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GOVERNMENT has approved a raft of measures including reducing the cost of key enablers in a bid to help industry recover from the liquidity crunch and high production costs. In a brief to the Press on Cabinet’s decision on the measures to enhance competitiveness yesterday the Minister of Industry and Commerce, Mr Mike Bimha said the Cost Driver Analysis of the Zimbabwean economy showed that the nation’s international trade flow and its composition point towards a sustained loss of competitiveness.

Government’s decision is based on findings on research conducted by a Cabinet committee which identified key cost drivers – labour, power, water, finance, transport and trade logistics, tariffs and trade taxes, taxation as well as information technology.

The Cabinet committee recommended the adoption of a Holistic Cost Reduction Model as it relates to utility costs and regulatory costs such as fees, licences, permits and levies.

On labour, Government approved reforms that will introduce efficiencies in the economy and measures that will introduce productivity at the firm level.

“Cabinet also emphasised the need to undertake reform exercises which include adjustment downwards of the parastatals and local authorities’ wages and salaries, as the current wages and salary levels are not only costly to ordinary citizens but also to companies through levying high rates, fees and other charges to sustain the wage bill,” Minister Bimha said.

On power, Cabinet agreed among other things that in key productive sectors of the economy, there is need to lower electricity tariffs for industrial production and that licensed Independent Power Producers should utilise the licences issued otherwise they should be revoked.

“Cabinet also approved key cross cutting recommendations which called for decisive action on corruption which is unfortunately contributing to the cost of doing business in the country,” said Minister Bimha.

In order to operationalise the recommendations Cabinet also agreed to constitute an entity whose mandate would be to promote a competitive business environment in the country and to rebrand the National Pricing and Monitoring Commission into the National Competitiveness Commission.

The NCC will be responsible for reviewing all new Government business regulations and repealing old excessive regulations that place a huge burden to business.

The committee carried out a comparative analysis of the country’s pricing structure vis-a-vis those of the country’s major regional trading partners.

The committee also benefited from the findings of the two aisory committees appointed early this year to investigate and proffer aice on imports and the cost of doing business.

The Cost Driver Analysis showed that imports rose almost twice as fast as exports in the last five years, resulting in the trade deficit soaring to $4,2 billion in 2013 from about $1,26 billion in 2009. This represented a rise of 234 percent.

It also showed that the huge increase in imports is largely driven by lack of competitiveness of domestically produced goods as well as low capacity utilisation of local industry.

Some highlights of the findings showed that based on the 2013 minimum wage levels, Zimbabwe was found to be more expensive in relation to Zambia, Botswana and Mozambique.

Mozambique was found to be 42 percent cheaper and Zambia 53 percent cheaper. However, in relation to South Africa, Zimbabwe was roughly 53 percent lower.

Redundancy dismissals were found to be lengthy and prohibitively expensive with the notice period in Zimbabwe of 13 weeks being approximately three times more than that required in the neighbouring countries.

Regionally the country was found to be expensive as its fixed water charges in all categories, that is, industrial, commercial and residential were found to be higher even when compared with the regional water-constrained nations such as Botswana.

“In Zimbabwe the finance costs remain way above the regional ones, the study revealed that on average interest rates were 28 percent per annum, a figure which is nearly double Mozambique’s (15,3 percent) and more than three times the South African rate 8,5 percent,” the Minister said.

On levies, taxes, permits and related regulatory costs the findings showed that an environmental impact assessment in Zimbabwe is 4,5 times more expensive than the next highest in the region (Malawi), 7,5 times more costly than Mozambique and 1 500 times more expensive than South Africa.

Source : The Herald