As local manufacturers struggle to raise foreign currency to import raw materials and equipment on one end, another uncontrolled delinquent flourishes on the other to their detriment. Cheap imports have flooded the Zimbabwean market and are knocking local products off the shelves. Product dumping has thrived in Zimbabwe since the turn of the century when the industry took a knock due to a lot of factors, among them the land reform programme which affected production, policy inconsistencies and liquidity constraints.
A large number of the strategic industries could not stay afloat and had to close shop. Some turned their factories into warehouses for local distribution and have to content with being local agents of dumped products in the market. Capacity utilisation across the industry has remained flat at 45% for the past two years, with projections indicating that 2018 may end on a low note.
Product dumping in international trade is when manufacturing firms export goods at a lower price than their domestic price or their cost of production. For example, a 42 inch television set which costs 2 800 yuan (Equivalent of $450 in Zimbabwe) in the Chinese market is shipped to Zimbabwe at $130 per unit and sold at $250 locally. This is predatory pricing at its best. Product dumping is rife in electrical products, home appliances, automobiles, spares, kitchen ware, pharmaceuticals, clothing and textiles.
Product dumping is not counterfeiting, though they largely have the same adverse effects to the local industry. Counterfeiting is producing an imitation or fake product disguised as original to ride on the popularity of a certain brand such as Nike footwear, Samsung handsets or Adidas sportswear. Counterfeiting is illegal and is easy to prove.
Dumping is not expressly prohibited, the practice is considered bad business and often seen as a method to drive out the competition for goods produced in a particular market.
The World Trade Organization (WTO) General Agreement on Tariffs and Trade and Anti-Dumping Agreement allows countries to protect themselves against dumping by levying tariffs in cases where that tariff would normalise the price of the product once it’s sold domestically. Effects of product dumping to local producers are widely known, ranging from reduced demand on the local market and subsequent loss of market share, suboptimal production, cash flow challenges and loss of revenue. In effect, the local industry fails to capitalise, pay for their overheads or loans and create employment.
The challenge is largely growing due to corruption at the border posts, legal loopholes and Zimbabwe Revenue Authority (Zimra)’s dilemma to curb it. Limiting product dumping means foregoing excise duty in the short term for long term benefits through protectionism of the local industry. Zimra is mandated to enforce anti-dumping regulations through the rules of origin for all imported goods. Rules of origin are laws applied by the government to determine the origin of imported goods. Customs, therefore, evaluates whether a consignment is suitable for any tariff preference, quota limitation or is affected by anti-dumping duty.
Zimbabwe is member of the Sadc Free Trade Area protocol and WTO agreement. These agreements promote free trade, but the policies have been widely abused to Zimbabwe’s disadvantage because of economic challenges the country is facing. Goods not manufactured in South Africa, Zambia, Tanzania, Mozambique or Botswana are labelled as if they were originating from that country to deceive customs before being imported into Zimbabwe. The major sources of dumped products in Zimbabwe are China, India, Singapore and UAE (Dubai).
To curb product dumping on the local market, the Government of Zimbabwe enacted two Statutory Instruments. The Competition, Anti-Dumping and Countervailing Duty Regulations of 2002 and the Competition Safeguards Regulations of 2006. These laws are known to Zimra as the customs custodians, but the organisation has no capacity to investigate and penalise offenders. The same predicament also affects local watchdogs such as the Competition and Tariffs Commission and Standards Association of Zimbabwe. The best way to deal with dumping is through empowering these institutions, enacting strict regulations and tightening border controls, among other measures.
Some of the prominent companies struggling due to product dumping include David Whitehead, Merlin, National Tyre Services, National Blankets, Edgars, Carousel, Waverley Blankets, Caps Pharmaceuticals, Willowvale Mazda Motor Industry, Quest Motors, Capri, Cafca, Art Corporation and Treger Industries. These manufacturers used to employ thousands, with most having to retrench in order to stay afloat or produce for survival in the hope that better anti-dumping policies from the authorities will save them one day.