Zimbabwe - Overseas Development Institute

75. For instance, m 1982, a 39% p r i c e increase was requested
f o l l o w i n g a 25% r i s e i n domestic s t e e l p r i c e s (accounting for 80%
of d i r e c t input costs) and an 18% increase was given a f t e r over
s i x months delay. S i m i l a r l y i n 1985, a 20% p r i c e increase was
granted f o l l o w i n g a 46% p r i c e r i s e a p p l i c a t i o n and t h i s r i s e was
only given at the end of the p l a n t i n g season when the annual
purchase of a g r i c u l t u r a l implements had taken place.
76. Although p a r t l y r e l a t e d to the drought years, Zimplow
suffered an a f t e r tax l o s s of $22,000 i n 1983, no p r o f i t s
recorded i n 1984 and f o r 1985 and 1986 an average a f t e r tax
p r o f i t rate 40% lower than that achieved i n the three year period
1980 to 1983 (and at current p r i c e s ) .
77. Zimplow reported a post-tax p r o f i t of $124,000 (2% of
turnover), while Bulawayo S t e e l Products's p r o f i t l e v e l was about
h a l f that amount.
78. One needs to be e s p e c i a l l y wary of extending too f a r the
argument e i t h e r that because f o r e i g n exchange f o r c a p i t a l
investment has been at a low l e v e l for a decade or more or
because machinery and equipment i s sold i t therefore needs
r e p l a c i n g and r e p l a c i n g with new equipment. For instance,
Bulawayo S t e e l Products maintains that even though most of t h e i r
c a p i t a l equipment i s o l d i t remains adequate to requirements for
both domestic and export production; and of that which needs to
be replaced there e x i s t s q u i t e adequate second-hand equipment on
the market. As for the argument from age, Bulawayo S t e e l
Products are s t i l l using an 1897 press which i s w e l l maintained,
quite adequate and c e r t a i n l y does not need r e p l a c i n g . S i m i l a r l y ,
both Lemco and the country's l a r g e s t tannery i n Bulawayo have
machines that are pre-World War I and n e i t h e r company would wish
to see them replaced.
The experience of Metal Box Central A f r i c a provides yet
another i l l u s t r a t i o n of the complexities of t h i s issue. Although
the plant operated by Metal Box i s over 20 years o l d and f a r
removed from the "state of the a r t " technology, senior personnel
at the f i r m b e l i e v e that i t i s s t i l l quite adequate. The main
reason i s that both the domestic and r e g i o n a l market i s small by
i n t e r n a t i o n a l standards and as the company produces a wide range
of products the key f a c t o r i s the a b i l i t y to adapt the machinery
q u i c k l y to the d i f f e r e n t shapes and s i z e required. Not i n f r e ­
quently only an eight hour machine "run" i s needed to s a t i s f y
demand for a month or two whereas the new high-speed machinery
can take up to four days to adjust and adapt ready to produce
runs f a r i n excess of demand i n Zimbabwe and the region. ,
79. The d i f f e r e n t i a l between the landed p r i c e of Zimbabwean
products and a l t e r n a t i v e s has thus probably been widening.
80. I t should be added, however, that at l e a s t three firms have
s t a t e d that they have been prevented from doing business with at
l e a s t one SADCC neighbour because t h e i r firms have not allowed
t h e i r s t a f f to provide back-handers and other i n c e n t i v e s as part
of the export deal; as other i n t e r n a t i o n a l competitors do engage