there is this tendency to increase prices willy nilly. What it then means is that in a global perspective, our products are now being produced at lower prices than when our rates were at par. The currency reform as we progress will ensure that we have more competitive products being exported. Make no mistake, a stronger currency to be precise the US dollar was not good for this economy. We now have our own currency which I am told is 1:3 now, that is a step in the right direction. What is needed now is consolidation to see the convergence between the parallel market rate and the official exchange rate so that we deal with the arbitrage situation that is obtaining in the market. We can only build a strong economy when we are exporting and earning foreign currency, this is the challenge being faced by industry we are not earning enough. We believe if we focus more on exports and import substitution, this will have a positive effect in stabilising our currency. A stable currency breeds confidence in the economy and this is what we are looking at.

LD: If my reading is correct, the AfCFTA could see some foreign companies exploring the Zimbabwean market. How attractive are we as a business destination with the existing concerns on policy inconsistency?
MN: I do not subscribe to the rhetoric that there is policy inconsistency. I would like to be schooled on the specific issues that people are referring to. I believe we have been very consistent as Government. We have come up with the Transitional Stabilisation Programme which we have been following judiciously. We are even close to having an institution that processes efficiently all investments that are coming into the country. We are committed, we are walking the talk. We have indicated that our priority is to create an environment which is conducive for investment. Property rights are protected in the new Zimbabwe Investment Development Authority (Zida) Act, we have also guaranteed that investors will be able to repatriate their earnings in quantum they will find fit as long as it is in compliance with our statutes and Reserve Bank requirements. So, we are making sure that we are creating an environment which compares positively with any environment out there, we know there is competition for investment and we want to make sure Zimbabwe is up there as well.

LD: We have seen a penchant for profiteering from our local businesses and we have seen many times Government sitting down with industry in search for common ground. Are we ever going to see the business ecosystem functioning without the need for Government to intervene, especially regarding prices?
MN: As it stands, it is quite clear that industry is functioning without Government intervention. I don’t think if Government kept intervening it would function the way it is. There is so much consumer abuse in the market as people are taking advantage of our position as Government that we want to have as minimal a role as possible in the market. We just do not want to regulate, but to provide the necessary support for the private sector to thrive. This is what we have been doing. When we interact with them, the primary objective is to understand the challenges they are going through but we have been intervening in a way where we come up with subsidies for the private sector. We don’t subsidise on the private sector to make profits but for them to pass on this benefit to the consumer because ultimately this is our main concern. There is a proliferation of bad tendencies in our business environment, people are increasing prices at a rate I cannot even put reason to. When I tried to engage some, they gave me the excuse of foreign exchange rates and to me that does not make sense at all. Why are we benchmarking our prices on the foreign exchange rate? For starters, the private sector made significant contributions towards liberalising the currency, they sugar-coated the whole thing but as a listening Government we took their contributions on board. Largely, what you saw in the Monetary Policy really came from the private sector, I think a number of them have been on record acknowledging that. Now, any business in manufacturing if you find your cost component consisting more than 50 percent of imports or requiring foreign exchange then your business model needs to be revised. By and large you will find that most of them, their importation of raw materials is between 15 and 30 percent of the cost. This is another anomaly but we will address differently. On a daily basis, if the rate changes in the parallel market the private sector is adjusting their prices with the same margin or more. That tells you that prices are not based on any fundamental economics but thumb sucking the parallel rate. Why is that so? No one is taking the private sector to account. When prices go up, people call the Minister of Industry and Commerce asking what we are doing about prices. Again, we need a mindset change on that because it is not the Ministry that sets the prices, we can only engage. However, we want to engage people who are keen to revive this industry and I am not seeing that as of now. I am not seeing commitment from the private sector to complement efforts from Government in reviving this economy. I am seeing people who are confrontational, I am seeing people who are bent on sabotaging these efforts. We are worried about that, because we provide all the support necessary to the private sector that is not being complemented. I think our engagements will have to toughen up a bit. We have to close the gap. We cannot achieve our goals if we are this divided. If our goals are diverse, we need to make sure that we align our goals and work for the economy and people of Zimbabwe.

LD: We are capping the first quarter. I would like your appreciation of the state of the industry as of now. Have we made progress since your entry into Cabinet?
MN: I want to look at our contribution from the first policy pronouncements that were made and these were on October 1 last year which were the Monetary Policy and the Fiscal Policy. I think we all know there was chaos that came after that, inflation shot up, we had all sorts of problems like product shortages. This led to us as a ministry to amend SI 122 where we had to open up borders because there were shortages. That stabilised prices a bit because we knew that we were producing the products but they were being hoarded somewhere. Hoarders were forced by the prospect of foreign products coming into the market and they began releasing the products which were being held elsewhere. We then had our challenges, especially of foreign currency which has become a perennial challenge by the way. The last quarter has always been problematic because it is rainy season and the gold sector does not do too well. It will also be far from the tobacco season and our earnings will be deployed elsewhere. We faced similar challenges, because overtime we have failed to address structural problems in our economy. This speaks mainly to our failure to innovate and our failure to address problems of relying on imported raw materials. This came at a time when 2018 saw the economy growing, there was increased demand of the product which meant increased demand for foreign currency to import raw materials. So that affected our third quarter quite heavily, we had reduced capacity utilisation because most of the companies could not access the hard currency to import raw materials.

That obviously affected our first quarter and that led to the February 20 monetary policy statement which liberalised the currency. We saw price stability up until the last two weeks when we saw prices going up. This is on the prices side. On capacity we have agreed with industry that we need to have an objective assessment. My feel is that companies are yet to come back to full throttle because we still have challenges with foreign currency. I am saying this highlighting the state of our industry and the economy at large. We are relying so much on foreign currency, everyone on the street is talking about the exchange rate. That mentality has to go. It is my view that we don’t need to continue on this trajectory. When we grew this economy, the last three years it was largely on the backdrop of the RTGS and the bond note. I think, unless we move back to that, where our RTGS dollar and bond note becomes the medium of exchange we may struggle to get rid of the bad behaviour that is creeping her. Industry and commerce wants to force the economy to redollarise, the will charge their goods and services in such a way that you cannot pay using the RTGS dollar, it becomes so cheap to use US dollar. I think there are decisive steps that have to be taken to address this, otherwise we will continue to move from pillar to post when some people are just taking advantage of Government support and really abusing our consumers.

LD: Are there plans towards protecting the consumer?
MN: Again, it is regrettable that Government has to involve itself in a market that is supposed to operate on a free market basis where forces of demand and supply determine prices. Because of what is happening, we will be engaging them and like I said, this time around I think we have to make sure that we deal with this bad behaviour once and for all. We don’t want to be pushed to a point where Government plays an active role in stabilising prices. We did that in the transport sector if you remember just a month or so back, we don’t want to be pushed to a situation where as Government we take a leading role to ensure that our consumers are protected. As it stands, the Consumer Protection Bill is already in parliament ready for a second reading. That was because we realised that there is no legal protection for our consumers from the abuses that they are facing on a daily basis. The other issue has to do with the nature of our economy. There are so many monopolies, people are just deciding on pricing because there is no competition. People are left with no option but to buy expensive products because there is no alternative. For example, sugar, they have recently increased by more than 70 percent or so. I am yet to get the new price but industry is bleeding because it is a key role material for a lot of industries. The monopoly means they can just price as they want, we are quite worried about and we want to have that addressed as a matter of urgency. In fact, there is work that is already being done with regards to that issue.

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