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ZIMBABWE has been reeling from a crippling trade deficit for many years, which has hampered economic growth and stability. ZimTrade, the country’s main trade promotion body, is on a mission to improve the negative trade position and advance the nation’s economic agenda. Zimbabwe Independent business reporter Kuda Chideme (KC) caught up with ZimTrade chief executive Allan Majuru (AM) to discuss matters relating to trade, challenges and the outlook. Below are the interview excerpts:
KC: What is the country’s trade outlook for the rest of the year?
AM: We expect Zimbabwe’s trade balance to improve, as measures are being put in place to support the manufacturing sector to become competitive in both the local and export markets. The country’s trade performance will also be spurred by the continued rise of brand Zimbabwe. The message from government, Zimbabwe is “Open for Business”, has been good in terms of reinvigorating global interest in Zimbabwe as a potential trade and investment destination. Some of the trade fairs we have participated in this year have generated increased business in comparison to last year. While sustainable change does not happen overnight, considerable positive change has been noted since the coming in of the new government, with the country hosting several international business delegations conducting business scoping missions. Several commitments have been made by prospective investors and buyers in response to these engagements.
Zimbabwe urgently needs investment, international and local, and to find markets for those products and services we are still producing competitively. Fortunately, due to our suitable climatic conditions and experience as a country, horticulture is one area that we can achieve competitiveness in a relatively short space of time. With industry, especially the manufacturing sector, the turnaround time is in the medium to long term, due to the necessary retooling and technical assistance required.
Zimbabwe’s exports are likely to remain on a positive trajectory because, although our imports have continued to rise, the process of retooling and diversifying our various industries will erode the need to import finished goods and some agricultural commodities. If the current climate continues, we expect the trade balance to improve towards year end.
KC: What policies would you want the new government to put in place after the July 30 general elections?
AM: There is need for government to put in place monetary and fiscal policies to address foreign currency shortages, among other issues. On trade-specific matters, as ZimTrade we lobby government on behalf of the private sector, and have identified several statutory instrument amendments and requirements that are inhibiting the country’s exports. So far, five out of the 24 amendments have been successfully reduced or removed, including the removal of export permit requirements for non-strategic products administered by the Ministry of Industry, Commerce and Enterprise Development, and permits for shipping product samples that are administered by the Medicines Control Authority of Zimbabwe.
We also want to see the continual streamlining of export procedures and regulations as these are meant to stimulate business, not stifle it. Trade is a global activity, hence we are competing with our regional and international peers for the market. In neighbouring South Africa, some of the export procedures and processes we practice in Zimbabwe are non-existent, so they spend more time enhancing their exports rather than making sure that they have the right documentation to export, some of which is not necessary.
Improving the ease of doing export business will aid in the growth of exports, something which is key in turning around the fortunes of the country. The main reason why we are not competitive is to do with the high cost of production. Besides the obsolete machinery, there is need to look at the macro-economic enablers with a view for them to aide competitiveness. We have a relatively high cost of electricity, water, labour and fuel and these need to be reviewed.
KC: The country continues to be dogged by an excessively high import bill. How best do you think we can remedy this without necessarily resorting to protectionist policies?
AM: ZimTrade is working with local producers to develop local brands in such a way that the country’s drive towards import-substitution is demand-driven. This means improving quality and standards of our products and production efficiencies. The investments that are currently being lobbied for should also be aimed at import substitution. We are importing a lot of steel, so the resuscitation of the steel industry will go a long way in reducing the import bill. If you look at last year’s statistics, we imported substantial amounts of soya beans, crude oil and rice. These commodities can be produced locally.
The retooling exercise and growth of the manufacturing sector should also focus on the production of trinkets as these also constitute a huge component of our import bill. We are also strategically located in the region so assembly plants for machinery and equipment can be put in place not only to service Zimbabwe but the entire region. In this way we will also reduce our import bill.
KC: What are your thoughts on the African Continental Free Trade Area (AfCFTA)?
AM: The AfCFTA, once in force, should be a very useful bloc for promoting intra-Africa trade. In addition to the objectives of Sadc, Comesa and TFTA, the AfCFTA will address impediments to the trade in services, non-tariff barriers, investment and competitiveness of African markets. If you compare internal trade by the other continents, Africa has the lowest rate of trading amongst itself and, to make it worse, the continent is acting as a source of raw materials for other continents, hence we are exporting jobs and retaining little value from our resources and this needs to be addressed.
As ratification nears, ZimTrade will work closely with government and the private sector to ensure that even our SMEs are well-versed in the risks and opportunities inherent in any such agreement. A knowledge gap can result in our companies failing to compete internationally.
There is need for Africa to invest in infrastructure to reduce the cost of trading as this is one of the key impeding factors to intra-regional trade. In some instances, the cost of exporting, in terms of logistics, is high in the region and Africa compared to doing business with the United States or Europena Union.
KC: Apart from commodities, what other goods have shown potential to grow as major exports?
AM: Horticultural products — fresh produce and floriculture — have huge export potential, particularly in the European market. ZimTrade has been on a drive to capacitate horticulture farmers to enable them to meet the very strict EU market requirements. Once our local farmers are equipped with the necessary standards and certifications, the contribution from horticultural exports to the country’s total exports will grow significantly. There is also potential in the leather and leather products sector, clothing and textiles, as well as fast-moving consumer goods products (FMCG), which have a good track record in regional markets. As ZimTrade we have also identified scope for increased export of Zimbabwe’s arts and crafts to the global market. We have engaged marketing experts from the target markets to provide technical expertise to our artists.
KC: What steps is ZimTrade taking in developing export markets?
AM: As the national trade promotion organisation, we conduct desk and field research to identify opportunities in new markets. Recently, market research has been conducted in Botswana, Namibia, and DRC. A market survey was also carried out in Dubai to establish opportunities and supplier requirements for the lucrative fresh produce market in the Middle East. We are planning to conduct further research in Kenya and the United Kingdom, later this year.
To assist local companies to penetrate identified markets, ZimTrade facilitates their participation at trade fairs and expos and organises inward buyer and outward seller missions during which we coordinate strategic business-to-business meetings. This year we have so far taken 42 local companies to shows including Fruit Logistica (Europe’s biggest fresh produce show in Berlin), Agritech (agricultural inputs show in Zambia), DRC Mining Week (mining expo in Lubumbashi), Source Africa (clothing, textiles and leather goods show in Cape Town). Among other events, we are bringing some key retailers from South Africa up to Zimbabwe later this year to meet our clothing manufacturers. We will also soon be taking companies to Tete, Mozambique, to meet buyers in that market.
To improve the competitiveness of our local companies, we partnered with PUM of Netherlands and SES of Germany who provide expert technical and business advice on a voluntary basis. We have facilitated the visits of more than 20 experts in horticulture, leather, and other sectors in the past year, with more than 50 companies benefiting from their experience and knowledge of the EU market. Feedback has been excellent with beneficiaries reporting improvements in operational efficiency, product design and marketing, as well as identifying new markets.
KC: How are your members dealing with foreign currency shortages?
AM: We have received numerous pleas for ZimTrade to lobby for support from our members, most of whom require foreign currency to import raw materials and capital equipment. We have tried our best to lobby on behalf of our members with the Reserve Bank and various banks to have exporters prioritised for foreign currency allocation. Unfortunately for companies that have not been able to move up the foreign currency allocation list, to remain in business, the parallel market has become their source of the much-needed forex. The ripple effect of that, however, is the passing on of the cost of acquiring US dollars on the parallel market to the end user of the product, which has made Zimbabwean products even less competitive, locally and more-so on export markets.
KC: What other challenges are you facing as ZimTrade?
AM: The challenges that ZimTrade is facing can be broken down into institutional and policy or regulatory challenges. These have stifled ZimTrade’s activities in facilitating Zimbabwe’s export growth. The organisation, compared to other trade promotion organisations, lacks the adequate financial capacity to service all exporters and potential exporters Nonetheless, we have made do with our budget, and increased efforts to engage development co-operation partners to assist us in delivering on our mandate.
Positive nation branding is instrumental in facilitating trade and as a nation we need to seriously investigate this. Let me hasten to say that nation branding and marketing are two totally different things. Nation branding is about making a promise and sticking to it. The moment we renege on such promises then we are now creating a negative brand. And if we do not brand ourselves, someone else will do it for us and, in most instances, the picture painted of Zimbabwe will not be what we need or want as a country. So far with the coming of the new dispensation, the positive aspects of brand Zimbabwe are coming out.