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PROTECT IMPORTED MOTOR VEHICLE INDUSTRY–SARFED

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MBABANE – It can be strategic that government reduced the tariff measures as a way to boost local trade through increased volumes of imports, especially vehicles.

Southern African Research Foundation for Economic Development (SARFED) has made the call.  This is because the COVID-19 pandemic has significantly affected the trade sector at all levels of Eswatini. SARFED Regional Co-ordinator George Choongwa said the country was still faced with potential exogenous trade-related threats.  As of the year 2020/21, SACU receipts declined from E8.35 billion in 2020/21 to E6.38 billion in 2021/22, forcing the country to operate within the constrained fiscal space.

“Countries like Eswatini have the chance to remain sustainable and competitive through favorable industrial development policies which were robust and driven by both indo and exogenous factors that influenced the economic performance in both short and long-term basis." According to the national budget speech for 2020/21,  it was noted that the  levy on imported vehicles was projected to grow around 100 per cent, from E9.9 million to E20 million. While this could have a boost on national revenue, SARFED felt it was also expected that this initiative  might not be sustainable in the long-run considering the trade constraints brought by the continued spread of COVID-19 on a global trade perspective.  

However, the local motor vehicle industry, according to Choongwa was likely to remain less capacitated, leaving the Matsapha industrial area to operate below capacity as most car dealers might opt for alternative trade ventures if not relocate to other competitive regional markets like Zimbabwe, Malawi and Zambia due to their fully land-linked. at the same time these countries have  a huge consumer population as compared to Eswatini.

Disadvantage

The impact of 100 percentage hike on imported motor vehicles, according the foundation, is therefore, like to disadvantage the economy in several ways. They include increase in unemployment due to labour lay off and shutdown of business operations; and a rise in unfair wage bill for non and semi-skilled local labour force that worked for the importing firms, among other things. There also fears of reduction in government revenue in the long-run.

“Other sectors that needed urgent tariff review include the food and agriculture sector since the country mainly depended on imports from South Africa,” said SARFED. Choongwa recommends the formation of a local association to protect the imported motor vehicle industry. “Government can authorise the formation of local association to manage the  imported motor vehicle industry as a means of ensuring that there was no market failure and exploitation of local consumers and the entire supply value chain.

 

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