THE recent introduction of a 40% surtax on imported basics, among other restrictions, has been met with mixed reactions amid fears this will have a negative impact on local industry and the consuming public, businessdigest has established.
The government hiked import duty on selected products such as cooking oil, margarine, soap tablets and bars and washing powder from 10% to 40% last month.
While the adoption of multi-currencies in 2009 brought economic recovery from its comatose state and reversed the record hyperinflation that had rendered the local currency useless, it spawned a plethora of other problems that include the crippling of the local industry through the influx of cheap imports onto the market.
The use of foreign currency has seen an influx of cheap imported products as industry battles with a myriad of challenges that include outdated equipment, unreliable and expensive electricity, lack of long term funding to sustain operations and low capacity utilisation which plunged from 57,2% in 2011 to 39,6% last year.
This has sparked an outcry from the business community that faces the threat of collapse due to the influx of cheap imports. It has prompted calls from business for government to implement measures that will protect them from the devastating effects of the surge of cheap imported goods.
It has also negatively impacted on the country’s trade deficit
Bliss Brands, the South African maker of washing powder MAQ, this week decided to cease exports into Zimbabwe citing high costs that are being caused by the tax.
The increase in surtax has triggered fears of shortages of basic commodities on the market in what would bring back memories of the hyperinflationary era of 2008 when basic products were scarce and where customers endured empty shelves.
The increase could be part of the government’s strategy to protect the local industry.
Speaking at the Mandel/Gibs economic symposium early this year, Industry and Commerce minister Mike Bimha said there was need to strike a balance between protecting industry and protecting consumers.
He said they had to guard against protecting an inefficient industry as well as protecting an industry that will charge exorbitant prices for their products.
University of Zimbabwe economist, Fanuel Hazvinei, does not believe that the increase will trigger shortages in the short term.
“The increase in surtax charge will not create shortages,” he said. “Importers will continue to bring in commodities but at a higher price for the ordinary man.”
Hazvinei said the increased tax would only benefit the government as it would help boost its coffers.
“Industry does not need protective policies but needs government to put in place policies that make it conducive for local industry to be competitive,” he said.
Hazvinei added that industry need capital injection for local industry to be competitive.
However, Oil Expressors Association chairman, Jonas Mushangari, told businessdigest said the tax has breathed life into local industry particularly the cooking oil sector.
“The correct position is there are restrictions on imports, cooking oil and margarine through use of import licences and duties on finished products. These are meant to protect local industry,” Mushangari said. “Since the beginning of the year when these measures were introduced we have seen massive growth particularly in the cooking oil sector.”
He said some of the benefits include the coming in of new investors to partner with Surface Investment, United Refineries as well as a new oil plant set up by Pure Oil Industries and increased supply of cooking oil to a level where local suppliers are meeting national demand.
Mushangari said other benefits will be the increase of both capacity and employment as a result as well as decreased price of oil with the increase of local competition.