Exporters call for review of export waiver threshold

The Chronicle

business journalist

EXPORT companies have lobbied the government to increase the mandatory buy-back requirement to 40%, saying this diminishes the incentive to export and is unsustainable for sound business operations.

Those in the apparel sector say the 40% divestment requirement limits the ability to export, noting that the sector, in particular, depends on importing raw materials.

They called on the government to prioritize the allocation of foreign exchange to exporting companies and to ensure that the exporting sector has access to constant electricity.

This came out yesterday during a National Exporters Budget 2023 stakeholder consultation process hosted by ZimTrade in Bulawayo.

Zambezi Tanners managing director, Mr Arnold Britten, said the 40% retention was also holding back productivity in the leather sector.

“The 40% makes the leather sector uncompetitive and needs a review. We operate at 30% and to move upmarket, we need to have access to foreign currencies. Right now we are struggling to get foreign currency,” he said.

“We have to take out loans, which are very expensive. We are unable to grow. All of our requirements are imported. The textile sector uses our products and they are unable to develop because they cannot access our inputs, so our demise is also felt by the textile sector.

Outlining some of the challenges facing the sector, a representative of the Zimbabwe Garment Manufacturers Association, Mr. Menfre Tanyanyiwa, said the 40% divestment requirement has made exports less competitive.

He said the disappearance of the textile industry has hampered the use of locally produced fabrics and increased appetite for imported fabrics.

“If you want to export a product to any country in the region and get duty-free incentive, you must have processed the raw material twice and you must move it from yarn to cotton and from cotton to garments “, Mr. Tanyanyiwa said.

“When you look at garments and manufacturing, about 40% of the cost of your products is raw materials and a labor factor.

“When it comes to a 40% retention, it means you are looking for foreign exchange to finance the import of raw materials, which do not exist in the country.”

He suggested that the government support the relaxation of the double-processing requirement saying that garment manufacturers must satisfy their customers’ demand for a greater variety of garments and fabrics, than the local industry is. unable to offer.

Mr. Tanyanyiwa also said that government support for exports must be extended beyond small and medium enterprises and also reach out to established businesses.

“Most established companies find it difficult to enter international markets due to the high costs of market outreach, product certification and round-trip follow-up visits,” he said.

Regarding interest rates, a representative of Arenel Private Limited, Mr. Steven Ncube, said that the 200% interest has helped curb inflation and converge exchange rates.

“Some people are complaining about 200% interest rates, when you look at what’s happening in the world, most central banks are raising their interest rates.

“It’s because there was a lot of money in circulation. As a sector, our recommendations would be for continued open market operations, i.e. raising interest rates,” he said.

“The authorities must maintain this, but not for too long. It is necessary to balance it for sustainability because the market does not like extremes.

“So far the authorities are doing a good job, they have managed to moderate the reserve currency. They should now moderate the broad money supply. They are also doing well on the foreign exchange market where they are now witnessing a convergence of the parallel market and the interbank market, but it is necessary to liberalize the foreign exchange market.

Mr Ncube said delays in the release of foreign currencies allocated in the auction system were also affecting production levels.

“The delay in the disbursement of the auction system’s currency allocation is affecting operations. In our case, we have had outstanding bids since April this year and we encourage the authorities to look into this issue,” he said. he declared.

“It is necessary to liberalize the exchange rate, we must not abolish the auction system.”

ZimTrade Managing Director, Mr. Allan Majuru, said the main issues that emerged centered on rebates, 40% retention and foreign currency availability.

“One of the biggest issues that kept coming up was retention. This is a matter that we will pass on to the authorities,” he said.

“Stakeholders also recognized that the government needs money to fund the auction system, import energy and address other issues, but what is essential is that our exporters remain viable,” Majuru said.

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