ZIMBABWE’S manufacturing sector has expressed frustration over the government’s failure and insincerity in fulfilling a litany of financial and non-financial promises to shore up industry.
BERNARD MPOFU
Limited access to cheap capital to retool and stiff competition from regional players have been cited as some of the key factors stifling local industry.
The Confederation of Zimbabwe Industries (CZI) in its submissions to the forthcoming Mid-Term Fiscal Policy Review seen by The NewsHawks said the government has failed to live up to its promises on several fronts.
“The 2022 budget set aside ZW$2.3 billion for provision of medium and long-term finance to enable companies across the agricultural, mining and service sectors implement value addition activities through the Industrial Development Corporation, following the addressing of outstanding governance issues,” the CZI said.
“However, this facility is yet to be availed in 2022 despite the glaring need for funding on the ground. CZI hopes that the Mid-Term review will place emphasis on the need to expedite this process.”
Finance minister Mthuli Ncube last year undertook to embark on several measures aimed at stimulating growth after economic activity dipped due to poor policies. The after-effects of the Covid-19 pandemic and climate change-induced drought have dealt a blow. This included reviewing and aligning investment regulations and policy frameworks in line with regional and international best practice.
“The 2022 National Budget had promised that government will revive the multi-sectoral engagement with a view of eliminating obstacles to the doing business environment in the country,” the industrial lobby group said.
“Multi-sector engagement has not been revived to address the inherent ease of doing business obstacles that have been hindering our progress as a country, especially with respect to the cost and multiplicity of regulators that have to be approached for related services. This issue must be of priority in the second half of the year. The country is witnessing an erosion of competitiveness as domestic prices rise, and various taxes being levied on business. The African Continental Free Trade Area (AfCFTA), which is now under implementation, needs a competitive industry in order to survive and penetrate export markets. Failure to address competitive issues will result in demise of most domestic industries.”
Turning to International Monetary Fund Special Drawing Rights holdings, the CZI revealed that it had not benefited from the envisaged liquidity injection despite the government’s promises.
On 2 August 2021, the board of governors of the IMF approved a general allocation of SDR456 billion (US$650 billion) to boost global liquidity. Zimbabwe received SDR677.4 (US$961 million), which the authorities said would ease the liquidity situation in the economy.
“The budget highlighted that the funds will be used to support projects in the social sectors, namely health, education; and the vulnerable groups; productive sector value chains; infrastructure investment and foreign currency reserves and contingency fund,” the CZI said.
“A retooling revolving 2022 National Budget boosting aggregate demand, boosting exports, stimulating industrialisation, growing the tax base fund for new equipment and replacement for value chains was to be created. Industry is yet to benefit from these allocations, and we have gone through the first 6 months of 2022. Allocations of these funds will greatly help industry to retool, which is long overdue.”
At the peak of Covid-19 infections and fatalities, tourism, which was one of the hardest hit economic sectors—also expressed worry over the government’s failure to honour promises of a stimulus package.
Zimbabwe’s year-on-year inflation has continued to jump in quantum leaps, reaching three-digit figures in May amid warnings that the domestic currency may soon be jettisoned for the United States dollar due to unending inflationary pressures.
Rising inflation and the volatility of the Zimbabwe dollar have stood out as some of the key issues confronting the economy at a time global economies are yet to come to terms with effects of the Covid-19 pandemic and most recently the Russia-Ukraine conflict.
After enduring two years of economic contraction between 2019 and 2020, latest figures from the country’s statistical agency show that Zimbabwe’s economy remains stuck in the quagmire as the authorities battle to tame rising levels of inflation.
The country’s official annual inflation rate reached 191% in June from 131.7% in May.
