Risky dependence. . . Call to diversify export market

Zim exports destinations

Prosper Ndlovu, Business Editor
ZIMBABWE should diversify its export market and increase trade in value added products to achieve sustainable economic growth, experts have said.

The country continues to “put its eggs in one basket”, with dependence on South Africa for export receipts increasing in 2016 compared to the previous years, according to ZimTrade.

Economic analyst and Bulawayo businessman Mr Obert Sibanda said Zimbabwe was strategically positioned for exports in the region and challenged local companies to take advantage of that.

He said Zimbabwe still has a sound manufacturing base that is relatively lacking in the region and tipped the country to reap more export earnings.

“Most regional states other than South Africa do not have a good industrial base and we should take advantage of that. Some of our products are finding their way to other countries like Zambia through smuggling,” said Mr Sibanda.

Zimbabwe’s exports declined by 13.05 percent between March and January 2017, according to Zimstat. Comparatively, imports increased by 37.56 percent over the same period with the trade deficit worsening by 141 percent over the same period.

ZimTrade chief executive officer Ms Sithembile Pilime said last week the trade figures paint a worrisome trend. “It is clear that our dire situation demands serious commitment to address the trade regulatory and export capacity issues,” she said as she called for quick action to tame imports that continue to drain scarce foreign exchange.

Official statistics (as illustrated in the graph), indicate that in 1992, 63 percent of Zimbabwe’s total exports were spread across 10 markets compared to 2016 when 79 percent of exports were destined to South Africa only.

ZimTrade suggests the country should take advantage of its membership in the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (Comesa) preferential trade areas, to reduce its export market concentration ratio and improve trade with other players in these trading blocs.

“Both blocs have the potential to absorb Zimbabwe’s exports, which amounted to $2.8 billion in 2016), given that their 2015 import bills were over $160 billion and $180 billion, respectively,” said ZimTrade.

“The ratio of Zimbabwean exports to South Africa to Zimbabwe’s total exports has been on an upward trend, rising from 14 percent in 1992 to a peak of 79 percent in 2016.”

Mr Sibanda also concurred and commended ZimTrade for taking the lead in exploring the export potential in regional member states.

Over the years Zimbabwe has suffered severe de-industrialisation, which resulted in an influx of cheap imported products as local firms struggled to meet demand and offloaded thousands of workers as capacity utilisation dwindled.

Surveys have also shown the country’s economy is a victim of high costs of production and hurdles in the investment climate, which has prompted the ongoing ease of doing reforms.

The country’s economy is, however, gaining traction evidenced by an increase in industry capacity utilisation from 34 percent in 2015 to 47 percent in 2016, according to the Confederation of Zimbabwe Industries.

The introduction of Statutory Instrument 64 of 2016 to control importation of goods that are locally available, for instance, has helped boost revenue and capacity for most companies, mainly the food processing sector.

Given the rebound of commodity prices on the international market and the success of the 2016/17 agricultural season following good rains, Treasury, the IMF and AfDB have projected the economy to register a modest growth of between 1.3 percent to 2.7 percent this year.

Between 2012 and 2016, around 90 percent of Zimbabwe’s exports to South Africa constituted commodities such as unprocessed tobacco and minerals, mainly platinum group of metals (PGMs), gold and nickel, amongst others.

With South Africa as a natural and strategically key partner for Zimbabwe on both the export and import fronts, Zimtrade says Zimbabwe should move towards the export of more value added manufactured products and away from unprocessed commodities.

“In the same light, dependence on a single market puts a country at risk, as effects of any changes that may take place in that market may filter through to the exporting country,” it said.

For instance, the depreciation of the South African Rand against the US dollar between 2013 and 2016 resulted in Zimbabwean products becoming less competitive in the South African market.

In an effort to energise the country’s export growth, ZimTrade is offering market intelligence and facilitates local companies to participate in regional trade fairs, inward and outward buyer missions, as well as expos.

These activities have been conducted in countries such as the DRC, Tanzania, Namibia, Angola and Zambia, among others.

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