How SA riots will affect Zim
Widespread social unrest in South Africa, which has led to the closure of many factories and left key logistics arteries shuttered, will hurt local industries as the southern African country is Zimbabwe’s major source of raw materials and gateway to the outside world.
The riots, which have been ongoing since Friday last week, led to the closure of the N3 Highway that links Durban to Johannesburg. Durban-based shipping company, Mediterranean Shipping Company, announced closure of its Durban Head Office, “due to safety concerns of all our staff ”.
Other companies like Arcelor Mittal gave notice of force majeure as they could not meet their supply obligations.
Durban is the biggest port of entry for cargo coming into South Africa and regional countries, Zimbabwe included.
The riots affect the movement of trucks from the port to the border so shipments via Durban may thus not move as fast as expected, according to trade facilitation expert Elisha Tshuma.
Apart from overseas imports that come via Durban, Zimbabwean industries import the bulk of their raw materials from South Africa, according to a report by the Confederation of Zimbabwe Industries ( CZI). Most sectors of the Zimbabwe economy, will in the next few weeks experience the impact of supply chain disruptions caused by the riots. Firms in the agriculture value chain will be among the most affected as 80 percent of their raw materials are sourced from South Africa. Some of the imported raw materials by firms in the agriculture and horticulture sectors include fertiliser and agrochemicals, stock feed, breeder parents, incubators, parts, vaccines, seeds and plant material for horticulture.
Another sector that heavily depends on imports from South Africa and abroad is the chemical and petroleum products sector. At least 73 percent of the sector’s raw material requirements are imported from South Africa and China.
These include titanium, dioxide, chemicals, soap noodles, packaging tubes and bottles, potash and agrochemicals.
Products that are manufactured by this sector and might end up being in short supply include paint and protective coatings, agrochemicals, petroleum manufactured, lubricating oils and greases, Hotel body products and Covid-19 disinfectants.
All firms in the drink, tobacco and beverages sector import their raw materials from South Africa although their import requirements constitute only 35 percent of their total raw material requirements, according to CZI. Milk processors, for example, import more than 50 million litres (mainly in powdered form) from South Africa. Scenes of milk trucks throwing away milk because depots are full and can’t move stock amid riots will mean there would be some shortages once the social unrest quells.
However, Zimbabwe’s dependence on South Africa goes beyond the importation of raw materials, but extends to finished products. In 2020, Zimbabwe’s import bill from South Africa amounted to US$ 2,46 billion, representing half of the total import bill of US$ 4,98 billion. For the four months to April 2021, Zimbabwe had already imported goods worth US$ 938 million from South Africa. South Africa is also a major export destination for Zimbabwean products constituting 40 percent of the total export earnings of US$ 4,39 billion in 2020.
The current disturbances will compound to challenges that the supply chains were already facing as a result of the coronavirus. Following the outbreak of Covid-19, CZI called for “aggressive resuscitation of local value chains and heightened value addition and beneficiation initiatives”.
Similar calls are now being made following the SA riots that, according to a City Press report, saw 45 000 businesses affected with R16 billion worth of stock damaged. As CZI said in May last year, the Zimbabwe economy needs to “achieve some measure of self-reliance”.
Raw materials that can be produced locally should be produced in the country.