Chinese importers choke Zimbabwe manufacturers amid COVID-19
Zimbabwe has openly welcomed Chinese businesses, but local companies — already reeling due to the COVID-19 pandemic — have complained that cheap Chinese imports have put the squeeze on them.
Zimbabwe-China trade relations have for years favored the Chinese, with the Asian giant accounting for the bulk of Zimbabwe’s import receipts and the largest investors in the African country. But Zimbabwean companies already reeling from years of economic stagnation are speaking out, complaining about unfair business practices from Chinese firms who are importing goods and services that local companies could produce.
Last week, Zimbabwe information minister Monica Mutsvangwa told Chinese media that the country is determined to “offer itself as the foreign direct investment destination of choice to Chinese entrepreneurs” — a comment that is unlikely to be met with enthusiasm from local companies.
In a recent report, the Confederation of Zimbabwe Industries (CZI) raised concerns that while local manufacturers have the capacity to produce such things as polyethylene terephthalate (PET) for soft drinks, locally based Chinese firms are importing the material.
According to the CZI, 60 percent of the PET production in Zimbabwe is controlled by Chinese businesses, throwing local companies into economic uncertainty at a time when thousands of firms have reportedly closed shop, citing a hostile operating environment.
What’s more, Mutsvangwa said the government is easing the red tape to allow further entry of Chinese investors into Zimbabwe.
“Bureaucracy and red tape are being done away with,” she said. “Recently the president launched the One-Stop Zimbabwe Investment Development Authority to expedite business decisions and speed commitment of investment funds. This will be a boon to Chinese risky capital.” She added that “more FDI is anticipated from the new and growing business class of China and its crop of global billionaires.”
But experts have expressed concern about the shortage of protections for local producers.
“Government procurement policies do not support local producers,” said Albert Makochekwana, an economics professor at the University of Zimbabwe. “You see for instance government departments and parastatals buying most goods from other countries.”
“The government pronouncement should [tell people to] strictly be buying local, but our local suppliers’ prices are just out of this world,” he told The China Project, highlighting long-standing concerns about cheap Chinese products flooding local markets.
COVID-19 has only worsened the operating challenges of local manufacturers, something analysts say has resulted in the Chinese increasing their local footprint, bringing in cheaper materials.
“In many countries, governments seek to manage such investment inflows in accordance with national development strategy, but countries like Zimbabwe struggle to attract many investors due to a very poor business environment, and ongoing economic and political crises make it more difficult,” said Nathan Hayes, an analyst at the Economist Intelligence Unit.
“Zimbabwe could benefit from more structural external assistance, with investment across the supply chain,” he said. “Most inputs and equipment are imported, making it expensive, while the government has a limited supply of hard currency to pay for imports.”
Other factors have added to the woes of local companies: steep electricity tariffs, power outages, water shortages, and high rental prices, to name a few.
“Zimbabwe is a high-cost producer and all our locally manufactured goods and services are generally more expensive than from other countries,” said Makochekwana, the economics professor.
The Zimbabwe National Chamber of Commerce (ZNCC) says the country’s private sector is beset by not just COVID-19, but also government policies that continue to favor exporters at the expense of local producers.
“We continue lobbying for the survival of businesses, making sure anti-business policy measures are decried,” said ZNCC chief executive officer Christopher Mugaga in a February 10 business update.
“We expect almost 40 percent of small-to-medium enterprises not to survive the pandemic,” he said.
For now, with Mutsvangwa expressing the government’s commitment to granting China more business opportunities, it could be some time before local businesses turn the corner and help rebuild Zimbabwe’s battered economy.
