/ 12 August 2011

Biti restores import duties

In a move widely perceived as an attempt to resuscitate Zimbabwe’s frail manufacturing sector, the government has restored import duties on many basic foods three years after suspending it.

In his mid-term fiscal policy review last month, Finance Minister Tendai Biti imposed import duties ranging from 10% to 25% on basic commodities such as cooking oil, maize meal, jam and baked beans. Duties on rice, salt and flour will remain suspended until the end of the year.

The move signals the government’s efforts to shield local industry from consumer products largely imported from South Africa and Botswana.

But analysts are divided over whether local industry has the capacity to supply the country’s food needs and say the duties will lead to shortages.

Biti acknowledged that the local manufacturing industry remained “beset with a range of problems” but said import duty was necessary to reach this year’s target of 9.3% economic growth.

According to the Confederation of Zimbabwe Industries, factory productivity is between 40% and 50% of capacity and further productivity is limited because of power shortages and a lack of capital.

“I don’t think the economy is ready as the import duties would want us to believe. There are so many South African products on our shelves and it’s hard to imagine that our local industries can compete with those,” said economist Masimba Kuchera.

Zimbabwe’s food crisis peaked in 2008 when the collapsed economy reduced the productivity of local industry to less than 15%. After the dollarisation of the economy in February 2009, the unity government waived import duties in a bid to stock up the country’s empty supermarkets, resulting in brisk business for retailers and cross-border traders who imported large amounts of goods from South Africa and Botswana.

Now this has come to an end, and another blow was dealt to cross-border trade last week when the Zimbabwe Revenue Authority (Zimra) announced a 40% duty on electrical appliances, blankets and shoes. These products previously qualified for a traveller’s rebate of $300 and individuals could bring these products into the country duty-free once a month.

At the Beitbridge border post this week, Zimbabwean officials searched the bags of passengers from South Africa thoroughly and ordered them to declare the goods now listed under the new regulations.

“People are still allowed to bring in goods worth $300 for free per month but electrical goods such as fridges and stoves, blankets and footwear are no longer part of that list,” a Zimra official said.

Augustine Tawanda, secretary general of the Zimbabwe Cross-Border Traders’ Association, said: “This is going to affect the traders. They are going to lose in terms of business because the products are going to be fairly expensive and generally out of reach.

“If the prices go up the demand will go down, so we are going to see a significant reduction in imported food stuff getting into the country,” Tawanda said.