SA troubles present challenges, openings

BUSINESSWEEKLY

THE troubles over the past week in South Africa that have seen the temporary closure of the giant ports of Durban and Richards Bay and the closing or sharply reduced production in a swathe of major businesses in Kwazulu-Natal and Gauteng will obviously have an impact on Zimbabwe.

Zimbabwean businesses that use the closed ports to import or export products and those reliant on raw materials or products from the affected areas have to make contingency plans, and in some cases make emergency decisions, to minimise any disruptions.

While the South African government has been moving fast to contain the looting and violence, and to restore order, no one at the moment knows how long that will take and there are possibilities that other areas and transport corridors could be affected. Even if order is restored quickly, as we all hope, there could still be non-violent disruption especially in Kwazulu-Natal and its critical ports.

The scale of the problem can be seen that by Wednesday 25 000 troops were wanted to back the South African National Police Service, and that is a substantial chunk of the South African military.

One dangerous possibility is that other groups, who have little or no interest in Mr Jacob Zuma’s legal troubles, could use the disruption for their own ends, as has been done by many of those engaging in looting. We have, for example, on occasion had the main routes to Zimbabwe partially disrupted by groups opposed to foreign trucks and foreign drivers.

There is, in addition, the uncertainty of just how severe damage has been. While looting and destruction in suburban shopping centres makes graphic photographs, the impact is minor when it comes to trade. But any serious damage in Durban docks, or at some critical factory, could have a far more serious impact.

And when the authorities at eThekwini, the area that incorporates Durban, talk about R16 billion of damage to stock, property and equipment we are talking about serious issues.

In addition, with the damage in South Africa, and the looting, the industry is going to be dealing with a lot of extra internal orders and might well let export orders slide, or at least be reluctant to take on new large orders.

So Zimbabwean business managers, and especially those responsible for purchasing and logistics, have to start thinking very hard.

Obviously some shipments of raw materials from outside South Africa might need to be diverted to other ports, with Beira being the most obvious considering the poor state of the regional railway network that makes the bigger Maputo so difficult, although more attention needs to be paid to Walvis Bay because of the excellent road network to that port. South Africa’s ports on the western side are fully operational, but South African businesses must already be preparing to switch cargoes so these might become more cramped.

Fortunately almost all our fuel comes by pipeline from Beira and even if truckers are reluctant for a short while to drive tankers with private orders from South Africa it would be easy to divert these private imports to the pipeline since the owners already accept private shipments. And even if a South African refinery had to close there are other sources.

So the main problem appears to be over what goods coming to or from Zimbabwe were at Durban docks or en route to or from Durban, what ships carrying our cargo are now at anchor at Durban waiting for clearance, and what any of our suppliers who are in Gauteng or need to use that incredible transport hub are able to do.

The same problems of supply and transport, to a lesser degree, affect our neighbours in the region, especially Zambia and Malawi.

Thanks to the excellent grain harvests in the last season, Zimbabwe’s basic food imports are drastically reduced. We are still deficient in oil seed, but have breathing space since there was a better harvest now coming in of soyabean and so time to figure out where the required imports to top this up will be bought and which port will be used for deliveries.

Dairy products are a greater difficulty, since we are reliant on imports and use South African suppliers for most, but again we do produce a fair fraction of our own requirements and can import by more round-about routes if necessary.

So the essentials seem to be secure. But much of our industry is dependent on South African suppliers for some critical raw materials, even if it is only a couple of percent of the final product. In retrospect we should have been diversifying more when it comes to these supplies and using the growing free trade being encouraged in Africa to look at other sources.

Not many Zimbabwean businesses think “Egypt” for example, and too few even think “Kenya” although some activist Zambian businesses have been making inroads into our markets, taking advantage of Zambia’s earlier entry into the economic reform process. That in turn allows Zambians to buy more of what we make, so the trade benefits both countries.

So generally, while the severe disruption in South Africa will have a knock- on effect in Zimbabwe it appears to be manageable so long as our business sectors keep their minds clear.

That in turn allows us to think more positively. For a start a lot of Zimbabwean industrialists are still not at full capacity and so can expand, replacing imports and even more adventurously looking at exports.

While trade with Zambia, for example, has been growing in both directions as that economy grows and becomes more sophisticated, there could well be gaps in their supply chains we could now fill, as well as looking for more we need to import. More trucks on shorter journeys via Chirundu will do wonders on both sides of the border.

There is already a team of dedicated Zimbabwean industrialists in Malawi, looking to sell and looking at Malawi as a larger source of raw materials. Obviously they can now become even more serious in discussions about expanding trade in both directions a lot faster than originally anticipated.

And, at least in the short term, opportunities open in South Africa, at least once order is restored. South African businesses, right down to looted shops, are going to have to replace destroyed, stolen or damaged goods and even buildings.

Knowing where a Zimbabwean business could become a supplier of something in short supply would be useful. Certainly some Zimbabwean companies need to think about their marketing and the logistics for delivery.

Some building materials, for example, could well be sold south if the eventual damage is severe. Exports of cement would help balance any restriction on imports of the sort of building products that South Africans might have to keep at home for a while. And with South Africa now talking more seriously about diminishing inequality and opening more opportunity for the poorer majority, some interesting new markets for a whole lot of products can arise, helping to make trans-Limpopo trade far more balanced.

But there is the need for a wake-up call in Zimbabwean business. The heavy lifting by politicians and bureaucrats to create the trade pacts and agreements, with these to be consolidated and extended into a growing African Free Trade Area, need to be grabbed by the private business sector.

While South Africa will always be a major trading partner, and geography suggests it will always be the largest trading partner, it does not have to be the dominant trading partner and in any case the trade can and should develop into a better balance. We need to pay more attention than lip service to our region, and again build up our trade, in both directions.

However important a single country is in our trade, it should not be so important that a major, if temporary, dislocation can damage us. If our supply and marketing chains are more spread, it not only means our economy is more robust, it can find it easier to grow. The measures we take now will help to get that desirable spread sooner.