‘Value added agric prod­ucts key to ex­port growth’

Chronicle (Zimbabwe) - - Business -

ZIM­BABWE has a wide range of op­por­tu­ni­ties in value added agri­cul­tural ex­ports. These ex­ist par­tic­u­larly in ar­eas such as fruit juic­ing, oil ex­pres­sion, beef, fruit and veg­etable can­ning as well as cot­ton and leather pro­cess­ing amongst oth­ers.

One of the ma­jor ad­van­tages of value ad­di­tion is in­creased ex­port earn­ings as prod­ucts be­come more com­pet­i­tive on the in­ter­na­tional mar­ket.

Non-tra­di­tional agri­cul­tural crops such as veg­eta­bles, fruits, flow­ers, house­plants, fo­liage and spices, have higher mar­ket val­ues com­pared to tra­di­tional ex­port crops. Zim­babwe has the ca­pac­ity and po­ten­tial to re­sus­ci­tate ex­port of these non-tra­di­tional high value agri­cul­tural goods.

In 1992, Zim­babwe had a di­verse ex­port prod­uct mix with a high com­po­si­tion of value added prod­ucts such as tex­tiles, cloth­ing and pro­cessed foods, among oth­ers. How­ever, in 2015, the ex­port prod­uct mix was heav­ily skewed to­wards raw com­modi­ties.

Since dol­lar­i­sa­tion in 2009, the coun­try’s trade deficit has thus widened from $1.3 bil­lion to $3.3 bil­lion in 2015.

Zim­babwe, like many African coun­tries, is ex­port­ing low-value raw and semi-fin­ished prod­ucts only to im­port them back as ex­pen­sive fin­ished goods.

Con­se­quently, in­tra-Africa trade has been shrink­ing, hav­ing dropped by 36 per­cent from $84.4 bil­lion in 2012 to $54.1 bil­lion in 2015.

Cot­ton gin­ners use in­ter­na­tional lint prices as a bench­mark to set prices for the lo­cal pro­duce.

Con­se­quently, lower re­turns have seen Zim­babwe’s cot­ton pro­duc­tion fall from 350 mil­lion kilo­grammes in the 2011/12 sea­son to 104 mil­lion kilo­grammes in the 2014/15 sea­son.

Lo­cal farm­ers should, there­fore, im­prove the cot­ton value ad­di­tion from fi­bre to the fab­ric or cloth­ing level, to min­imise the ef­fects of de­clin­ing cot­ton prices.

Most cot­ton farm­ers only re­tain be­tween 15 per­cent to 20 per­cent of the value of their pro­duce, while the re­main­ing 80 per­cent to 85 per­cent is re­alised by other value chain play­ers such as gin­ners, spin­ners and cloth­ing man­u­fac­tur­ers who are usu­ally for­eign­ers.

In­ter­na­tional com­mod­ity prices are sus­cep­ti­ble to ex­ter­nal macroe­co­nomic shocks and hence are very un­sta­ble. An ex­am­ple is the drop in cot­ton prices, which em­anated from the sharp in­crease in global cot­ton stocks (par­tic­u­larly in China) as well as the in­flux of cheap synthetic fi­bres.

The global av­er­age price per pound of cot­ton de­clined by 56 per­cent from $1.56 in 2011 to $0.68 in 2016.

ZimTrade is there­fore, en­cour­ag­ing busi­nesses par­tic­u­larly in the agri­cul­ture and man­u­fac­tur­ing sec­tors to re­di­rect their ef­forts to build­ing skills and tech­nolo­gies that will al­low pro­duc­tion of their own high value prod­ucts and grow rev­enue in the process.

Orig­i­nally pub­lished in the Zimtrade Au­gust news­let­ter.

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