Exporters put pressure on govt

Exporters put pressure on govt
Published: 12 July 2016
THE manufacturing sector is pushing for government to address impediments that are stifling exports so that they can generate more revenue for the economy.

The move by manufacturers comes at a time Zimbabwe is projecting a trade deficit of $2, 5 billion this year as the economy imports more than it exports.

Confederation of Zimbabwe Industries president Busisa Moyo told Standardbusiness last week that there was need for the removal of all direct and indirect duties on raw materials, internal devaluation on changeable costs, which are rentals, production-based compensation and power cost for the export sector among other things to make local manufacturers competitive on the exports market.

"Our cost base is 45 to 55% higher than our regional peers based on a cost driver study conducted in 2014. This is our biggest impediment," he said.

"Secondly, funding and financing for re-tooling and export working capital so quality and standard is higher. There is need to have export quality and new and efficient equipment."

However, Moyo said manufacturers were looking at ways to increase exports to take advantage of the 5% export incentives introduced by the Reserve Bank of Zimbabwe to boost local production and stem imports.

Under the $200 million facility guaranteed by the African Export-Import Bank, exporters get an additional 5% of their earnings but in bond notes set to be introduced later this year.

Takunda Mugaga, the Zimbabwe National Chamber of Commerce chief executive officer, said the solution lied in harmonising regional trade policies.

He said he wondered why Sadc member countries regardless of their small sizes spent a lot of energy protecting their inefficient economies when capital was failing to find the right destinations. He said no serious investor would set up shop in a country where movement of capital and goods was restricted.

Mugaga said the use of the US dollar and high production costs impeded exports, and so did exogenous factors such as trade policies of the neighbouring states.

"You cannot export pharmaceutical products to South Africa by road, it's strictly by air, which can only make Zimbabwe's export of pharmaceuticals expensive," he said.

"On road transport, lorries or haulage trucks plying the African routes need a certain number of axles in order to be allowed, for example in the Democratic Republic of Congo (DRC).

"Once such trucks carry goods, for instance from South Africa to DRC, they are not allowed in-transit movement of courier for instance from Masvingo to Chirundu, that's a clear impediment."

He said other export impediments were lack of information by the traders and policy inconsistencies relating to most African trade policies. This made intra trade within Africa a challenge, which was the reason why intra trade within Africa averaged 14% compared to 57% in Europe.

Mugaga said Sadc should graduate from being a political club to an economic bloc because movement of exports between states was still uneven with bigger economies such as South Africa unwilling to liberalise their markets to foreign competition from Africa.

He said it would be easier for American presidential nominee Donald Trump to set up an enterprise in South Africa than it would be for Zimbabwe-born telecoms entrepreneur and philanthropist Strive Masiyiwa.

Mugaga said the performance of the export market as shown by export receipts was not encouraging and the use of the United States dollar had made exports uncompetitive.

He said high costs of production meant the pricing structure was already unfriendly to the potential markets.

"The export incentive is a medium to long-term policy intervention," Mugaga said.

"It doesn't work in an environment where you see high levels of illicit financial outflows because they have a negative compensatory impact on the proposed policy moves.

"Imagine you incentivise an exporter and it is the same exporter who is externalising and is involved in transfer pricing. This leaves the 5% incentive as a cost to the economy, which is funding that 5%."

ZimTrade chief executive officer Sithembile Pilime said export impediments included lack of export incentives, lack of competitiveness as a result of a plethora of regulations, permits for both export and imports of raw materials and other inputs, fees associated with regulation of permits, different and scattered offices for export documentation and long periods of processing permits.

She said the other challenges were high production costs arising from the use of obsolete machinery, high cost of utilities and other inputs.

"Our exporters cannot compete against regional and international exporters who are receiving various export incentives from their governments," she said.

- online
Tags: Exports,

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