GOVERNMENT is putting in place a package of fiscal incentives to stimulate industrial value chains in targeted economic sectors to buttress the Local Content Strategy that seeks to substitute unnecessary imports, which continue to drain liquidity from the economy.
Finance and Economic Development Minister, Professor Mthuli Ncube, revealed this in his 2020 National Budget Statement where he stressed the need to revamp domestic industrial output for export gains and job creation.
“The 2020 National Budget will actualise value chains through the Local Content Strategy by supporting domestic production of products, which the country has a comparative advantage,” he said.
“In line with available capacity, initially the support is targeted at the following areas: pharmaceuticals, tyre production, hides/leather processing and steel production. Treasury is, therefore, packaging respective fiscal incentives for this purpose. The country imports a lot of goods and services that can be locally produced, causing de-industrialisation and sustaining higher trade deficits and exporting jobs in the process.”
Prof Ncube said the revival of the local steel industry, for instance, was key for the economy given the value chain potential it possesses. As such, he said, Government will continue to seek local and international investors in order to revive the sector whose constraints have been worsened by the demise of Zisco a decade ago. Prof Ncube said the 2020 budget will also promote venture capital to support ailing industries and start-ups, which are an important vehicle for the resuscitation of the local industry.
“The manufacturing sector has immense scope for promoting our value addition thrust and hence facilitate higher value-added output, value chains, diversification, export earnings and import substitution, which all underpin growth and job creation thrust of 2020 budget,” he said.
The minister said serious attention was being given to traditional economic constraints such as shortages of foreign currency, power shortages, utilities, high production costs, as well as low aggregate demand. As such, he said next year’s budget will seek to drive implementation of the Zimbabwe National Industrial Development Policy, which seeks to support innovation-led and investment-led industrialisation to increase capacity utilisation to above 70 percent by 2023. The policy rides on key pillars and strategies that include import substitution, export-led industrialisation, strengthening value chains, mineral beneficiation and value addition. To that end, Prof Ncube said Treasury will capitalise the Industrial Development Corporation (IDC) by $240 million to enable it undertake its mandate effectively.
“Treasury will also provide a guarantee scheme for companies to access capital from financial institutions for retooling purposes. Overall, the Ministry of Industry and Commerce is allocated $368 million and this thrust will also be supported by advancing the ease of doing business reforms, as well as addressing key issues of energy and foreign currency shortage,” he said.
Prof Ncube also said incentives will be extended to exporters while the rest of Government improves the removal of administrative impediments such as export permits for exporters.
“Initiatives on value chains will receive fiscal support, thus diversifying exports and supporting linkages between various sectors of the economy,” he said.