Home » Industry » Buy Zimbabwe Decries Deteriorating Trade Balance [opinion]

Imports continue to outpace exports as the country continues to lose competitiveness due to the strengthening of the United States dollar against the currencies of Zimbabwe’s major trading partners, a decline in commodity prices and a very slow growth in manufactured exports. In January 2014, the country’s exports amounted to $278 million and imports totalled $487 million, resulting a deficit of $209 million. The January 2015 trade statistics produced by ZimStats show January total exports of $267 million against imports of $538 million resulting in a current account deficit of $271 million, reflecting a 29,6 percent increase in the deficit. Imports increased by 10,5 percent whilst exports shrunk by 4 percent.

ZimStats figures show that the country’s manufactured exports constituted under 9 percent of the country’s exports, the major export earners being tobacco contributing about 33 percent of total earnings followed by nickel mattes and ores, semi manufactured gold and cane sugar respectively .

The major contributors to our imports bill in January 2015 remain fuel, medicaments, motor vehicles and motor vehicle parts, capital goods and fertiliser. There is a possibility of further compression of exports due to weakening global commodity prices. Our BoP position remains precariously difficult at a time when growth in manufactured exports is slow while the country has insufficient foreign currency reserves at its disposal to finance the current account deficit.

Zimbabwe has in recent years struggled to finance its yawning current account deficit, estimated at 25 percent of gross domestic product (GDP) as exports and reserves have remained subdued. The annual trade deficit which narrowed by 14 percent from $3,9 billion in 2013 to $3,3 billion in 2014 is likely to sky rocket in 2015 to surpass the 25 percent of GDP mark against a background of weakening exogenous factors.

The country is exposed to external shocks due to the fragile global economy and decried heavy reliance on commodities. Declines in global activity and commodity prices will have inescapable consequences for the country’s export earnings, and hence its output, incomes, and fiscal revenues.

Working markets should have generally about 70 percent of their consumer products on the shelves from the local producers and only 30 percent imported. Emphasis should be on value addition and local production to create jobs locally rather than relying on cheap imports thereby creating jobs for other markets.

In the analysis by Buy Zimbabwe, local companies have enough capacity to produce enough including for export if the appropriate environment is accorded. The industrial policy and related policy interventions should look at the whole value chain and support feed sectors into the industry, particularly agriculture to ensure availability of inputs to the industry.

More importantly there is an urgent need for a national strategy for foreign direct investment which the government and the private sector must jointly develop and execute in order to attract FDI in more conscious and directed efforts towards industries that have bigger multiplier effects on key aspects such as employment creation and foreign currency generation.

Following many years of economic decimation and industrial decline, there is a deliberate call for the government to continually institute smart protectionism by deliberately imposing tariffs on consumer products that can be manufactured locally at marginal cost differences.

In doing so the policy should be given a chance to take effect regardless of the potential short term increases in prices.

This kind of protection should be meant to level the playing field and also aiming at nurturing those industries with the capacity to produce and sufficiently supply the domestic market.

The state of the key enablers such as electricity supply, railway transport, and road network becomes are leading factors denting national and export competitiveness.

This therefore suggests an urgent reform of the parastatals in question. Another critical competitiveness factor that Zimbabwe urgently needs to address is the labour cost and labour laws. It is high time the labour laws are reviewed to take into account productivity based remuneration.

Maintaining the status quo in the wake of escalating trade deficit and a worsening balance of payments position and low investment appeal is likely to condemn Zimbabwe into a supermarket economy, with very high unemployment and declining government revenues which will ultimately lead to a decline in social services and nailing Zimbabweans into perpetual poverty.

The future is in our hands and we need to make the present count. Till next time, God Bless.

Source : The Herald