Better alternatives to Zimbabwe import ban exist

In June 2016 the Zimbabwean government instituted the infamous Statutory Instrument 64 of 2016 banning the importation of basic commodities such as bottled water, sugar, soap, cooking oil, cellphone handsets, electronics, vehicle spares, clothing, and second hand vehicles. The list also includes such household items coffee creamers, camphor creams, white petroleum jelly, body creams and many others including beds. The list is actually quite exhaustive there would simply not be sufficient space in this article to repeat them, we can however discuss the principle behind this move and debates its merits and demerits using a few examples of these commodities.

The obvious stated benefit of this is to narrow the ever widening trade deficit ($1,1bn in the first five months of 2016 alone) the country is enduring mainly due to the current general economic crisis, one of many since independence. In fact Zimbabwe has never known a single period of 4 consecutive years of growth since its emergence from colonial rule in 1980, we have seen more problems than joy since the dawn of our so called independence. Empirical research published in virtually all reputable economics journals argue against the existence of tangible benefits if any of import bans or restrictions but, let's not just rely on that and understand Zimbabwe specifically and in the most practical layman terms possible by referring to specific examples.

As any citizen seeking to understand first hand as objectively as possible the efficacy of such regulations I initially went to see the cross border transporters who move these products from South Africa and then I spent some time in Zimbabwe last week and visited various locations where these products are sold and spoke to consumers.

Let's start with the cross border transporters better known as oMalayitsha, at one location where they operate from, a disused basement parking lot in Hillbrow Johannesburg now serving as a warehouse of sorts of stacks upon stacks of beds which had failed to be exported across the border into Zimbabwe. These are beds that predominantly Zimbabweans working in South Africa had purchased for export back home, beds they would purchase in South Africa anyway. These are items which would normally attract customs duty at the border if the normal process were to be followed to the letter, at the cost of the exporter. When I arrived in Zimbabwe I inquired about the average value of these beds once they arrive in the country and was told that they would typically cost no more than about $120 to $150 each including duty and transport.

Now, the stated purpose of Statutory Instrument 64 is to protect local industries and I found out that indeed a local manufacturer did exist in Bulawayo in the form of National Beds whose product retails on average at around $400 a unit. A question I would immediately ask at that point in time is, what are the chances that someone who ordinarily buys a bed in the $150 range would shift to a local products costing $400? I would argue that the answer is quite obvious, this simply is an unrealistic expectation but the jury is out as far as to whether or not this measure will work in this specific instance, only time will tell. In my opinion this is one reason why the number of beds in "that" warehouse in Hillbrow is growing rather than declining with each passing week (I've been there thrice in the last six weeks), the buyers of these beds are hoping against hope, or resorting to rent seeking measures even if it now costs them twice what they ordinarily paid, in such a position I'm certain they would argue it's still worthwhile compared to a $400 bed.

Moving along, I looked at a range of other products on the list including, soap, cooking oil, Camphor cream and petroleum jelly. An analysis of these products against the background of an import ban clearly can't just be about price alone but consumer perceptions about quality or derived value as well. In the latter case I would have to concede that views obtained on perceptions were based on limited sample sizes from merely speaking to a few ordinary consumers and can't be taken as representative of the entire base but useful all the same.

The country appears to produce a wide variety of cooking oil products some priced competitively and others not entirely. A 2 litre bottle of Olivine Cooking Oil in a local supermarket typically costs $3.49 while Zimgold costs $2.99 and Pure Drops $3.35. Upon asking consumers what they would have paid for an imported product now absent from the shelves due to the ban I was told of price ranges in the $2 to $2.50 range. I then asked about consumer perceptions of these and was told that Olivine was highly regarded and Zimgold so-so while Pure Drops was viewed as a very inferior product, in the words of consumers, "You need lots of it to achieve the same effect as other cooking oils" in your food.

For those that grew up in or still live in Zimbabwe, many will remember Geisha soap with fondness and this perception hasn't changed much. Geisha and Jade which are manufactured locally retail at 79c and 69c respectively while the imported equivalent Lux Beauty soap goes for $1.35 a bar. If I was in anyone's shoes inside Zimbabwe, holding the perceptions that I gleaned, clearly Geisha and Jade wouldn't require any import protection under current conditions, they would be obvious choices.

The next product in my snapshot survey was petroleum jelly. The well-known brand Vaseline which retails at 99c a 100ml container while its local competitor called Elegance goes for 79c a 100g. Vaseline is clearly slightly more expensive. However the perceptions around Elegance were very negative to say the least. One never really knows if it's just lack of pride in one's own country's products but it was said that regardless of used quantities, this product actually left your skin in a far worse condition than before, cracked and dry, you would far rather use soap as lotion. The average consumer was thus quite happy to part with a few extra cents for what they view as product of far greater value for money, Vaseline.

A comparison of Camphor creams pitting the imported Ingrams Camphor cream at $2.39 a 500ml jar vs it's local equivalent Maxi Smooth at 90c a 150ml container was slightly more interesting. The imported product on average would work out at 0.478c/ml while the local product would be 0.6c/ml (90/150). Not only does the local equivalent suffer the same fate as the bed example in terms of price comparisons, perceptions about it were also extremely negative. This particular product was a specific target of much condemnation. The local product, Maxi Smooth it appears stands very little chance in all respects pitted against Ingrams. Some consumers claimed that it even exhibits signs of biodegradation after some time.

Regarding cellphone handsets, vehicle spares or electronics, I would like to ask anyone in the current government to point me in the direction of the nearest manufacturing factory for these in Zimbabwe that they seek to protect through the imposition of bans or import license requirements. That's an awful lot of trouble for one tiny part of a long value chain which sits largely offshore in foreign lands anyway. I can understand that this might have the effect of shifting the retailing of these products into the relatively easily taxable formal sector rather than the largely self-employed informal sector but this is only retail. We completely destroy our manufacturing capacity then scamper to protect retail. While one is tempted to concede on the tax collection argument we neither provide raw materials, design nor manufacture these products. We are protecting shopping malls while ignoring measures to attract the factories currently in foreign lands employing other people in far greater numbers. If anything we drive hard on investor unfriendly policies such as indigenization Zimbabwe style. Empirical evidence ultimately suggests that the one sure way of protecting local markets is by ensuring that local products are viewed more favourably by consumers and that they are produced at the most competitive rates both in terms of quality, utility value and price. This is the reason why it's so difficult to compete against BMW in Germany or Chinese made tyres in China.

Under normal circumstances locally made products have the obvious advantage of much shorter distances to travel to the end consumer and the absence of import duties and the much sought after protection of jobs domestically. The only issue they would have to contend with, in a fair trade environment is the relative cost of production in competitor supplier countries and this is what brings us full circle back to the example of beds.

At first glance, its either beds made in Zimbabwe are clearly not made at competitive costs or that we have a bunch of very greedy local manufacturers and/or retailers or that the likes of South Africa are dumping as the president claimed recently. However the markets (supply and demand) easily correct themselves with respect to inordinate pricing and there is absolutely no technical definition based evidence of South Africa dumping and so the issue must be in the cost of production.

Upon probing further, one was told by some locals that this owes itself to two issues, the first being perceptions about the value of money since the Zim Dollar inflation era as well as the recent depreciation in the Rand. Although the former reason has been proffered to me in the past, I find it very difficult to buy after such a long time since the adoption of the US Dollar as our main currency of trade. Again the markets would correct themselves over time and people would come to know that there is no such thing as a two dollar loaf of bread.

So, how do we resolve this gloomy looking picture aside of import bans/restrictions? Well apart from the obvious issue of ensuring that local industrial capacity rises significantly from the mid 30%s at least allowing local manufacturers some benefit in terms of economies of scale as well as the issues of ensuring that local industries are encouraged to manufacture quality products herein enters the argument for Randization. Aside of having to swallow our pride and moving away from the US Dollar as our primary currency of trade, there aren't any significant downsides, South Africa is where the bulk of the goods listed under Statutory Instrument 64 originate, they are our biggest trading partner. South Africa is not dumping, the rand has simply depreciated. I really don't think we import much cooking oil or soap from the USA. As the Rand depreciates or appreciates so does the relative value of goods imported from South Africa move locally.

The only thing we have managed to achieve with the import ban like many ZANU PF government policy measures in the past such as, land reform the impending bond notes etc. is to create yet another rent seeking opportunity at the country's borders, not to mention seeking to advantage the few remaining selected well connected local manufacturers and mostly retailers whose names we shan't mention just yet. A local manufacturer or retailer must earn their keep in the long term to survive and we have the examples of Olivine Cooking Oil and Geisha soap to name but a few. They don't need any policy protection whatsoever. Statutory Instrument 64 instead of protecting self-employed small traders and forcing our local industries to become more robust is unlikely to achieve the desired results, many of them are busy mechanising in any case, well at least the few that I visited recently in Belmont Bulawayo as part of my analysis. Indeed how else would they compete?

Its little wonder the country will continue in the current state of socio-economic tension in this area as well as in many others, we have an utterly failed government holding the reigns, we are rudderless lot. It's time for the citizenry to speak and speak up with a thundering loud voice and say enough is enough, we are no longer afraid, all 14million of us.

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Lovemore Fuyane is a Zimbabwean and writes from South Africa.