HomeBusinessZNCC lobbies for removal of duty on raw materials

ZNCC lobbies for removal of duty on raw materials

THE Zimbabwe National Cha-mber of Commerce (ZNCC) says government should remove duty on raw material imports to help local industries compete with counterparts in the region.

REPORT BY KUDZAI CHIMHANGWA

ZNCC vice-president, David Norupiri said local companies were affected by high costs brought about as a result of the duties levied on imported raw materials.

“For example, oil imported as a raw material for the manufacture of soap products gets into South Africa duty-free from Asian countries,” said Norupiri. “But when headed for Zimbabwe, the same raw materials are subject to 15% duty, 15% Value Added Tax and a 25% surcharge.”

He said this meant that even before a Zimbabwean business can factor in transportation costs, it is already facing a 55% cumulative cost before trading, thereby affecting the competitiveness of local products relative to imports.

He implored the government to revisit the 2007 duty regime instituted at a time when there were basic commodity shortages in the country.

But the ZNCC’s plight is a snapshot of the challenges faced by businesses trading regionally.

With setbacks ranging from direct tariffs, lengthy customs procedures, corruption at border posts and transportation bottlenecks, trade between African countries is severely curtailed.

According to a 2013 African Economic Outlook report produced by the AfDB and United Nations Development Programme among other partners, a number of African countries face stiff competition on international markets.

They have less bargaining power at international bodies such as the World Trade Organisation and when negotiating economic partnership agreements, said the report.

“Trade between African countries is currently estimated at 10% to 12% of the continent’s total, a long way behind other regions,” the report noted.

Trade analysts say there is need to ensure that the trade barriers between countries are lowered and that the infrastructure such as road and rail enables access to other markets.

Harvard Business School Associate, Eric Werker said considering Zimbabwe’s relatively small economy, trade at regional level would be a plus for its firms to acquire some level of scale.

“One view is to increase trade within the region, being part of regional free trade agreements, reducing barriers and not just formal barriers like tariffs, but also informal ones like checkpoints, bribery in customs offices and surprise taxes on companies,” he said.

He said a second view would be for companies to adopt an international outlook.

“The fact is, the global economy is much larger than the regional economy. There should be nothing stopping a Zimbabwean firm from trying to access markets in the United States, Europe or East Asia because frankly, there is more purchasing power there. You are perhaps limited by transport costs but if you are good at something, you shouldn’t have your ambitions stopped at the border,” he said.

According to a 2013 Economic Commission for Africa report, if African countries can facilitate integration, this would be equivalent to creating large domestic markets that can help firms to build their competitiveness in final products before they attempt to penetrate industrial country markets.

Outgoing Deputy Prime Minister, Arthur Mutambara said regional integration had become more important than in the 1960s period, and argued that national sovereignty has to be done away with, to make the process work.

“We are so caught up in our national state. One of the costs of regional integration is giving up on national sovereignty,” said Mutambara. “Our leaders must understand that there is need to give up on some elements of sovereignty, in order to embrace the bigger picture. And I don’t think we are there yet.”

He said Zimbabwe, as well as other African states should move away from a national sovereignty mindset to regional sovereignty, in order to be better placed when trading with other continental blocs.

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