Aggressively explore local value chains, CZI

ZIMBABWE industries will have to aggressively explore value chain possibilities that promote local manufacture of some raw materials, if it is to avoid shocks associated with over-reliance on imported raw materials, industry representative body CZI has said.

The country imports the bulk of its critical raw materials and finished products and any disturbances such as recent demonstrations in South Africa over the imprisonment of former president Jacob Zuma to the supply chain will greatly affect production.

The outbreak of the coronavirus pandemic saw supply chains for imports coming under serious threat with industry experiencing delays or no delivery of raw materials at all.

The cost of bringing in raw materials also went up as manufacturers had to look for new suppliers or new forms of transport or routes to import critical raw materials.

In 2020, the country’s import bill amounted to $4,98 billion.

Between January to June this year, foreign payments worth US$2,7 billion were made.

The bulk of that import bill accounting for 69,3 percent or US$639.2 million was towards the procurement of raw materials, according to the Reserve Bank of Zimbabwe’s press statement dated 8 July 2021.

According to the International Trade Centre trade map in 2020, South Africa accounted for 49,3 percent or US$2,5 billion of total imports and the rest of the world combined accounts for 50,7 percent $2,6 billion. Of that 50,7 percent, some goods transit through South Africa.

This effectively means any distribution in the supply chain, such as those caused by Covid-19 and the riots that took place in South Africa, will leave Zimbabwe critically exposed.

Production will be greatly affected in Zimbabwe because our companies depend heavily on South Africa for key raw materials, according to CZI in a report following the riots in South Africa.

A Trade dimensions study on the impact of Covid-19 done by CZI in 2020 highlights the exposure of local firms to imported raw materials.

According to the study, 58 percent of imported raw materials come from South Africa.

If we exclude fuel, electricity and machinery from our imports, South Africa accounts for almost 80 percent of Zimbabwe’s imports.

In addition, the disturbances in South Africa do not only affect imports from there, but also imports from other countries into Zimbabwe.

Singapore and China combined account for 20,2 percent of our total imports, and most of these imports come through the Durban Port or Richards Bay, according to CZI.

Some of the imported raw materials such as maize, crude soyabean oil, milk, wheat among others could be manufactured locally.

“As industry will need to aggressively explore value chain possibilities to promote the local manufacture of some of the raw materials where possible,” said CZI.

The business membership organisation (BMO) said external shocks such as Covid19 and the riots in South Africa are beyond the country’s control but there is need to “look for ways to insulate ourselves from such shocks in future”.

CZI said the heavy reliance on the South African economy can be mitigated by leveraging on the AfCFTA, which is turning the continent into one huge market, making the issue of political and economic risks (especially from SA) less impactful.

AfCFTA is flagship project of the African Union’s Agenda 2063, which aims to boost intra-African trade by providing a comprehensive and mutually beneficial trade agreement among the member states, covering trade in goods and services, investment, intellectual property rights and competition policy.

It brings together 55 member states, a 1.3 billion people market with a combined gross domestic product (GDP) of more than US$3.4 trillion.

With AfCTA in place, there are opportunities to procure raw materials from other African countries to overcome the problem of over-dependence on SA.

“It is, therefore, more imperative for Zimbabwe to push for ease of doing business reforms that ensure that the country is the most efficient and most competitive place of production in the region and continent, thereby increasing its attractiveness for all types of local and foreign investments,” the BMO said.

CZI said priorities for action include an analysis of what is imported from SA and how local manufactures can be supported to manufacture them locally.

Zimbabwean industries should constantly retool and replenish old equipment to ensure that when regional and international competition comes, they will be able to withstand the pressure.