BUSINESSES have sounded the alarm bells.
They will not enjoy the benefits of a large market presented by the African Continental Free Trade Area (AfCFTA).
Perpetua Muzondo, chief economist of the Confederation of Zimbabwe Industries (CZI), the country’s biggest industrialist lobby group, recently said local firms are spending about a fifth of their revenue on regulatory costs which makes them highly uncompetitive under the AfCFTA.
“With the regulatory costs, we are saying about 17,9% is the percentage of the amount that is being paid by businesses on their overheads. So, this encompasses our Zinwa [Zimbabwe National Water Authority], our EMA [Environmental Management Agency], all the regulatory institutions, they are so many. So, these are some of the expenses which we are saying if they are reduced, our businesses will be competitive,” Muzondo said at last week’s Zimbabwe Economics Society breakfast meeting, held in partnership with Friedrich Ebert Stiftung.
“But, as industry, as we stand, currently our lobbying point as industry was to go to the ministry and beg for import licences so that we reduce the number of imports that are coming into the country because our industry is not yet competitive enough to compete with other countries.”
The warning comes as Zimbabwe will next year begin preferential trading under the AfCFTA, which allows local companies to export products duty-free, or with reduced duties.
Ninety percent of tariff lines will be zero next year.
AfCFTA is the world’s largest trading bloc since the creation of the World Trade Organisation, with a population of over 1,4 billion and a GDP of over US$3,4 trillion.
- AfCFTA: Zim must put its house to order
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The single market, which entered into force in 2019, is part of a roadmap to drive intra-African trade which is below 15%.
The revelations by the CZI mean that local firms will not be able to benefit from an expanded market in the absence of some housekeeping issues by the authorities.
Authorities must align the regulatory regime and remove the bottlenecks for local firms to compete under the AfCFTA.
Government needs to urgently re-jig its strategy on enablers to businesses, such as electricity and water.
The current biting power cuts have left firms on the edge as they are forced to use other alternative sources such as diesel-powered generators which has increased the cost of production.
Local products will not be competitive due to the increased cost of production.
For Zimbabwe, it must increase its productive capacity, lest it becomes a big supermarket for products from the continent.
On its part, government on Tuesday said it was working on a four-pronged strategy to address the power challenges buffeting companies.
This entails the bundling of Zesa, rehabilitation of six units at Hwange Thermal Power Station under a build, operate and transfer model and provide foreign currency to independent power producers, reduce loss of electricity during transmission and deal with the huge debtors’ book by installing pre-paid meters.
Local firms must also realign their operations in line with changing trends.
The banking sector has seen restructuring exercises as financial institutions strive to build a lean and efficient machine to confront external changes.
AfCFTA is here to stay and Zimbabwe must align to the single market which is seen as Africa’s “Marshall Plan”.
Its full implementation will lift 50 million people out of poverty by 2035, according to the World Bank.
