Government incentives boost manufacturing sector

A RANGE of Government incentives aimed at bolstering the manufacturing sector and reducing reliance on imports has led to locally produced goods now occupying over 80 percent of supermarket shelf space.

This comes as the Government will soon be implementing the Zimbabwe Industrial Reconstruction and Growth Plan (2024-2025), which seeks to foster sector growth.

The plan’s strategies include targeting a manufacturing growth rate of at least five percent annually, increasing sector investment by three percent per year, and raising the manufacturing value added (MVA) to 20 percent of GDP by 2030.

The Ministry of Industry and Commerce has implemented various incentives, such as duty rebates and suspensions, to support broader economic development, create jobs, and enhance access to affordable goods.

Permanent Secretary in the Ministry of Industry and Commerce, Dr Thomas Utete Wushe, urged the private sector to fully utilise these incentives.

Dr Thomas Utete Wushe

He emphasised that the incentives, aligned with priority value chains, aim to decrease import dependence by promoting local production using indigenous raw materials.

“These incentives, aligned to the priority value chains, are designed to reduce the overall dependence on imports for goods we can manufacture using locally endowed raw materials. It demonstrates Zimbabwe’s desire to upscale industrialisation in line with NDS 1, Vision 2030 and the Sadc Industrialisation roadmap,” said Dr Wushe.

He said by effectively leveraging on these incentives, tax rebates, duty suspension and VAT deferment, manufacturers have enhanced their financial viability, profitability and competitiveness.

“These measures support broader economic development, job creation, and improved access to affordable goods and services,” he said.

In addition, Dr Wushe urged the private sector to optimally make use of and access the incentives to take advantage of the Government’s efforts to grow the local industry.

“Equally, we will work with the investment fund managers, development banks, pension funds and investors to explore more funding opportunities for industrial growth,” he said.

The incentives include VAT deferment on capital equipment imported by specified sectors, with periods ranging from 90 to 180 days, extendable to two years with Finance Ministry approval. However, there are calls from stakeholders to increase the VAT deferment period and lower the minimum value threshold of US$500 000, which is seen as prohibitive for small and medium enterprises.

The textile and clothing sector has notably benefited from these incentives, particularly through duty-free importation of essential raw materials like fabrics, dyes, and pigments. Yet, some manufacturers, especially in the soap and cosmetic sector, remain unaware of these rebate facilities.

Dr Wushe noted that manufacturers have benefited from duty-free importation of fabrics that cannot be produced by the local textile industry.

These include materials such as fabrics of denim, yams, woven polyester, sewing threads, and machine accessories.

Dr Wushe said most manufacturers in the soap and cosmetic sector have indicated that they are not aware of the rebate facility.

Finance Minister Professor Mthuli Ncube, in a recent mid-term monetary review, noted robust economic growth despite challenges. However, he highlighted that this growth has not significantly transformed national productivity, exports, or employment, attributing this to a decline in the manufacturing sector’s contribution to GDP from 23 percent in between1980-1989 to nine percent in 2023.

Prof Ncube identified issues such as low export competitiveness, high import dependence, inadequate public utilities, complex regulatory environments, and a lack of affordable long-term finance as factors undermining the sector’s growth.

The Zimbabwe Industrial Reconstruction and Growth Plan (2024-2025) aims to address these challenges through sector-specific strategies, including enhancing processing, fostering innovation, and promoting linkages with SMEs.

The plan will also focus on value addition, improving the business environment, and leveraging opportunities under the African Continental Free Trade Area (AfCFTA). Additionally, the Government plans to create industrial hubs in rural areas to generate employment and improve living standards.-chronicle