Local Content laws coming in June

Government and the private sector will soon be compelled to purchase most of their goods and services locally under new production-stimulating regulations authorities are crafting. The Local Content Policy has sector-specific procurement thresholds that will be bolstered by Local Content Regulations coming in June.

The measures piggyback on Statutory Instrument 64 of 2016, which aims to optimise domestic supply chains and promote import substitution under Zimbabwe's broad industrialisation trajectory.

President Mugabe indicated as much in his 37th Independence Day Anniversary address, highlighting that Government would continue to manage imports and support the manufacturing sector whose capacity utilisation increased from 34.3 percent in 2015 to 47,4 percent last year.

Responding to inquiries from The Sunday Mail last week, Secretary for Industry and Commerce Mrs Abigail Shonhiwa said: "Stimulating domestic consumption and production through promoting procurement of locally-produced products by both the public and private sectors can partly address this challenge.

"The Ministry of Industry and Commerce is spearheading the process of formulating a Local Content Policy which will stipulate sectoral percentage thresholds for goods to qualify as locally-produced. Local Content Regulations will form a key part of Government's broad industrialisation initiatives through maximising the localisation of supply chains.

"The Policy is intended to buttress measures being implemented by Government to manage imports such as removal of products from the Open General Import Licence through various Statutory Instruments such as SI 64 of 2016."

She continued: "The LCP framework for Zimbabwe will be defined from the beneficiation perspective which focuses on value addition. The main principle of the LCP is setting value addition ratios through minimum sectoral percentage thresholds for goods to qualify as locally-produced.

"The local content thresholds for different sectors will be based on sectoral analysis and regional best practise. Preliminary work has been done towards the formulation of the policy, which includes development of a Concept Paper which was shared with stakeholders from both the public and private sectors.

"The ministry is now working on conducting a comprehensive market analysis/study to estimate, on a sectoral basis, the amount (in percentage terms) which can be produced locally and that which can be imported, among others. The study intends to avoid a situation where sectoral local content thresholds are thumb-sucked, leading to price increases and shortages on the local market.

"Once the market studies have been completed, the formulation of the Draft Local Content Policy will be done. The Draft Policy will then be presented to stakeholders for validation and inputs from the validation exercise will be incorporated in the Final Local Content Policy document."

Confederation of Zimbabwe Industries vice-president Mr Sifelani Jabangwe said: "We have made our contributions and we are hopeful that they will be included in the final policy framework. This is exactly what is being done by other countries, which is taking local consumption and using it as a tool for industrialisation.

"It helps ensure that our industries are running and, in turn, creates employment. In South Africa, for instance, they actually have an Act of Parliament to back local content.

''The move is a step in the right direction and a much broader intervention than introducing piecemeal interventions such as SI64."

University of Zimbabwe senior Economics lecturer Professor Albert Makochekanwa added: "Local institutions play a pivotal role in stimulating production by local industries. We already have another initiative that is similar to the Buy Zimbabwe Campaign.

"Such policies are derived from the first such initiative in the world, which was born out of the Buy America Act of 1933, which clearly states that any local institution can only import when it is satisfied that the product is not available locally.

"Other countries have similar initiatives in place. It is now standard economic practice the world over. In short, it is a good policy and needs to be implemented properly."