ZIMBABWE’S industries are singing the blues as poor infrastructure, rampant corruption and depressed demand for local goods suppress the manufacturing sector’s growth prospects. The country’s economy is haemorrhaging due to a number of structural challenges that have seen industrial capacity utilisation sliding to a measly 34,3% in 2015 and hundreds of companies shutting down, with thousands of workers losing their jobs. Zimbabwe Independent business reporter Taurai Mangudhla (TM) interviewed Zimbabwe National Chamber of Commerce CEO Chris Mugaga (CM) on the state of the local industry. ZNCC is the country’s largest industry lobby group. Below are excerpts:
TM: What were the biggest challenges faced by business in 2015 ?
CM: 2015 was quite a traumatic year as the economic slowdown sharpened, witnessed by the downward revision of GDP figures. A number of challenges haunted business. These challenges range from an inefficient labour policy framework, debt distress, with most companies carrying a debt which arose at the turn of dollarisation, as well as rampant smuggling of cheap imported products which almost decimated the entire domestic value chain as producers can no longer access markets for their products while financial services had been funding the merchandising business at the expense of production.
TM: What were ZNCC’s major activities as a lobby group in 2015, particularly on reforms?
CM: As the voice of business, it is our mandate to always engage government on policy matters. The modus operandi we employ to push for reforms include direct engagements with ministers responsible for portfolios which we believe require reforms. We also make sure we have input in every fiscal policy directly to the treasury boss after wide and deep consultations with the business community in every corner of the country. The parliamentary portfolio committees, notably the one on Finance and Economic Development, as well as the one on Industry and Trade, also consult us post-national budget on policy proposals.
TM: in your view, what were ZNCC’s biggest achievements in terms of its mandate in 2015 ?
CM: We managed to push Energy minister (Samuel Undenge) to urgently address the issue of independent power producers (IPPs) since they had been failing to get recognition in terms of their expertise to assist in solving power challenges. A number of them, including domestic IPPs, have now acquired contracts to augment government’s effort to increase generation capacity. The chamber also managed to conscientise government to bring the Zisco matter to finality, which saw government adopting the company’s debt and also cleaning its balance sheet through laying off excess staff.
TM: What concerns remain unresolved and critical for industry in 2016?
CM: Quite a number of issues certainly remain unresolved getting into 2016 and these include the promulgation of a draconian labour framework into law following a knee jerk reaction by government to massive job losses last winter. The 99-year lease regime in agriculture is an eyesore to bankers as they are clearly not interested in funding resettled farmers’ projects. Power outages which continue to weigh down on capacity utilisation with no clear framework on how we expect to avert the imminent disaster as a nation given that water levels in Kariba Dam can only continue to dwindle and lastly our relationship with China on trade matters appears like China is the biggest winner given their investment model in Zimbabwe which favours the high end of the market than the supply side.
TM: What is ZNCC currently doing to bring change conducive for industry revival and growth?
CM: ZNCC is not resting on its laurels.We have stepped up our lobbying efforts to make sure we remain an independent voice when it comes to playing an advisory role to government. We are encouraging our members, especially those in capital intensive industries such as mining, infrastructure and energy, to engage in Public Private Partnerships with foreign giants as a way to circumvent liquidity challenges bedevilling our economy. We also continue commissioning surveys and research papers to improve the quality of policy in the economy given that government’s budget towards research is quite limited. We believe it is our duty to complement their intention, but at the same time giving an honest assessment of policy positions from government without bias.
TM: What is your relationship with government and its attitude towards your requests and recommendations, for example on the National Budget and on general policy?
CM: The relationship is quite strong and healthy. However, it is natural that government will not take every recommendation we bring to the table given that there are a number of constituencies which government is also accountable to, which includes labour, civil society as well as international treaties which can relate to trade or other commitments as assented to.
TM: Industry is concerned about Zimra’s tax collection methodology saying a harsh stance could be that last blow to already struggling players. What’s your view?
CM: Generally, any harsh collection strategy is synonymous to milking a cow until its death, which is not advisable. However, I understand where frustrations by Zimra emanate from, given they are dealing with an economy which is turning more informal by each day. The solution lies in coming up with an amicable answer without either party resorting to litigation. Conflicts associated with tax collection are what also motivated ZNCC to come up with an Alternative Dispute Resolution centre, expected to start operations this first quarter.
TM: What statistics do you have as ZNCC to show the demise of industry in terms of closing companies or those that are downsizing?
CM: The situation is certainly dire with a number of companies in a survival mode. At the height of job losses following the Zuva Petroleum case, we saw over 30 000 people losing their formal jobs. For every 10 start up companies, only two are surviving beyond 24 months. The irony is after companies retrenched in July 2015, the situation didn’t improve, which could be evidence that unfriendly labour laws were not only a threat to industrial growth, but a plethora of other factors as well. In our observations, those companies which are said to be downsizing are in fact changing focus to become middle-men and for some of them, drivers of smuggled goods, as a way of maintaining their infrastructure.
TM: Government recently published amendments to the Indigenisation Act, how effective are they in terms of inspiring confidence in foreign investors?
CM: The problem is not necessarily the indigenisation law itself, but rather the number of times you tamper with the law which can be interpreted as lack of decisiveness by the government or a ploy to hoodwink investors.
I think the indigenisation law which was there when Saviour Kasukuwere was at the helm should have stayed put. The regular amendments we are witnessing can only make the policy unpredictable.
Remember we have two extremists in this investment world, those who say No to indigenisation in its entirety and those who say you cannot indigenise my company either because I am Zimbabwean or my company is already indigenised through share ownership on the local bourse.
For example, imagine how many people will point out that Barclays is a 100% foreign-owned bank but coming back to Zimbabwe, if you take a closer look you will realise it is more indigenous than some of the black-owned banks in the country.
I think it is therefore pertinent to mute the political tone when it comes to indigenisation and apply it as a non-partisan, non-racial, non-tribal and genuine policy to address the historical imbalances which date back to the 1890s.