Local content policy nears finality

Mangaliso Ndlovu

Government is reportedly finalising the proposed local content policy that will prescribe thresholds for local material in all products; amid indications the policy document would soon be submitted to President Mnangagwa before adoption as Government policy.

This process forms part of interventions Government is instituting towards management of the country’s unsustainable import bill, which has resulted in scarcity of foreign currency needed to import key commodities such as raw materials, fuel, medicines and equipment.

In working towards a local content policy to support local industrialisation, Zimbabwe is not traversing uncharted territories, as its biggest trading partner, South Africa, has local content thresholds for different sectors ranging from 30 percent to 100 percent.

Zimbabwe imported products valued US$5,87 billion in the first nine months of last year, well ahead of the country’s major source of foreign earnings, exports — which totalled US$3,44 billion in that period — from US$4,86 billion exported in the first three quarters of the prior year.

Industry, Commerce and Enterprise Development Minister Mangaliso Ndlovu confirmed to Business Weekly that his ministry was crafting a local content policy to encourage the consumption of local products.

Minister Ndlovu said the documents with finer details of the proposed local content policy was almost ready, but said it was currently reserved for sight of the Presidency first before it is finally made public.

“The local content policy is just trying to encourage people to buy local and we see it as a major step towards import substitution, that is what it is all about,” he said, but could not shed more details due to time issues.

Minister Ndlovu could also not be drawn into revealing timelines on when the local content policy was expected to come into force although indications are that its crafting is now at advanced stages.

Estimates say 55-60 percent of products found on local supermarket shelves are imported from across the world; but the majority comes from neighbouring South Africa, which is Harare’s largest trading partner.

The minister pointed out that the local content policy was part of a number of imports management interventions his ministry was rolling out to keep Zimbabwe’s huge import bill under check or even reduce it.

Government contends that there are ways to support the local industry without resorting to Statutory Instruments to regulate importation and such options entail crafting of a local content policy to encourage citizens and local corporates to buy products produced locally.

The Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe, said industry has been pushing for a local content policy, which will compel inclusion of prescribed amount of local material in products sold in Zimbabwe.

“We are currently pushing for a local content policy to be put in place. Government is now just awaiting approvals to increase the amount of local content by Zimbabwean enterprises.

“It is a policy that we have been working on together with the Ministry of Industry and Commerce,” he

The CZI president said the Procurement Act would also give leeway for local industry to scale up production for increased consumption of locally produced goods instead of continuing to rely on imports, which require forex.

It is believed that the increased consumption of locally manufactured products has the potential to drive the country’s industrialisation agenda and at the same time help whittle the country’s trade deficit.

No comment could be obtained from the Zimbabwe National Chamber of Commerce (ZNCC) on the local content policy, but the country’s largest lobby for commerce did make submissions towards crafting of the LCP.

In July 2016, Government introduced SI64 in an effort to restrict entry of foreign products, especially those which could be manufactured locally.

Companies that benefited from SI 64 registered a significant increase in their order books from 30 percent to 60 percent.

However, this led to differences with South Africa, which complained that Zimbabwe had adopted unfair trade practices, which violated the Southern African Development Community trade protocols.

Certain protectionism measures require members to seek derogation from SADC.

Although local content is a commonly used industrial policy lever,  there is, however, no formally agreed definition of what constitutes local or content means, and this makes implementing the policy difficult.

Although there is no agreed definition of what constitutes “local” or “content”, this concept generally means a set of policy measures that typically require a certain percentage of factors of production such as labour, supplies of intermediate goods, services and knowledge used in the production process to be sourced from domestic economy.