How Zimbabwe can revive industry and end its cash crisis

Binga South Member of Parliament Gabbuza Joel Gabbuza says the best way to revive Zimbabwe’s industry is to target the manufacturing of a few kitchen commodities because those are the major things that the country is importing.

Government should then introduce an import tax of even 5 percent, like the current export incentive, because with $6 billion worth of imports every year the government can raise $300 000 which can be used to revive industry.

Gabbuza said the current export incentive would not revive industry at all because it was targeted at a few companies and commodities.

“Firstly, we are giving incentives of 5% to the chrome industry and the gold sector, which are the only things that are there in terms of exports.  If you look at a gold or chrome plant, even if you give them a 5% incentive, if the capacity of the processing plant is to produce 10 tonnes, no matter how much incentives you offer, that plant will not produce any excess, so that 5% will not result in extra production at all.  The plant is built to process a certain amount of commodity or mineral output per month or per day,” he said.

“Mr. Speaker Sir, we are also incentivising things like tobacco, which is seasonal.  After we have reaped all our tobacco, what else will bring in foreign currency?  It is a seasonal crop and once it is reaped and sold, it is done.  Therefore, we will only earn foreign currency from tobacco over a certain period.”

Gabbuza reiterated that half of Zimbabwe’s problems could be solved by resuscitating ZISCO.

“This is because if ZISCO Steel starts operating, automatically Hwange Colliery will start moving and the National Railways of Zimbabwe will also start operating.  What will ZISCO Steel do?  If it starts operating, the fertilizer price of ammonium nitrate will definitely go down because ZISCO Steel subsidises Sable Chemicals through buying oxygen.

“The mining industry will start operating, the cost of operations will be reduced because most of the dynamites used in the industries now are being imported from such countries as China, South Africa and others, which is moving foreign currency outside the country.  However, if ZISCO Steel was operational, explosives automatically follow because they are a by-product of the hydrogen produced at Sable Chemicals where Sable supports ZISCO Steel.  That will be helpful to us.”

Gabbuza said he was fully behind the call by Chegutu West legislator Dextor Nduna to force Asian businesses to bank.

“If you move around town right now looking for the only business places that are ticking – If you go to Mahommed Mussa, I suspect they could be cashing in US$100 000 or more as turnover per day.  However, the question is, is that money circulating in our banks?”   he asked.

“If we bank US$100 000 cash from Mahommed Mussa alone, will there be a cash shortage in the banks.  Go to the Gulf Complex along Chinhoyi Street and the shops along all those streets around the Gulf Complex, all the shops are Chinese shops and there is a hive of business.  Definitely, all the money being circulated there is not being channelled to the banks.  If they were being channelled to the banks, would we still be having queues of people waiting for money outside banks?

“I think those are some of the things that the Minister must try to consider and see if we can possibly mop up all the money from people who are not keeping money in the banks so that it is allowed to circulate.  Then of course the issue of targeting industries, incentivizing four working industries does not work.  Let us resuscitate those industries that have collapsed.  We do not need to put Government money, let us charge people at the border.  People are importing, put an import tax; that import tax then goes to the industries, the local industries.  I am sure that will definitely work if we try all those proposals.”

Full contribution:

HON. GABBUZA: Thank you Mr. Speaker Sir.  I just have a few points that I want to emphasise – [HON. MEMBERS: Inaudible interjections.] –

THE TEMPORARY SPEAKER: Order Hon. Members, let us hear the Hon. Member in silence please.

HON. GABBUZA: Mr. Speaker Sir, I strongly believe that the more I listen to people talk about bond notes, the more I become more sceptical on whether it is going to solve the intended problems.  Bond notes are supposed to solve our cash crisis, but I do not think that only bond notes will be a solution.

Therefore, there are certain things that I think the Minister must consider.  Why do I have scepticism on bond notes being a solution to our cash problems?  Firstly, we are giving incentives of 5% to the chrome industry and the gold sector, which are the only things that are there in terms of exports.  If you look at a gold or chrome plant, even if you give them a 5% incentive, if the capacity of the processing plant is to produce 10 tonnes, no matter how much incentives you offer, that plant will not produce any excess, so that 5% will not result in extra production at all.  The plant is built to process a certain amount of commodity or mineral output per month or per day.

Mr. Speaker Sir, we are also incentivising things like tobacco, which is seasonal.  After we have reaped all our tobacco, what else will bring in foreign currency?  It is a seasonal crop and once it is reaped and sold, it is done.  Therefore, we will only earn foreign currency from tobacco over a certain period.

There are some people who believe that industry is improving, that is capacity utilisation, I was listening to the Minister of Industry and Commerce the other day.  Mr. Speaker Sir, my recollection is that, there is very little capacity utilisation that has improved, mainly because it was said that we are now producing cooking oil.  We are not producing cooking oil at all.  We are actually repackaging what is produced outside. If we talk of Delta Beverages, they are one of the major industries that remain in the country, but what are they doing?  Everything is coming from outside the country, including the bottle tops.  What is locally produced is only water.  Mr. Speaker Sir, as long as we just think about bond notes and incentives, it will not work.  I think the Minister’s focus must be to target industries and see how best we can improve our industries in terms of productivity.  Incentivising three companies that continue to produce will not work.  I wish the Hon. Minister would one day find time to move around Bulawayo, most of the industrial complexes, especially on a weekend, have been turned to church halls now.  There is very little activity going on.

Mr. Speaker Sir, what should we do?  My proposal is that, because we are literally importing everything in the kitchen, the Minister should consider targeting a few kitchen commodities that are used by women when they cook in the kitchen, because those are the major things that we are importing.  They should then introduce an import tax, even if it means 5%.  I was doing my computation and consulting with other economists.  Our import bill is about US$6 billion and if we tax 5% on US$6 billion, we get about US$300 000 and that money is channelled to local industries so that there is improvement in their capacity utilisation.  We will reopen those industries and we give them the modalities on how it can be done.

However, if we unveil US$300 000 per year, we will have more than 100 industries producing.  Once our own industries start producing, we will see them exporting.  We have good quality commodities like Mazoe which is not comparable to any product in the region.  However, we need to capacitate those industries so that they export and definitely, we will have more foreign currency.

Mr. Speaker Sir, the other thing is about ZISCO Steel.  I have always argued that if ZISCO Steel is resuscitated, we will solve almost half of our problems in the country.  This is because if ZISCO Steel starts operating, automatically Hwange Colliery will start moving and the National Railways of Zimbabwe will also start operating.  What will ZISCO Steel do?  If it starts operating, the fertilizer price of ammonium nitrate will definitely go down because ZISCO Steel subsidises Sable Chemicals through buying oxygen.  The mining industry will start operating, the cost of operations will be reduced because most of the dynamites used in the industries now are being imported from such countries as China, South Africa and others, which is moving foreign currency outside the country.  However, if ZISCO Steel was operational, explosives automatically follow because they are a by-product of the hydrogen produced at Sable Chemicals where Sable supports ZISCO Steel.  That will be helpful to us.

The other proposals that I want to make had been emphasised on by Hon. Nduna.  If you move around town right now looking for the only business places that are ticking – If you go to Mahommed Mussa, I suspect they could be cashing in US$100 000 or more as turnover  per day.  However, the question is, is that money circulating in our banks?  If we bank US$100 000 cash from Mahommed Mussa alone, will there be a cash shortage in the banks.  Go to the Gulf Complex along Chinhoyi Street and the shops along all those streets around the Gulf Complex, all the shops are Chinese shops and there is a hive of business.  Definitely, all the money being circulated there is not being channelled to the banks.  If they were being channelled to the banks, would we still be having queues of people waiting for money outside banks?

I think those are some of the things that the Minister must try to consider and see if we can possibly mop up all the money from people who are not keeping money in the banks so that it is allowed to circulate.  Then of course the issue of targeting industries, incentivizing four working industries does not work.  Let us resuscitate those industries that have collapsed.  We do not need to put Government money, let us charge people at the border.  People are importing, put an import tax; that import tax then goes to the industries, the local industries.  I am sure that will definitely work if we try all those proposals. Those are the few things that I thought I could put on the table.

IBTimes

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