Business / Economy
Zimbabwe urged to replace imports with local produce
07 May 2013 at 22:47hrs | Views
A Bassfisherman's Approach
ACCORDING to recent statistics, the trade deficit between Zimbabwe and South Africa is US$530 million. Zimbabwe is importing goods worth US$3,2 billion from South Africa compared to exports of US$2,7 billion to that country. The goods we are importing from South Africa range from basic agricultural produce such as pumpkins, butter nuts, oranges, apples, cauliflower and many others to high-tech products such as cars and machinery.
In the short to medium term there are some primary goods that Zimbabwe is importing from South Africa that can be substituted with locally produced goods.
Most agricultural produce are the easiest ones to deal with in the short term. This can be implemented using the model of import substitution industrialisation.
The concept of import substitution industrialisation stated in the early 1950s when developing countries were trying to cushion themselves against trade imbalances with the developed countries in the West. The emphasis then was on high-tech heavy industries such as steel manufacturing .
What is import substitution industrialisation?
Import substitution industrialisation (ISI) is a trade and economic policy that advocates replacing foreign imports with domestic production.
It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialised products.
According to the Singer-Prebisch thesis, ISI is an attempt to reduce foreign dependency of a country's economy through local production of industrialised products, whether through national or foreign investment for domestic or foreign consumption.
ISI does not mean total import elimination. A nation implementing ISI begins to import raw materials that become necessary for its industries, such as petroleum, chemicals and other raw materials that it does not have.
The real objective of import substitution is therefore not to eliminate trade but to lift a nation to a higher stage, that of exporting value added products that are not susceptible to economic fluctuations such as raw materials.
In its raw form ISI requires Government to lead the process investing in areas which are deemed to be key and strategic industries.
The assumption is that bureaucrats are very knowledgeable about market dynamics and have entrepreneurial ability to do it successfully.
Experience elsewhere in countries such as Brazil demonstrated that though bureaucrats are highly educated, they are not highly entrepreneurial as well.
This then implies that the best role of the Government is to provide enabling environment for the private sector to operate well.
This involves a combination of formulating sustainable policies and protection for the local industries through calculated tariffs.
Relevance to Zimbabwe
It is a fact that some of the imports from South Africa can be substituted by locally produced goods.
One industry that has successfully demonstrated it is the Poultry Industry in Zimbabwe. Immediately after the introduction of the multi-currency regime Zimbabwe was bombarded with cheap imports of poultry products from Brazil and South Africa. This threatened the sustainability of the local industry.
The Association of Poultry Producers realised that the only way to stop imports is by producing competitively priced products.
They lobbied their members to produce efficiently to which the members responded accordingly.
The poultry industry is the livelihood for many households in both urban and rural areas. The size of the growers ranges from those who produce 600 per annum to 3 000 000 per annum.
Thereafter, they lobbied the Government for protection of the local poultry industry. Poultry Producers of Zimbabwe successfully lobbied for US$1,50 per kilogram import duty on imported chickens.
Poultry Producers' Association of Zimbabwe chairman Mr Solomon Zawe said the poultry industry demonstrated that imports can be substituted by locally produced goods without compromising on quality and without punishing the end user through charging ridiculous prices.
"Imports brought efficiency and honesty in the production of chicken. Without the pressure from imports the price of chickens used to range between US$5 to US$10 per kilogram. However, it has now fallen to US$3,50 per kilogram at wholesale price," he said.
This price takes into consideration the fact the price of grain has risen considerably throughout the world.
Regardless of this the poultry industry is still growing. The growth of the poultry industry has also been accompanied by a corresponding growth in stockfeeds distribution points.
The stockfeed producers have responded by taking stockfeeds to the people. Over the past three years several outlets were opened in growth points and towns by Irvine's, Proceeds, Lunar, National Foods, Windmill while other suppliers have been distributing poultry stockfeeds from Zambia.
The benefits of import substitutionindustrialisation
The analysis reflected that if ISI is adopted correctly by any one industry, it can lead to growth of many other industries within the value chain.
The growth of the poultry industrialisation led to the growth of other several industries such as retail, agriculture and meat processing industries.
In agriculture, there is still need to improve efficiency in the production of maize and soyabeans for the betterment of pigs and chickens.
The farmers need to produce better and cheaper tonnage per hectare which will culminate in reduction of prices of stockfeeds in the long term.
The growth in industries along the value chain also resulted in increases in domestic employment.
Disadvantages of import substitution industrialisation
If ISI is not well implemented it can lead to major distortions in the pricing of commodities. Zimbabwe has a history of producers who withdraw products from the market for rent seeking purposes.
Therefore, protection for local industries which do not produce will result in consumers suffering at the hands of unscrupulous producers.
The poultry industry has demonstrated that ISI which is fostered by local producers can work if Government also chips in by providing an enabling environment.
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The writer is a Managing Consultant at CLC Training International. E-mail: chiganze@iwayafrica.co.zw
ACCORDING to recent statistics, the trade deficit between Zimbabwe and South Africa is US$530 million. Zimbabwe is importing goods worth US$3,2 billion from South Africa compared to exports of US$2,7 billion to that country. The goods we are importing from South Africa range from basic agricultural produce such as pumpkins, butter nuts, oranges, apples, cauliflower and many others to high-tech products such as cars and machinery.
In the short to medium term there are some primary goods that Zimbabwe is importing from South Africa that can be substituted with locally produced goods.
Most agricultural produce are the easiest ones to deal with in the short term. This can be implemented using the model of import substitution industrialisation.
The concept of import substitution industrialisation stated in the early 1950s when developing countries were trying to cushion themselves against trade imbalances with the developed countries in the West. The emphasis then was on high-tech heavy industries such as steel manufacturing .
What is import substitution industrialisation?
Import substitution industrialisation (ISI) is a trade and economic policy that advocates replacing foreign imports with domestic production.
It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialised products.
According to the Singer-Prebisch thesis, ISI is an attempt to reduce foreign dependency of a country's economy through local production of industrialised products, whether through national or foreign investment for domestic or foreign consumption.
ISI does not mean total import elimination. A nation implementing ISI begins to import raw materials that become necessary for its industries, such as petroleum, chemicals and other raw materials that it does not have.
The real objective of import substitution is therefore not to eliminate trade but to lift a nation to a higher stage, that of exporting value added products that are not susceptible to economic fluctuations such as raw materials.
In its raw form ISI requires Government to lead the process investing in areas which are deemed to be key and strategic industries.
The assumption is that bureaucrats are very knowledgeable about market dynamics and have entrepreneurial ability to do it successfully.
Experience elsewhere in countries such as Brazil demonstrated that though bureaucrats are highly educated, they are not highly entrepreneurial as well.
This then implies that the best role of the Government is to provide enabling environment for the private sector to operate well.
This involves a combination of formulating sustainable policies and protection for the local industries through calculated tariffs.
Relevance to Zimbabwe
It is a fact that some of the imports from South Africa can be substituted by locally produced goods.
One industry that has successfully demonstrated it is the Poultry Industry in Zimbabwe. Immediately after the introduction of the multi-currency regime Zimbabwe was bombarded with cheap imports of poultry products from Brazil and South Africa. This threatened the sustainability of the local industry.
The Association of Poultry Producers realised that the only way to stop imports is by producing competitively priced products.
They lobbied their members to produce efficiently to which the members responded accordingly.
The poultry industry is the livelihood for many households in both urban and rural areas. The size of the growers ranges from those who produce 600 per annum to 3 000 000 per annum.
Thereafter, they lobbied the Government for protection of the local poultry industry. Poultry Producers of Zimbabwe successfully lobbied for US$1,50 per kilogram import duty on imported chickens.
Poultry Producers' Association of Zimbabwe chairman Mr Solomon Zawe said the poultry industry demonstrated that imports can be substituted by locally produced goods without compromising on quality and without punishing the end user through charging ridiculous prices.
"Imports brought efficiency and honesty in the production of chicken. Without the pressure from imports the price of chickens used to range between US$5 to US$10 per kilogram. However, it has now fallen to US$3,50 per kilogram at wholesale price," he said.
This price takes into consideration the fact the price of grain has risen considerably throughout the world.
Regardless of this the poultry industry is still growing. The growth of the poultry industry has also been accompanied by a corresponding growth in stockfeeds distribution points.
The stockfeed producers have responded by taking stockfeeds to the people. Over the past three years several outlets were opened in growth points and towns by Irvine's, Proceeds, Lunar, National Foods, Windmill while other suppliers have been distributing poultry stockfeeds from Zambia.
The benefits of import substitutionindustrialisation
The analysis reflected that if ISI is adopted correctly by any one industry, it can lead to growth of many other industries within the value chain.
The growth of the poultry industrialisation led to the growth of other several industries such as retail, agriculture and meat processing industries.
In agriculture, there is still need to improve efficiency in the production of maize and soyabeans for the betterment of pigs and chickens.
The farmers need to produce better and cheaper tonnage per hectare which will culminate in reduction of prices of stockfeeds in the long term.
The growth in industries along the value chain also resulted in increases in domestic employment.
Disadvantages of import substitution industrialisation
If ISI is not well implemented it can lead to major distortions in the pricing of commodities. Zimbabwe has a history of producers who withdraw products from the market for rent seeking purposes.
Therefore, protection for local industries which do not produce will result in consumers suffering at the hands of unscrupulous producers.
The poultry industry has demonstrated that ISI which is fostered by local producers can work if Government also chips in by providing an enabling environment.
-----------------
The writer is a Managing Consultant at CLC Training International. E-mail: chiganze@iwayafrica.co.zw
Source - zimpapers
