Zimbabweans should embrace the newly introduced local currency, the Zimbabwe Gold (ZiG) to ensure the country does not become a supermarket of the region.
This comes as the operationalisation of the Africa Continental Free Trade Area (AfCFTA) gathers momentum.
The US dollar is in the basket of currencies used in Zimbabwe as part of the multi-currency system.
As it stands the use of US dollar dominates local transactions and according to the Governor of the Reserve Bank of Zimbabwe (RBZ), Dr John Mushayavanhu, by end of 2023, over 75 percent of local transactions were being conducted in US dollars.
It is, however, feared that the dominance of the US dollar in the local market will attract more regional imports when the AfCFTA is operationalised, rendering Zimbabwe a supermarket for products from the region and beyond.
It is highly anticipated that the use of US dollar will attract more competition locally, given the competitiveness of some regionally sourced goods.
Already history has it that when the country dollarised during the inclusive Government over a decade ago, the country become a dumping ground of old automobiles, ICT materials and some home appliances among other goods, with regional and international traders taking Zimbabwe as a cheap source of US dollars.
Zimbabwe’s production costs have lately been exorbitant, influenced by multiple factors such as high production costs stemming from myriad of factors including high cost of capital, turbulent macroeconomic environment, unavailability and higher electricity prices.
However, the success of the recently introduced ZiG among other intervention measures by the Government, will undoubtedly enhance the local industry’s competitiveness compared to regional peers.
The introduction of the ZiG, a structured currency backed by gold and other precious metals, is expected to be an impetus to the stabilisation of the local economy going forward.
Speaking during the AfCFTA Tariff Offer dissemination workshop convened by the Competition and Tariff Commission (CTC) and Confederation of Zimbabwe Industries (CZI) on Tuesday, economist Dr Reneth Mano, said embracing the local currency would go a long way in improving the local industry’s competitiveness in face of potential cut-throat competition to be caused by the AfCFTA.
“We should be confident in our local currency, because its survival means our survival. If ZiG does not work, our industry also will not survive. The continued use of the US dollar will make us a supermarket economy as soon as this AfCFTA comes into effect.
“Making ZiG work should be the consensus or rallying point if we are serious about making wins in the AfCFTA environment. We should try to deal with our macroeconomic environment and address the difficulties in doing business,” said Dr Mano.
Government has since maintained a tough stance against illegal foreign currency traders and stewards of arbitrage that have been perpetuating a rapid free fall of the local currency before.
According to a survey by CTC, 50 percent of the large companies are not yet ready to compete in the AfCFTA given an albatross around their operations which leaves them with higher priced goods.
Mr Tawanda Katsande of CTC, implored local companies to pull up their socks and produce quality and competitively properly priced goods so that locals do not end up preferring foreign cheap substitutes.
He called upon relevant authorities and the private sector to ensure a workable macroeconomic environment that lessens the cost of doing production locally, particularly some issues to do with availability and affordability of electricity.
“There is going to be increased competition in Zimbabwe because of the US dollar, we are now reluctant about the US dollar while other countries are hungry for it , goods are going to come here even at lower cost so that they access the greenback,” said Mr Katsande.
To be competitive, Mr Katsande said local companies should keep in touch with new technologies for efficient production processes that lessen cost of production.
He said some of the derelict equipment still being used in industry consume a lot of electricity, while there are now alternatives that use lesser and cheaper electricity.
CZI chief economist, Dr Cornelius Dube, said doing business in Zimbabwe is not easy and the macroeconomic environment needed to sorted for local industry to be competitive.
“Cost per unit for our local companies is actually higher compared to regional peers because here someone is using inferior type of technology, capital costs are high.
“About 18 percent of total overheads are just compliance costs. The regulators try to collect as much as they can from the business,” said Dr Dube.
The Competition and Tariff Commission in collaboration with CZI has been conducting awareness workshops on Zimbabwe’s preparedness in terms of the implementation of AfCFTA mainly focusing on tariff offer.
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