#BannedImports in Zimbabwe

How many of us actually understand the S1 64 2016 article that the Government of Zimbabwe had implemented in full force for several days now.  With all the protests and mayhem reported it can be easy as a bystander to be easily swayed by the public rhetoric and automatically make uninformed assumptions (like BREXIT) without taking the time to understand why, and what the reasons behind the statutory restrictions on particular import substitutions. 

After scrolling last night through my Facebook newsfeed, as I sometimes do in the hopes of catching some news I may have missed during the day – I came across an interesting and highly heated debate on the #BannedImports in Zimbabwe.  What stood out the most was an individual who had a very different point of view to the rest of the participants.  However, it wasn’t just that fact he was willing to stand up for what he believed, he is a Practitioner in manufacturing FMCG products in Zimbabwe and according to the statement on facebook, the individual “employs 300 people in his company… manufactures products which they export to over 20 African countries including Canada and Hungary…of which last year they exported 500 tons of products…which is 70% of turnover in exports related receipts.”  Suddenly, he had my attention, I was curious to learn, what he had to say and why they would support S1 64 2016. So I read on and decided to share the insights that resulted in changing my mindset around the statutory instrument.  Below are my 5 points I was able to extrapolate from the insightful individual to share with interested parties:

1)      “Government has not banned imports”

 Government of Zimbabwe have removed products with import substitution from the Open General Import License (OGIL).  This means if one wants to import them, one will need an import license.  To obtain the license one needs to justify why there is a need to import the product.  For example Coffee Creamer is on the list because it can be found locally.  Otherwise, if it is on the list, but you are unable to  source it locally, the SI 64 2016 is flexible and companies/traders can obtain an import license at the cost of US$30 valid for 3-months.

2)      SI 64 2016 is a Temporary Tool

The concept of SI 64 2016 was discussed at the SADC heads of state meeting in Victoria Falls 2015 and it was agreed that Zimbabwe’s industry lagged behind regional countries by 10 years and needed to be capacitated to prevent disparities in trade balances between member states of SADC.  In accordance, to regional trade protocols, SI 64 is time bound for a period of about 5 years but may vary from sector to sector depending on the timelines for retooling and upscaling of capacity and throughput.  Therefore, it’s important to highlight that the SI is a temporary tool to help address the problems to which Zimbabwe faces in the form of cash shortages and possibly failure by Government to pay salaries.

3)      Currency Valuations and Incentives

Most of the public rhetoric assumes that Zimbabweans perceived quality on local products is low.  That is not entirely true.  Compared to Chinese imports, Zimbabweans generally prefer local industry solutions as they are of better quality.  However, quality doesn’t necessarily translate to value or affordability and unfortunately because Zimbabwe trades in US$ currency, affordability rests with currency valuations. The rand has weakened to around R15 to the US$1. So imagine a local manufacturer costs of producing a product are in US$ but they are competing with Importers with goods manufactured in ZAR (Rand) costs – so they can export at cost and are incentivized via rebates offered to foreign manufacturers.  This allows their products to still reach the consumer at cost and still make a profit.  However, Zimbabwean manufacturers do not share the same benefit.  The South African government have placed several non-tariff barriers that deliberately stifle competition from imports especially from Zimbabwe.  With such obstacles it makes sense for to create an instrument such as S1 64 to level the playing field.

4)      Customer-Centric focused Strategy

Benefits to the local manufacturer: It depends on the products that you are offering to the market.  If the product is targeted at a value chain that recognizes quality ahead of price and your customers have a perceived value of your products that is more favourable than your competitors then you are likely to retain your customers. Customer loyalty = Customer retention.  Furthermore, customized products tailored to the smallest trader unlike for example China where one has to import in bulk to trade, creates a competitive advantage and a niche market, cementing a company’s position.

5)      Lead Time in Production

A supply chain is organized in a way that reduces lead time is always a value add.  In this individual’s case lead time is as a result of geographical proximity.  In addition, better payment terms with suppliers compared to their competitors makes the company an attractive business partner.  This improves your economies of scale.

“Whoever has ears, let them hear,” Jesus said, Matthew 11:15, and in light of recent global events of BREXIT can we safely choose, “Ignorance is bliss”, route?