ZIMBABWE should diversify its export markets to avoid putting all eggs in one basket and at the same time maximise value on exports in order to cushion itself against potential global shocks on trade, experts say.
Report by Taurai Mangudhla
Latest Zimbabwe National Statistical Agency figures quoted in the African Development Bank (AfDB)’s March issue of the Zimbabwe’s Monthly Economic Review, show that there are some trade imbalances between Zimbabwe and most of its trading partners, particularly South Africa.
The AfDB report indicates that although 69% of Zimbabwe’s exports go to South Africa while about 43% of the imports come from its southern neighbour, there is a trade imbalance in South Africa’s favour in absolute terms since Zimbabwean exports to South Africa were only US$2,67 billion while imports from the same country were about US$3,21 billion between January and March this year.
The regional bank further notes that although countries like the United Kingdom (UK) and the US are important sources of imports with UK accounting for 19,9% of total imports and the US accounting for 7,5%, the value of Zimbabwe’s exports to these countries is not significant and the same is true for countries such as Zambia, China, Mozambique and Kuwait as Zimbabwe’s imports are more than its exports to these countries.
The United Arab Emirates, a major buyer of the Marange diamonds, accounts for 12,4% of Zimbabwe’s exports followed by Mozambique which accounts for 7,3% and Zambia and China with 2,5% and 2,2% respectively.
“It is important that Zimbabwe’s export destinations are diversified to minimise shocks affecting trade. For example, the implementation of the Preferential Procurement Policy in South Africa, intended to ensure that South African firms receive priority in procurement, could close off some opportunities for Zimbabwean exports,” AfDB said in the report.
Bulawayo based economist Erich Bloch said while Zimbabwe’s trade relations with China was important, an economy cannot afford to put all its eggs in one basket.
“We need to diversify into other markets and government needs to introduce export incentives so that we remain competitive in other markets,” he said in a telephone interview.
Bloch said the country was exporting clothing and textile competitively in the 1980s and 1990s to as far as China and Malaysia, but the situation has changed after government abandoned previous export incentives. He argued Zimbabwe’s resource based economy needed to focus on value addition in order to maximise on return.
“More than 90% of our produce goes unprocessed, be it chrome, cotton or platinum so there is need to value add,” Bloch said. He said government needed major policy reforms and ability to ensure rule of law in order to attract the much needed foreign direct investment to support development of beneficiation plants locally.
Economic analyst Takunda Mugaga agreed with Bloch’s assertion on the need for value addition, saying it should be Zimbabwe’s primary focus.
“Value addition will improve our current account which is what we need,” he said.
Mugaga said the country should focus on increasing its exports to South Africa, given the neighbouring country’s economic position.
“A focus on widening export markets right now would be a luxurious policy move which we cannot afford right now,” argued Mugaga. “South Africa is a richer market in terms of buying power and it belongs to the Brics. It is a bigger economy than any other in Africa and especially southern Africa to the extent that even if there are external shocks that will force the economy to shrink by 50%, it will remain better than any average African country economy.”