Zim industries to take heat from SA demonstrations

ZIMBABWE’S industries will likely feel some pinch from the demonstrations taking place in South Africa, its largest trading partner, as trade becomes clogged.

The demonstrations, whose epicentre was KwaZulu-Natal spread quickly to other parts of South Africa, but the greatest impact on regional trade has been disruptions of operations at the Durban Port, Richards Bay Port and on logistics and freight companies.

The Durban Port, in particular, is a main gateway to the Southern Africa Development (Sadc) region that has the largest hinterland in South Africa, and the port is connected with the inland countries via the North-South Corridor.

The port handles up to 31,4 million tonnes of cargo annually and is the fourth largest container terminal in the Southern Hemisphere.

It is one of the major ports utilised by Zimbabwean importers and exporters as an international gateway.

Official figures show that South Africa is Zimbabwe’s biggest source of raw materials for industry, followed by Europe at 13 percent, and China at 11 percent.

Observers opine that this huge dependency for raw materials on the South Africa market exposes local industry.

“Our industries are exposed by the developments in South Africa. Covid-19 and the current developments in South Africa drive further home the need for us to strengthen and deepen our value chains,” said industry representative body, the Confederation of Zimbabwe Industries (CZI).

An analysis of available data shows that local primary producers, as well as food and beverages manufacturers will perhaps be the hardest-hit by ongoing developments in the southern neighbour.

According to a CZI report entitled “Raw Material Import Exposure for Zimbabwean Industries”, 80 percent of Zimbabwean companies in the agriculture and horticulture sectors source their raw materials from South Africa.

And in terms of the quantum of raw materials utilised by players in these sectors, 73 percent were imported, while the balance (27 percent) are procured locally.

The report shows that South Africa is the major source of imported raw materials for local drink, tobacco and beverages producers, although imported raw materials account for 35 percent of their requirements.

Observers in South Africa have warned of food insecurity issues as a result of the demonstrations.

“In the case of trade, the current disruptions weigh even more heavily on businesses and farmers in the agriculture sector. On average, 75 percent of the country’s grains are transported by road annually,” wrote Wandile Sihlobo from the University of Witwatersrand.

“These are largely exported through the Durban harbour.

“The same is true for imported food products such as rice, wheat and palm oil, among other products.

“The volumes are also large for horticulture, specifically citrus, a leading exportable agricultural product in South Africa.

The burning of trucks on the roads and the blocked routes to the ports will prove costly to businesses and harm South Africa’s reputation as a global supplier in different value chains.”

These “broader value chains” could extend to other areas of the Zimbabwean economy, given that South Africa is Zimbabwe’s biggest export market.

South Africa accounts for over 70 percent of Zimbabwe’s exports.

In this regard, it is largely expected that the latter’s primary producers, namely mining companies, agricultural and horticultural players will be hit if trade routes remain clogged.

According to an earlier analysis by trade expert Taku Fundira for Tralac, “South Africa’s with Zimbabwe mirrors that of a developed country vs developing country trade profile wherein South Africa (developed) imports mainly primary, low value natural resource-based products and exports to Zimbabwe (developing) largely value-added manufactured products”.

He added: “75 percent of South Africa’s imports are mainly mineral products with another 23 percent mainly agricultural products.

“Exports on the other hand are quite diversified ranging from machinery; mineral fuels; vehicles; plastic products; electrical equipment among others; the bulk of which are value added products.”

Zimbabwe National Chamber of Commerce (ZNCC) chief executive Takunda Mugaga has estimated that the Zimbabwean economy could lose around US$30 million if the demonstrations continue for a period of a week.

The events in South Africa have again highlighted the need for Zimbabwe to boost and diversify its manufacturing output, as well as expand its import and export markets.