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Import ban toxic policy

PRESIDENT Robert Mugabe’s remarks this week that import restrictions, mainly from South Africa, would help resuscitate local industry show he is out of his depth.

Zimbabwe Independent Comment

Several issues emerge out of this.

First, Mugabe, as usual, doesn’t get it. Sadly, he is being misled by self-interested captains of industry led by the CZI and other self-serving elements like Buy Zimbabwe Campaign. Quite clearly, business is acting in self-interest, not to help consumers. They claim to be protecting local industry and jobs, but their argument is flawed in the current Zimbabwean context. There are far more people in the informal sector now suffering due to the ill-advised ban than those benefitting from it because of the current structure of the economy.

Second, indeed, economic openness tends to affect some industries and workers in any economy. But the adverse impact suffered by those so affected is a drop in the ocean relative to the broader and bigger benefits gained as a whole in line with the economic dictum that what is true of one is not necessarily true of the whole. The pains of one worker who loses his job due to imports are far outweighed by the gains of millions others whose standards of living improve due to imports. Protectionism is generally counter-productive and should the neighbours retaliate by restricting imports into their own markets, overall standards of living suffer and consumers are the ones who are dealt a severe blow as they could endure rising prices — inflation — and be subjected to goods of inferior quality as has become the case now. So this import ban is a toxic policy.

While government’s measures might provide relief to a handful of companies and their owners, in the long run protectionism often ends up hurting the very people it purports to protect.

Third, besides, it violates World Trade Organisation and Sadc trade protocols, which just proves Zimbabwe is not a business-friendly environment. That is why South Africa, Zimbabwe’s largest trading partner, is protesting. Of course, South African companies are badly affected, but imposing restrictions without exhaustive consultations is bad business and ultimately self-defeating.

Which companies and jobs is government protecting? Authorities are simply protecting inefficiency, over-pricing and profiteering by unscrupulous businesses. Competition protects consumers from sub-standard goods and overpricing.

Also, authorities are merely addressing symptoms of the problem, not the root causes. Zimbabwe has now become a warehouse mainly for South African goods due to the collapse of local industry owing to economic mismanagement.

Imports are also flooding the country because local industry is uncompetitive partly because of poor business models, old production systems and antiquated machinery. The use of the overvalued US dollar also makes things worse.

Mugabe’s spirited defence of the import ban just shows he is ill-advised. What the economy needs is promoting free trade, attracting foreign direct investment and getting new capital as well as comprehensive political, institutional and policy reforms, not trade restrictions.

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