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Have import restrictions helped Zimbabwe's manufacturing industry?

Aug 16, 2019
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Have import restrictions helped Zimbabwe's manufacturing industry?

Zimbabwe, like much of Africa, has been on a mission to increase its manufacturing capacity. Zimbabwe primarily exports raw materials; over time, it has realized that this is a waste of its natural resources. The government decided that participating in the supply chain beyond extracting resources would create more wealth and jobs for the nation. With this in mind, over the years, the country has used statutory instruments to restrict the flow of imports to bolster local manufacturing.


The statutory instruments were prioritized when the Buy Zimbabwe campaign was not achieving its goals fast enough. The Buy Zimbabwe campaign sought to convince consumers to prioritize buying products made in Zimbabwe. Although the campaign was supported by government and business, it struggled to gain traction with consumers. Zimbabwean products were either too expensive or of lower quality.


SI61 of 2016 was a reiteration of previous statutory instruments built for the same purpose, reduce imports, and increase local production. All these legislative instruments were later amalgamated to SI122 of 2017. After the government passed SI61 manufacturers in Zimbabwe got some reprieve:


Industrial capacity grew from 30% to 60%
Jobs were created
The import bill was reduced
Foreign direct investment in manufacturing saw a small rise

Unfortunately, all of the above came at a cost to the consumer. A few months after the SI61 was enacted, prices of goods crept up. Local manufacturers no longer had to compete with foreign cheaper products. Manufactures justified this by saying:


Investment in new equipment and not profiteering was behind price increases
Lack of affordable funding for capital expenditure was raising their costs


Moreover, structural inefficiencies in the Zimbabwean economy, for example, goods are transported by road instead of cheaper rail.
Zimbabwe was later forced to relax the SI122 in 2018. This was due to products becoming scarce. Zimbabwe’s finances were in shambles, and the banks no longer had foreign currency to import goods such as raw materials and machinery parts for manufacturing. The government decided to relax the SI122 to enable more companies and individuals to import products, even if they were manufactured locally.


The import restrictions had the potential to be beneficial to Zimbabwean industries, but they created distortions and later proved to be not as effective. The import restrictions could work with other fixes to the economy, such as infrastructure development, financing, and policy consistency, to name a few.

 

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