The ManicaPost
Kudzanai Gerede Business Correspondent
Statutory Instrument 64 (SI-64) of 2016 targeting the removal of various products from the Open General Import Licence to protect locally produced products from unfair competition poised by cheap imports, have not only divided public opinion locally but also drew attention of fellow regional counterparts who are signatories to regional free-trade protocols.
Last week, Industry and Commerce Minister Mike Bimha met his South African counterpart Mr Rob Davies to clarify the country’s position and the reason behind the import controls, which are however not permanent as the country seeks to gain its productive footing before liberalising its market. SA was reportedly not happy with Zimbabwe’s move.
Zimbabwe has a yawning trade deficit standing at an average of US$3,5 billion annually owing to a combination of weak productive levels and massive importation of goods on the domestic market.
Latest statistics released by the Zimbabwe National Statistical Agency (ZIMSTAT) revealed that Zimbabwe imported US$ 2,07 billion worth of goods against exports of US$949 million in the first five months of 2016 with raw products from the extractive sector dominating its exports.
While the continent agrees the best way regional economies can realize substantial and sustainable growth is to diversify their economies away from the conventional extractive sector driven ones to manufacturing thus the promulgation of the industrialisation agenda, SI 64 is one such move by Zimbabwe to fix its infant industrial engine by protecting it from external forces.
Zimbabwe is coming from a long epoch of economic restrictions imposed by the Western nations, which had crippled the entirety of its once formidable industrial forte leaving industrial museums across its major productive cities like Mutare and Bulawayo.
It is against this background that the country does not have its local currency and is on a rebuilding exercise since adopting the American dollar in 2009.
The Confederation of Zimbabwe Industries reports that the country is in need of an excess of US$8 billion to repair and retool its machinery before it starts producing at a competitive gear with its regional counterparts.
The introduction of SI 64 is a modest way which speaks sub-consciously to the fact that Zimbabwe just like many of its regional peers are not yet ready for free-trade.
Analysts say there were no sufficient and proper fundamentals in place to sustain the idea of economic integration when African statesmen crafted free-trade agreements which have proven to be divisive even under the most organised institutions like the European Union which saw Britain opting out barely two months ago through a domestic referendum.
While Africa’s levels of development are so discordant that it becomes almost impossible to reach a win-win affair between such disharmonious economies under free-trade arrangements, the absence of a common currency further complicates any mutual content as the case with Zimbabwe and its biggest trading partner South Africa.
South Africa is a highly developed and mechanised economy whose productivity levels are far more efficient and cheaper than that of Zimbabwe.
Furthermore, South Africa’s Rand is stable but weaker than Zimbabwe’s adopted currency which compounds exchange rate matters for Zimbabwe to be competitive enough leading to the current trade imbalance with its southern neighbour.
It is unpalatable for Zimbabwean industries to continue under the status quo where local products are being crowded out of the domestic market by imports which do not face equally high production costs which has prompted Government intervention through import controls to bolster market uptake.
To circumvent such potentially toxic trade imbalances, free trade can flourish either if member countries industrialise in unison which can take some time to achieve if minimum economic benchmarks for compliance are put in place as prerequisites to any form of free trade arrangement between regional members akin to the European Union model so as to ensure convergence.
Under the “Convergence” criteria, EU members have to meet benchmarked targets which are formally defined as set of macroeconomic indicators which measure aspects like stable inflation rate, sustainability of public finances through limits on government borrowing and national
debt to avoid excessive deficit, exchange rate stability and long term interest rates in order for free trade across the bloc to flourish without smaller economies feeling impeded by bigger ones.
This is to ensure that there is convergence amongst parties to free trade agreements and member states begin at a similar level of economic stability for local producers of various commodities to engage in fair competition with their external counterparts.
While Zimbabwe affirms to the notion of regional integration and unrestricted trade among African economies testimony to its commitment to various free trade treaties, the country is however in dire need to re-establish its industrial base before fully accommodating external interest for economic growth.
As long as disparities in industrial development are extremely extensive among regional economies and macroeconomic indicators are so discordant, free trade will only serve to promote industrialists in better advanced and stable economies like South Africa at the expense of less developed ones.
