Nzenza cheers up US$3 trillion bloc
. . . warns CZI to brace for stiff competition
GOVERNEMT has warned industries to brace for stiff competition against other African manufacturers as the region removes trade barriers, following a historic trade pact that came into effect in January.
Commenting on the African Continental Free Trade Area (AfCFTA), Industry and Commerce minister Sekai Nzenza told industrialists recently that opportunities will be in abundance as the US$3,2 trillion bloc eliminates duties on 90% of goods.
But Zimbabwean firms, which last week said 53% of their installed manufacturing capacity was idle due to a biting economic crisis, must measure up to high quality and better priced products.
AfCFTA is the largest trade bloc worldwide in terms of participating member States, with a market potential for goods and services of 1,2 billion people, according to the African Development Bank (AfDB).
The AfCFTA agreement revolves around trade liberalisation through tariff and nontariff barrier reductions to increase intracontinental trade.
The United Nations Economic Commission for Africa has predicted that the AfCFTA will raise intra-African trade by 15 to 25%, or US$50 billion to US$70 billion by 2040 compared to a motherland without the bloc.
With the region’s highest inflation rate, Zimbabwe is one of the most expensive countries in the region.
Companies always complain about high duties, fees and utility costs, which are passed on to consumers, making local products uncompetitive.
Nzenza acknowledged that once AfCFTA opens the domestic market to an avalanche of foreign products, Zimbabwe will need to help its firms withstand competition.
“Government signed and ratified the AfCFTA agreement which entered into force on January 1, 2021,” the minister said.
“This has created an open market worth US$1,35 billion in Africa. So far 54 out of 55 African countries have signed the free trade agreement to allow duty free access of goods and services. The implications of the market liberalisation are an increased opportunity to access a bigger market.
“However, local players should gear up and match increased competition from other countries. Zimbabwe is already implementing the Trade Protocols under Comesa (Common Market for Eastern and Southern Africa) and Sadc (Southern African Development Community) and this has been promoting duty free access of goods originating from within the region, hence, offering an advantage to industry and commerce,” she added.
The Manufacturing Sector Survey released by CZI last week demonstrated that Zimbabwe was preparing for the bigger market, with industries projecting that by the end of next year, capacity utilisation would rise to 61%, underpinned by foreign currency availability on the foreign exchange auction floors.
“The official exchange rate has become the major determinant in the pricing equation,” CZI chief economist Tafadzwa Bandama told businessdigest.
“It is encouraging to note that business can now access foreign currency through the formal channels although it’s now taking longer to access the money.”
There have been high prospects for growth since trade kicked off quietly in a region where trade between peers account for 15% to 18%.
The AfCFTA pact created a multi-trillion dollar single Africa market that members hope will scale up trade beyond the 18% and boost ailing economies.
But achieving this goal will require member States to eliminate barriers.
This can be achieved by following a defined road map that will level the playing field and address inequalities between Africa’s economies.
The Institute for Security Studies in South Africa, says dealing with inequalities may add pressure on big economies to reduce tariffs.
However, the effects of this will take time to be registered.
The new bloc projects that by 2034, 90% of tariffs will have been eliminated.
This week, AfDB acknowledged that economies on the continent require transformation.
“The African Continental Free Trade Area is projected to provide in the medium- and long-term opportunities for markets to spur economic growth. The intra-African market is expected to mitigate some of the negative effects of Covid-19,” AfDB noted.