Return of import duty ill-timed
By Diana Chisvo, Business Writer
Wednesday, 03 August 2011 09:28
HARARE – The Consumer Council of Zimbabwe (CCZ) says government’s decision
to restore import duty on basic commodities is ill timed as local industry
is operating way below capacity.
The consumer watchdog said there was still heavy reliance on imports as
local industry could not meet demand, adding that CCZ was also not consulted
in the decision making.
“Industry needs to increase its capacity utilisation and this also means
that agriculture needs to be fully viable because it feeds industry,” CCZ
executive director Rosemary Siyachitema said.
Siyachitema said the Finance ministry should have first evaluated local
industry capacity before implementing duty.
“The ministry should have waited till end of year to monitor industry the
announcement by Minister was premature,” the CCZ boss said, adding that
industry will struggle to offer competitive pricing for their goods
resulting in price increases.
In his mid-term fiscal policy review last week, Finance Minister Tendai Biti
said the import duty, scrapped in 2008 to ease food shortages, would be set
between 10 and 25 percent.
Biti said this restoration was necessary to protect local industries and
also improve local supply of goods.
“If local industries are protected they can help alleviate unemployment
rates in the country,” he said.
Biti said the move would also help the country achieve the projected 9, 3
percent economic growth rate this year.
However, Siyachitema said the local industry still faced many challenges
among them financing and shortages of raw materials, which affected
production levels.
“The money in banks is not enough for recapitalisation and the industry
sector in Zimbabwe is not yet strong enough to sufficiently undertake the
production of commodities,” she said.
“Zimbabwe does not yet have the infrastructure to fully cater for the
country’s demands and needs to turn around and recapitalise before this can
fully be implemented” she said.
Siyachitema said the imposition of the duty will put more pressure on
consumers who are currently struggling to make ends meet.
“The consumer will bear the weight in this transition. The impact of the
duty will be felt by the consumer and they are the ones who will pay
grossly,” she said.
“We are not convinced that industry is ready. A few commodities prices have
already gone up for example cooking oil,” Siyachitema added.
“The Consumer Council of Zimbabwe expects price increases of basic
commodities in the coming months,” she said.
According to the Industry and Trade ministry, local industry is currently
operating at 47 percent capacity utilisation and requires over $2 billion to
fully capitalise.
Meanwhile, economist John Robertson said the development will have no
inflationary effect if the country stops importing goods and local producers
offer competitive prices.
“Local producers need to offer prices that are affordable to local
consumers,” Robertson said.
“We will have to wait and see how inflation will be influenced,” he said.