- November 25, 2019
- Posted in LOCAL
Exports are considered an integral component of Zimbabwe’s economic recovery plans.
In fact, exports are a vital cog in the nation’s quest to achieve a middle-income economy by 2030.
Despite successive trade deficits in the past decade, there are signs of better prospects if challenges affecting production are addressed.
Although local businesses have raised concerns over challenges such as foreign currency shortages for raw materials and retooling, insufficient power and fuel supplies, exports have actually registered a 2 percent growth to US$2,82 billion in the February to September period compared to US$2,76 billion in the same period a year ago, according to Zimstat.
Imports over the review period stood at US$3,57 billion, narrowing the trade deficit to US$744 million.
This represents a 62 percent decline in the trade deficit from US$1,97 billion in 2018.
From 2017 to 2019, the trade deficit fell by 49 percent from US$1,45 billion to US$744 million.
Although this decline is largely attributed to a drop in imports, the preferred and sustainable scenario is when exports increase more than the percentage decline in imports.
At the same time, the country needs to ensure a decline of imports of value-added goods, whilst maintaining the imports of raw materials and inputs that are necessary for manufacturing of export products.
Zimbabwe’s exports are increasingly concentrated in primary commodities and resource-based products, which exposes the country to volatile global commodity prices.
The growth and diversification of Zimbabwe’s export basket can be achieved not only by altering the product composition of exports, but also by altering the range of export destinations.
This is prioritised in the National Trade Policy (2020-2023) and National Export Strategy, which envisage growth of value-added products and services from US$4,5 billion recorded in 2018 to US$7,2 billion in 2023.
There is need for the Government to encourage deeper integration, particularly of manufacturing firms, into the regional and global economy.
Central to this is cutting delays and costs of accessing imported intermediate inputs, including reducing border delays and transaction costs associated with exporting.
Adoption of inward-looking strategies and policies which emphasise import substitution could economise on scarce foreign exchange and ultimately generate new manufactured exports without difficulties associated with exporting primary products.
Currently, high costs of both exporting and importing have contributed to low participation by Zimbabwean companies, particularly among small- and medium-sized enterprises.
In terms of export performance by sector, horticulture exports increased from US$42 million in 2017 to US$55 million in 2019, a 39 percent jump over the past two years.
To continue harnessing the potential of this sector, there is a need for Government and financial institutions to deliberately finance export-oriented production.
It is encouraging to note that Government, through the 2020 National Budget presented recently, has committed to put in place an Export Revolving Fund for seed capital, which will be channelled towards the development of exports, particularly horticulture which is low-hanging fruit.
As the national trade development and promotion organisation, ZimTrade is currently offering technical intervention programmes to seven value chains – macadamia nuts, paprika, bananas, sweet potatoes, flowers, pineapples and avocados.
Further, exports of manufactured products between February and September this year topped US$167,4 million, up from US$131,7 million from the same period last year.
This represents a 6 percent contribution to total exports, up from 5 percent in 2018, and down one percentage point from 7 percent recorded in 2017.
However, the percentage contribution of agricultural inputs and implements to total exports has remained flat at 0,5 percent, but the value has risen to US$14,7 million this year from US$14,4 million a year ago.
In the past two years, the value has dropped significantly from US$17,3 million owing to the decline in shipments of hand tools such as spades, shovels, mattocks, picks, hoes, forks, including mineral or chemical phosphatic fertilisers.
There is room to boost exports if local companies increase the distribution of their products in the Southern African region during the current rainfall season.
The processed foods and beverages sector, whose importance stems not only from its contribution to foreign currency earnings but also employment creation, appears to have weathered the challenging economic environment.
Although there was a drop in exports from US$65 million in 2017 to US$47,5 million in 2018, shipments rose to US$69,1 million in 2019. This is attributable to growing sugar, fruit juices, and vegetable fats exports.
However, the sector is being negatively affected by rising imports of cereal preparations, meals, and wheat flour.
Sectors that have underperformed include the leather sector, where a 58 percent decline from US$2,6 million in 2018 to US$1,1 million in 2019 was recorded.
In 2017, exports in this sector stood at US$2,7million.
This drop is mainly caused by the decline in availability of game skins, whose volumes have progressively declined year-on-year from 75 tonnes a month five years ago to the current 35 tonnes a month.
It has also been affected by falling global prices of reptile skins caused by changes in grading standards by buyers, as well as the rising global campaign against purchasing of animal skin products.
Clothing and textile exports also slumped from US$21,2 million in 2018 to US$18,4 million in 2019.
Exports from the building and construction sector were US$33 million between January-September 2019, a 15 percent reduction from US$38 million registered during the same period in 2018.
Performance in this sector was affected by declining granite and wood exports.
Contribution of minerals to exports remained steady at US$1,7 billion recorded in 2018 and 2019.
Minerals total contribution to total exports went down from 62 percent in 2018 to 60 percent in 2019. There has also been a decline in exports of raw tobacco over the past two years from US$326 million in 2017 to US$267 million in 2019.
The sector is, however, picking up as US$117 million worth of exports were recorded last year.
But there is need to increase value addition of tobacco, so that export earnings will be increased from the same products. Statistics show that Zimbabwe’s earnings from manufactured tobacco exports have increased by 47 percent to US$28,2 million this year from US$19,2 million a year earlier due to rising exports of cigarettes and other homogenised tobacco to countries such as China, United Arab Emirates, South Africa, Indonesia and Belgium.
There is scope to earn more from manufactured tobacco if local companies set up value-addition chains in the country, which will also create more jobs.
Allan Majuru is ZimTrade’s chief executive officer