Zimbabwe faces steep challenges to take advantage of Africa free trade area
By any measure, Zimbabwe’s manufacturing sector has fallen on hard times, decimated by the economic crises of the past two decades. The southern African country has gone from being among the most highly industrialised countries in sub-Saharan Africa at independence in 1980, in fact the second most developed after neighbouring South Africa, to undergoing a rapid decline and becoming among the poorest.
Its earlier growth was underpinned by agriculture, mining and manufacturing sectors that have been most hit by poor government policy and political ineptitude.
The manufacturing sector has almost disappeared and its potential has been largely ignored by the authorities.
According to the National Development Strategy one (NDS1), which was launched in November last year, manufacturing contributed 25% to GDP in 1990, but that has now fallen to just 10,6%.
The fall of the manufacturing sector has been partly blamed on the growing demand for cheaper finished products, from mostly South Africa and China.
But mainly, the sector has suffered from governance failures that created political instability, hyperinflation at various times over the last two decades which also decimated consumer spending, an unfavourable tax regime, globalisation, obsolete machinery, rolling power cuts, lack or unavailability of adequate funding for retooling among others.
With a shrinking domestic market and economic fundamentals that continue to worsen, there has been little incentive to revive local industries.
But the advent of the African Continental Free Trade Area (AfCFTA) at the start of the year has changed the ball game, and it is time to rebuild the industrial base to exploit the new opportunities it presents.
African countries began officially trading under the AfCFTA at the start of the new year after months of delays caused by the coronavirus pandemic.
The trade agreement presents a huge bloc that cut across Africa’s 55 economies with a collective 1,3 billion consumers and a combined US$3,4 trillion GDP.
African leaders hope this would help usher in an era of development for a continent that has seen little of that in recent times.
It took four years of talks for governments to agree to the AfCFTA which would be headquartered in Ghana.
That agreement was eventually reached in March 2019.
The free trade area, the largest since the creation of the World Trade organisation in 1994 is an attempt by African leaders to help unlock the continent’s economic potential by boosting intra-regional
trade, strengthening supply chains and spreading expertise.
It compels member States to remove tariffs from 90% of goods entering their markets from the region, allowing free access to commodities, goods and services across the continent.
For Zimbabwe, AfCFTA should provide the opportunity to revive its rusting industries, create employment and allow the innovativeness of its population to lift the economy out of poverty.
The above-mentioned NDS1 is targeting to increase the contribution of the manufacturing sector to GDP from 10,6% to 15% by 2025.
It also hopes to ramp up valueadded exports from US$727,47 million last year to US$1,3 billion in 2025.
The policy is skewed mainly towards reviving agriculture, which provides over 60% of raw materials to industry.
But government must also spread the opportunities to the wider economy and country to address a disturbing trend highlighted by the NDS1.
As of 2019, about 46% of Zimbabwe’s manufacturing firms were located in Harare as a difficult operating environment led some companies to either close down or relocate to the capital.
AfCFTA presents real opportunities, it is up to the government and industry to grab them or watch other countries exploit Zimbabwe's evident gaps.
The country cannot afford to remain a net importer given its natural endowments.
Among the biggest concerns for the country is its inability to attract investors who may be seeking opportunities presented by the free trade area.
Several questions arise: Can local companies retool to become competitive?
Can government improve policy making to make the country more business friendly, not only to new investment but to encourage existing companies to boost present facilities or set up new ones?
How can it improve its IT ecosystem to encourage youth participation?
Are there logistics in place to take local produce to foreign markets quickly and on demand?
Experiences over the festive holidays laid bare Zimbabwe’s challenge in resolving its poor logistics at its largest inland port of entry, the Beitbridge Border Post, with truck drivers spending days in queues on both sides waiting for service.
Beitbridge is the busiest transit port for cargo from South Africa with destinations in Zimbabwe, Zambia, Malawi, the Democratic Republic of Congo and often as far as Tanzania.
The Beitbridge-Chirundu Road is a key component of the TransAfrican Highway Network linking South Africa and Zambia.
It is also part of the North– South Corridor Project and the Cape to Cairo Road, and a gateway to the Common Market for Eastern and Southern Africa.
There are relatively few studies on the financial benefit the corridor brings to Zimbabwe but a situation analysis carried out in 2009 showed that the waiting time at the border was about 33 hours for south-bound traffic while for north bound traffic waiting time was about 45 hours.
It was estimated that the cost associated with this waiting time was about US$29,3 million for south bound and US$35 million for north bound traffic per year.
Recently, logistics companies said it was costing them US$300 per truck each day they spend at the border.
Zimbabwe has also neglected the roads that make up the corridor: The Beitbridge-Harare Highway was built in the 1960s and has far outlived its 20-year lifespan.
After haggling over tenders since 2003, government finally started work on the dualisation of the road last year, with different companies working on parts of the project to expedite completion, but this may have come too late to save the situation.
The new kazungula Bridge simply by-passes the bottlenecks at Beitbridge, Zimbabwe’s bad roads, its notoriously corrupt police and links the South African ports to the same markets Zimbabwe is targeting to service.
The bridge’s opening is certainly a boon for the AfCFTA but Zimbabwe has a lot of work to catch up.
This story was taken from the Weekly Digest, an AMH digital publication