Speaking during a pre-budget dialogue hosted by The Chronicle in Bulawayo yesterday, Dr Mugano said the local content policy was a sustainable option to arresting the influx of imports in line with World Trade Organisation (WTO) accepted standards.
The local content policy is expected to replace Statutory Instrument 64 of 2016, which removed several goods from the Open General Import Licence in order to protect local industry from cheap imports. The Ministry of Industry and Commerce and the private sector have started consultations following concerns over limitations of S.I.64 of 2016.
“The local content policy is a continuation of S.I. 64/2016 and it can be used to reduce the trade deficit and to create employment by improving the competitiveness of the local manufacturing sector,” said Dr Mugano.
“In coming up with a local content policy, focus should be made on ensuring that the policy is business oriented. There should be some incentives given to companies.”
He said the country was working on coming up with the local content policy, which should be in place by December this year.
Dr Mugano said since the introduction of the multicurrency system in 2009, Zimbabwe has continued to record negative trade balance due to low competitiveness of local industries against their foreign counterparts.
“We need to localise in order to create jobs and in embracing the local content policy, it must be known that it is a process and not an event.
“So business should be involved in the crafting of the policy so that as we go forward we also establish the threshold that can be supplied locally,” he said.
Official data from the Confederation of Zimbabwe Industries (CZI), indicates capacity utilisation in the manufacturing sector stood at 47.4 percent last year from about 34.3 percent in 2015.
Dr Mugano said the adoption of a multicurrency system rendered the country’s monetary policy statement weak and to counter the challenges, Zimbabwe needed to enhance its production levels to competitive levels in order to generate the much needed foreign currency.
“When using a multi-currency regime, the country’s monetary policy becomes very weak so you have to produce so that you export in order to generate foreign currency.
“We need to make a surplus in terms of what we produce so that we create exports before we can introduce local currency.
“We need to have reserves of US dollars in our account before we introduce the local currency.
China has reserves exceeding $4 trillion and every year they are realising a trade surplus,” he said.