The Sunday Mail
WITH policymakers still brainstorming on the efficacy of formulating a deliberate policy to promote consumption of locally produced goods, the avalanche of foreign-produced products, particularly those from South Africa, Zimbabwe’s largest trade partner, continues to flood the local market.
Treasury and industry representatives worry that the continued influx of goods from across the borders will pull the plug on local companies that are struggling to remain afloat in the wake of an entrenched liquidity crunch.
Experts say the continued weakening of the rand – trading at 10,5 against the US dollar as of Wednesday last week – against a basket of world currencies continue to make goods from Africa’s biggest economy relatively cheaper, a development that is likely to feed the continued motivation to import.
Statistics gathered by The Sunday Mail Business recently from various sources ranging from the South African department of trade and industry (DTI), the Ministry of Finance and Zimbabwe National Statistics Agency (Zimstats) show that the trend has continued unabated since the beginning of the year.
In fact, Zimstats figures indicate that although imports into the country slipped 12 percent to $1,4 billion in the first three months of the year from the same period a year earlier, exports also dropped 23 percent to $625 million in the review period, yielding a trade gap of $775 million.
Imports from South Africa, at $625 million, made up 43,2 percent of the import bill.
Singapore was the second largest source for local imports, shipping in goods worth $219 million..
Notably, China was the fourth largest supplier at $80 million.
Zambia and Botswana were ranked the fifth and sixth largest source of local imports by supplying goods worth $34 million and $33 million respectively.
Diesel and unleaded petrol made up the bulk of the imports in the period, accounting for 22 percent or $315 million of the bill, followed by maize imports at $55 million.
Medicaments (mixed or unmixed), which are substances used for medical treatment, constituted 3,5 percent of the imports at $51 million.
Treasury officials also believe that foodstuffs and motor vehicles still contribute the bulk of local imports.
Local authorities are beginning to increase efforts to ban those products that can ideally be produced and supplied by locals.
Last month, the Ministry of Agriculture, Mechanisation and Irrigation Development banned the import of South African fresh fruits and vegetables — tomatoes, potatoes, mangoes, grapes and apples.
It is estimated that local retailers shell out more than US$1 million a month in importing fruits and vegetables from Pretoria.
Similarly, South Africa remains the largest export destination of local goods, absorbing 58 percent or $360 million worth of products, with Mozambique coming in second at $149 million.
China only took in goods worth $2 million from Zimbabwe in the review period.
Worryingly, the country continues to export semi-processed goods.
Semi-manufactured gold at 19,2 percent or $120 million accounted for a big chunk of exports.
Flue-cured tobacco made up 13,7 percent or $86 million of shipments followed by unsorted diamonds and nickel ore and concentrates at $78 million and $77,9 million correspondingly.
On the overall, imports soared to US$7,7 billion in 2013 against exports of US$3,5 billion, yielding a trade gap of US$4,2 billion.
Government is concerned with the blood-letting in industry, especially the manufacturing sector, as firms continue to close shop. In its February 2014 economic commentary, the Ministry of Finance and Economic Development indicated that about 15 companies in the metals and engineering sub-sector were shut. “The manufacturing sector remained under pressure, with a number of companies facing acute financing challenges.
A total of about 15 companies in the metals and engineering subsector were reported to have closed during the month of February.
“Furthermore, sales of consumer goods were reported to have declined by 25 percent to 30 percent during the month, reflecting intensification of the liquidity crisis in the economy.
“Imports of finished goods such as sugar, cooking oil and laundry soap under the general import category continued to flood the market, reflecting increased incidences of smuggling as well as the use of fake import licences.
“The strengthening of the US dollar against currencies of our major trading partners also made imports much cheaper with some landing at below margin prices, exerting pressure on locally manufactured goods,” said the Finance Ministry in the commentary.
Weakening rand becomes a curse for producers
The adoption of the multi-currency system in February 2009, which has naturally made the United States dollar the preferred currency of exchange in transactions, has had the effect of making the local market susceptible to shocks in the currency market.
As a result, the continued slump of the South African rand against the greenback, which makes imports cheaper than locally manufactured goods, has continued to feed into the presumed superiority of foreign products.
In January, the rand dropped the most in five years by weakening to 11:1 against the US dollar. It has weakened 23 percent since the beginning of 2013.
SA finance minister Mr Pravin Gordhan said the country’s budget shortfall is expected to top 4,2 percent of gross domestic product in the year through March, raising the spectre that the currency will continue falling.
It is feared that the more the rand will continue to slacken, the more difficult it would be for local producers to find their footing in a market that continues to be dominated by foreign products.
The Buy Zimbabwe versus The Proudly South African
Unlike the Buy Zimbabwe campaign that heavily borrows from a similar exercise in South Africa, the Proudly South African initiative was born as a manifestation of the “Buy South African” campaign – a well articulated and forcefully implemented project to push the frontiers of South African produced goods.
Although it was initially conceived at the Presidential Jobs Summit in 1998, the campaign followed two years of international research, planning and consultation.
The National Economic, Development and Labour Council (Nedlac), an organisation funded by the South African department of labour, is the one which is responsible for monitoring the campaign’s progress.
It also gives a platform for Government, organised business, organised labour and organised community groups to network.
The campaign is not however peculiar to South Africa alone because it has been conducted with similar success in countries such as Britain, the US, Australia, New Zealand and Malaysia.
In essence, the Proudly South African ‘mark of quality’ is the universal symbol of endorsement, the tick signifying local content, quality and approval.
It is used on all promotional material.
But both the mark of quality and accompanying phrase are protected under the Prohibited Mark and Merchandise Marks Act.
In order to ensure that the campaign is well funded, companies aspiring to be members are expected to pay about 0,1 percent of annual turnover, and this applies only to those products that carry the mark of quality.
Non-governmental organisations only pay a nominal fee.
The fees range from R500 to R500 000.
Members benefit from advertising, promotion and consumer education campaigns.
Conversely, the Buy Zimbabwe campaign, which was launched in 2011, has not received any meaningful financial injection to sustain its operations despite receiving significant goodwill from local companies.
A weak local industry that is significantly weighed by a biting cash crisis, including obsolete machinery that make local goods uncompetitive, has robbed the Buy Zimbabwe campaign of the momentum that it had in the beginning.
Because of multiple challenges that continue to confront the productive sector of the economy, Zimbabwe has naturally evolved as a high cost producer among its peers in the region.
Although the country’s electricity tariffs – at US9 cents per unit – are considered to be lowest in the region by NorConsult Africa, the intermittent power supplies makes a resort to alternative power expensive.
High labour costs also further inflate production cost.
Without being sufficiently competitive, local products have, thus, not been able to stake a claim on the local market.
