How US$3,2 trillion free trade bloc can boost Zim industries

WHEN the Finance ministry engaged Zimbabwe’s industries in a dialogue to map out a strategy for the 2021 budget in October last year, a key highlight of their input was that the domestic market was shrinking under pressure from a rapid erosion of incomes and deindustrialisation.

A country’s industrial sector, they told Finance minister Mthuli Ncube, only flourishes under a climate with high consumption rates, without which strategic moves towards scouting for foreign markets and expand trade becomes crucial to save both industries and workers that work in factories.

Overstretched by terrifying market shrinkage, high costs of production and a volatile currency, the Zimbabwe National Chamber of Commerce (ZNCC) and the Confederation of Zimbabwe Industries (CZI) called on President Emmerson Mngangagwa’s administration to lay the ground for raving up international trade.

The potential

The African Continental Free Trade Area (AfCFTA) was only a pipe dream in October when the discussions took place.

But it was clear that industrialists had already discovered the immense potential that this colossal market had, and they had begun moves to get government realise that Africa could be the answer to Zimbabwe’s problems.

“The country should participate meaningfully in the regional and international economy and take advantage of AfCFTA and Tripartite Free Trade Area (TFTA),” CZI said.

“Opportunities for synergies with all neighbouring countries to establish one-stop border posts and enhance efficiencies and collaboration need to be executed to improve flow of trade. One of the key measures to ensure export competitiveness is to allow all raw materials to be imported duty free. To enable locally manufactured goods to compete with imports as well as to compete in the export markets where our products compete with products from countries that we source some raw materials from,” the industrial lobbies noted.

Their calls came at the right time.

AfCFTA, the huge bloc that cut across Africa’s 55 economies with a combined 1,3 billion consumers and a combined US$3,2 trillion gross domestic product was established this month.

It is armed with an agreement that compels member States to remove tariffs from 90% of goods entering their markets from the region.

This is expected to allow free access to commodities, goods and services across the African continent.

Beyond poverty

For many AfCFTA is not just a bloc, but the ultimate hope for Africa to lift itself out of poverty.

Beyond trade, AfCFTA is expected to promote industrialisation, create jobs and improve competitiveness in the region’s industries at a global scale.

However, for a smooth rollout, countries have to agree on some of the remaining issues like the Rules of Origin, which are key elements in international trade.

The bloc carries with it fresh hopes for the revival of Zimbabwe’s industries, which requires up to US$2 billion to operate full throttle following two decades of crisis.

But already, some industrialists are throwing caution over the sustainability of entering as huge market that could see big players swamp the domestic market with cheap goods.

“We have the AFCTA to contend with and we are not sleeping on the job. It is our hope, working with Zimtrade and the Confederation of Zimbabwe Industries, to make sure our products are also in the region,” says entrepreneur Roselyn Musarurwa-Charehwa, founder and managing director of Surdax Investments.

Charehwa hopes to ship her products across the African continent, benefiting from the relaxed barriers.

But she also knows that a range of issues will have to be addressed before the playing field can be smooth for Zimbabwean companies.

The hard work needed

CZI president, Henry Ruzvidzo says while relaxation of trade barriers presents opportunities for domestic industries to export to larger markets, authorities will have to work around the clock to lead companies into Africa.

“We need to move with speed to address all concerns over doing business in Zimbabwe to attract investors and the Zimbabwe Investment Development Agency (Zida) has its work cut out,” Ruzvidzo said.

Zida is the State agency with the mandate to review hurdles to investment in Zimbabwe and take corrective action.

“One of the biggest concerns will be where foreign investors assemble production capacity to take advantage of the relaxation of regional trade.

“If they set up in Botswana, South Africa or Zambia and they produce goods that (we) produce, we have a big task.

“One of our major concerns will be logistics. Logistics must be in place to take us to the market quickly,” he said.

In southern Africa, governments appear to be responding to this concern with the establishment of projects like the multimillion Kazungula Bridge, which links Botswana, Zimbabwe and Zambia and significantly reduces distances travelled by transport networks.

Ruzvidzo said logistical gridlocks were not only confined to Zimbabwe but across the continent.

“But infrastructure will be developed as governments see the benefits of intra-Africa trade.

“It will now make sense to add value in Africa and trade with a bigger market.

“We have been looking at this as CZI. There is a national strategy being worked out and we have been providing input,” he said.

The worries

But Oswell Binha, board chairman of the CEO Africa Roundtable, said while there had been scepticism about Zimbabwean firms’ capacity to match stiff competition from some of Africa’s biggest manufacturers, there were so many ways that the country could leverage on the bigger continental market to strike deals that can boost international trade.

“We must look at our comparative advantages,” Binha said.

“We are going to be better together. Further derogation will not do us favour. We must be part of this from the start. The problem with African countries is that we are so much obsessed with our own national sovereignty at the expense of our economies,” he noted.

Zimbabwe appeared to be preparing well for the bigger African market with the launch of Zimbabwe National Industrial Development Policy (ZNIDP) two years ago.

The African Development Bank (AfDB) says by launching ZNIDP, the country was on a strong path to achieve regional integration.

“It is expected that the implementation of fiscal consolidation measures, currency reforms and the ZNIDP, among other measures will position the country to be a highly productive and competitive player that will effectively contribute to achieving the objectives of the AfCFTA,” said.

ZNIDP laid out a vision for Zimbabwe to build a technologically advanced, competitive and diversified industry by 2030.

It says these targets will be achieved by consistently attaining a series of performance indicators, including manufacturing sector growth rate of at least 2% per year over the policy period, which runs until 2023.

ZNIDP identifies agro-based industrialisation as one of the pillars to complement the development of industrial value chains that are vital for international trade.

This story was taken from the Weekly Digest, an AMH digital publication