Zambia’s failure to cut deals with SA widens account deficit to USD$3.8billion
THE ZAMBIAN government is struggling to cut clear quantifiable deals with its largest trading partner South Africa that would start to address the widening trade deficit, with trading volumes between the two countries surpassing US$3.8 billion.
Despite Zambia and South Africa having enjoyed a cordial relation since time immemorial, there seems to be impediments with closing deals that are in favor of Zambia. Perhaps the major achievements of the efforts to engage in negotiations has only been the signing of trade commissions, with the latest being the Bi-National Commission (BNC) which some critics have described as mere talk shows.
Historically, the two countries have shared common aspirations and enjoyed warm relations dating back to the 1960s during the freedom struggle and is demonstrated by the number of high level visits that have been conducted by both political and business leaders.
In an exclusive interview with Zambian Business Times, Ministry of Trade public relations manager Godfridah Chanda said South Africa remains Zambia’s biggest trading partner in the region and Zambia is determined to ensure that this relationship continues to grow.
Chanda said that the bilateral relations between the two countries have strengthened as evidenced from the trade between the two countries which has now surpassed $3.8 billion.
“Zambia has witnessed a number of South African firms getting established in terms of investments. Some notable companies such as Zambia Sugar Ltd, Medicare all making substantially huge investments resulting in employment creation for our Zambian nationals”, Chanda said.
She noted that a number of South African chain stores have also been established in Zambia and in terms of statistics over 250 South African companies are operating in Zambia with a combined product range of about 3,000 products and services across various sectors.
She said trade between South Africa and Zambia remains buoyant although it is heavily skewed in favor of South Africa and so far trade between the two countries has shown expansion of business opportunities for local companies by opening new markets as long as South Africa removes unnecessary barriers and make it easier to export.
While Zambia has opened up its economy for trade and investments from South Africa, Zambia is still resolving some technical barriers to trade especially for products from the agriculture sector such as quails, pepper and honey among others.
South Africa predominantly exports high value goods such as machinery, chemicals, mineral products, motor vehicles and processed foods, while Zambia on the other hand mainly exports base metals and mineral products, with little value addition.
Chanda said that in order to address the imbalance in trade, the Ministry of Trade is taking steps such as securing shelf space on South African chain stores established in Zambia.
The government through the ministry has managed to secure shelf space for the available locally produced goods, especially fruits and vegetables in an effort to reduce imports from South Africa.
Under the auspices of Joint Trade and Investment Commission ( JTIC) established in September 2017, the two countries developed the Implementation Action Matrix for the Memorandum of Understanding on Trade and Industrial Development Cooperation.
She further disclosed that in terms of industrial cooperation, Zambia is expected to package private sector-led project proposals in the energy, mining, ICT, infrastructure, and tourism sectors and processing of natural resources for the two countries to cooperate and partner in.
The two countries further intend to partner in the development of viable agro-processing industries in Zambia and also intensify efforts to search for potential investors in the sector.
Both countries are expected to identify strategic infrastructure development projects in both physical and economic sectors to partner in, in order to enhance competitiveness of the Zambian economy.
Meanwhile, Zambia and South Africa established a Business Council which was launched in 2015 in South Africa to support business partnerships between the two countries.
The Business Council is expected to enhance bilateral trade, facilitate new investments and provide practical solutions to the challenges hindering trade and investments in both countries.
Chanda said this has further promoted collaboration between investors in the two countries, for instance, in the energy sector.
The Zambian government has further helped to resolve some of the measures imposed by South African authorities that impede Zambia’s exports.
In addition, Chanda said that government’s vision is clear with regard to a private sector led growth, industrialization, job creation and micro, small and medium enterprise development and it is for this reason that it has continued to offer a conducive investment climate, sound economic policies and a stable political environment for the private sector to thrive and support Zambia’s competitiveness in the domestic, regional and global markets.
The government has legal and legislative backing for investment promotion and protection, property rights, guarantees and environmental concerns.
Zambia has continued to implement positive and forward-looking investment climate and economic policies aimed at fostering economic development and improving the social welfare of the Zambian people. This has been coupled with the formulation of policies aimed at encouraging private sector participation in the economy.
The Ministry of Trade is vicariously responsible for coming up with trade policies that are in the interest of the economy as well as ensuring that trade deals are made with Zambia’s major trading partners. This is key to its contribution to a stable macro-economic environment, especially stabilization of the local unit, the Kwacha trading levels with say the USD which depends on the market forces of demand and supply.
Another case in point is that Zambia imports its petroleum from mostly Saudi Arabia and Kuwait, hence this import bill requires that the country also engages these countries to negotiate trade deals that would ensure that the country also exports some of its products to these same countries as trade partners.
The announcement that local farmers would be exporting goat meat to Saudi Arabia was a welcome starting point but it's clear that whatever levels or volumes of goat exports attained, that would be a drop in the ocean when compared with the heavy petroleum import bill Zambia foots.
Failure to strike favorable deals with these countries that Zambia spends most of its import dollars on and has some level of negotiating power should make the ministry look for alternative trading partners that are willing to engage in fair trade deals and volumes between the two countries.
It’s clear that countries such as South Africa, Saudi Arabia and others which according to the Central Statistical Office trade data, the country has huge and widening trade deficits with, have no production monopoly of these resources or products. It therefore makes the flirting with alternative trade partner countries who are willing to sign fair trade deals remaining a viable option for Zambia.
Commerce and Trade Minister Christopher Yaluma