'Forex deal lifts industrial output' - NewsDay
BY FREEMAN MAKOPA
SHELF space occupied by domestic products shot to 80% at the end of November after industrial production was boosted by United States dollar injections from the foreign currency auction system, NewsDay Business has learnt.
In a wide-ranging interview yesterday, Industry and Commerce minister Sekai Nzenza said after a frustrating phase in which companies struggled to access cheap foreign currency to import machinery and raw materials, the auction system injected US$241 million into industries, giving them fresh impetus to expand.
The foreign currency auction system was introduced in June 2020.
Before that, companies were mostly sourcing foreign currency from an expensive black market, which has been holding the bulk of United States dollars circulating in the economy since banks adopted a cautious lending regime a few years back.
In July, the Reserve Bank of Zimbabwe said banks were holding up to US$1,7 billion in idle liquidity.
However, even the foreign currency auction system has struggled to provide enough funding to end the blazing crisis.
Industries have reported backlogs of up to 15 months on allotted amounts, but government has undertaken to address the problem.
“We appreciate the effort of other government stakeholders such as the Ministry of Finance and Economic Development as they engaged in clearing the backlog,” Nzenza told NewsDay Business.
“A total of US$241 million was allocated from January 2021–November 2021 through the auction system towards the support of the industries for productive sectors of the economy. With this allocation, industry and commerce imported raw materials and equipment. This had an immediate impact on production as shelf occupants of locally-produced products reached 65%-80%,” Nzenza said.
She said the African Continental Free Trade Area (AfCFTA), a market reaching out to 1,2 billion African citizens across 54 countries with a combined US$3,2 trillion gross domestic product (GDP), will unlock fresh export opportunities for Zimbabwean manufacturers.
“The coming in of the African Continental Free Trade Area will give an advantage of a bigger market that will be supporting the industries to retool through supporting them in accessing fiscal incentives. The Ministry of Industry and Commerce will continue with our robust engagement in ensuring that we timely assist in terms of policy interventions. Noting that foreign currency is scarce, the ministry has come up with sectoral strategies that are promoting and encouraging industries to export more,” Nzenza said.
AfCFTA has given hope to many of the region’s economies.
In October, Wamkel Mene, secretary-general of the bloc said Zimbabwe should take advantage of the bigger market as it rebuilds its struggling economy.
Mene, who spoke during a ZimTrade exporters’ conference, said AfCFTA would increase intra-Africa trade.
“The Africa Continental Free Trade Area that started trading in January 2021 offers significant trading opportunities to Zimbabwe to further grow its exports, to boost its economic growth and transformation,” Mene told the conference.
“I say this because the export potential for intra-Africa trade is quite significant and is estimated to be close to US$85 billion. This is currently projected to raise the current level of intra-Africa trade to more than US$230 billion, potentially accounting for more than 22% of total Africa trade. It is therefore time for our private sector in Africa, not just in Zimbabwe, to explore trade and investment opportunities that are presented by AfCFTA both in the area of trading goods and trading services. With a generous endowment of natural resources, existing stock of public infrastructure and a comparatively skilled labour force Zimbabwe has an unprecedented opportunity to join existing supply chains in Africa through the AfCFTA,” he added.
Mene spoke as the Zimbabwean CEOs pushed domestic industries to mount aggressive strategies towards unlocking opportunities brought by AfCFTA.
In a note released ahead of its annual conference in October, the CEO Africa Roundtable (CEOART) said AfCFTA had potential to propel re-industrialisation across the African continent.
- Nzenza’s full interview will be published in the Zimbabwe Independent in the first week of January 2022.
- Follow Freeman on Twitter @freemanmakopa