The ManicaPost
Kudzanai Gerede Business Correspondent —
ONE of the major constrains that continue to frustrate the economy’s headway is the recurring negative balance of trade on an annual basis to which its effects have adversely cut across key sectors such as the financial services whose capacity to settle foreign payments on time for priority product items have been dampened.
This has also taken a huge toll on industry, particularly the mining and pharmaceutical sectors which acquire a huge chunk of supplies for production outside the country hence foreign payment delays have left many companies counting loses.
Approximately US$6 billion annually is lost through acquisition of various import products in an economy that already uses an international trading currency for domestic transactions with just a little less than US$3 billion recovered through a narrow range of export products mainly from the primary sectors of mining and agriculture.
Authorities remain committed to curb the widening trade gap as shown by the imports management measures put in place, not only to protect local industry, but also to minimise foreign currency leakages.
The country has recently been facing delays in foreign payments to suppliers of commodities such as fuel and lubricants owing to foreign currency shortages biting most banks.
This week, the country’s statistic agency, ZIMSTAT released figures showing that the trade deficit has narrowed by close to US$1 billion amid high expectations from industrialists that the country will continue capping the deficit with steps already taken to cajole Government to further cushion local firms in the interim.
As at end of 2016, latest data shows a marginal increase in exports to US$2,83 billion from US$2,7 billion, while imports fell to US$5,21 billion from US$ billion the previous year.
Analysts, however, said the slight change in trade deficit figures was a welcome development at a time Government needed industry and other economic players to gain confidence in its policy interventions.
Last year, Government introduced import restrictions through Statutory Instrument 64 as a way of promoting local products and curbing the ever yawning trade imbalance with the rest of the world.
Confederation of Zimbabwe Industries (CZI) president, Mr Busisa Moyo told Business Post that the import restrictions put in place by Government played a major role in offsetting the trade deficit although more products still need to be scrapped from the Open General Import Licence to accommodate other product lines local industry is capable of producing.
Despite an improvement from US$3 billion, a trade deficit of around US$2,3 billion remains worrisome for a lean economy as this one, as it almost accounts for a fifth of Gross Domestic Product.
“The ministry of Industry initiatives to restrict imports through SI/18, 19, 20 and SI/64 of 2016 as well as SI 6 and 126 of 2014 are starting to pay off and we are in discussions with Government to increase the number of products that can be manufactured locally and substitute imports where it is clearly possible.
“We are also encouraging Parliament to enact Minimum Local Content Procurement rules for Government, private sector and the wholesale and retail trade,” said Mr Moyo.
He, however, emphasised the shortage of liquidity for the greater part of the year as another underlying factor that slowed down imports and ultimately low aggregate demand for luxurious import products.
“The shortage of liquidity has meant that country has been forced to prioritise its imports and go down only importing basics and raw materials. We encourage this to continue and luxuries be denied for the next three years as we build industry and the capacity to create employment and increase productivity,” he added.
He further noted that despite the trade deficit narrowing by close to a billion dollars this was much to a sharp fall in imports against a marginal increase in exports but applauded industry resilience to export in the wake of challenging operating environment.
Government has also been credited for the export incentive scheme which came with additional bond notes for exporters which resulted in an increase in production particularly in gold and tobacco sectors with the aim for export markets
“Companies albeit in a difficult and high cost environment are beginning to be export conscious and are building export markets and opening foreign markets. Horticulture exports are contributing a significant amount of exports and Mineral prices are starting to firm again and should result in value growth,” he added.
Value growth resonates with the country’s economic vision of unlocking value in the country’s raw minerals to maximise on profits.
Zimbabwe’s export basket comprises of a narrow product range mainly dominated by 5 minerals which find external markets in their raw form hence restricting the country to a small proportion of its mineral values.
“Investment in education and technology to manage and add value to our minerals before they leave the country will not only add value to our ultimate export receipts but will help diversify our economy and improve on GDP,” said economic analyst, Mr Adonis Ntuli.
He said this would help the country cushion itself from oscillating international commodity prices which took a severe dip of up to 30 per cent from 2014 to 2015 leaving most commodity backed economies in recession.
However analysts are of the view that Zimbabwe’s major Achilles is its weak productive levels that are a result of a multi-faceted factors ranging from high cost of doing business, old equipment and lack of competitiveness of its final products which affects viability.
Mr Moyo said there was need to continue with production-friendly policies which spur industrial growth while it also accorded a favourable environment for entrepreneurship in order to encourage more business enterprises in the country.
“Government needs to continue its pro-local industry stance as we encourage entrepreneurship, innovation and employment. This is consistent with the changing winds internationally as countries look at their domestic production development such as the US under President Trump,” he said.
