Brexit: Time for local exporters to act

23 Feb, 2020 - 00:02 0 Views
Brexit: Time for local exporters to act

The Sunday Mail

Trade Focus
Allan Majuru

Finally, Brexit happened!

A historic moment was reached on January 31 2020 at 11pm GMT (Greenwich Mean Time) when the United Kingdom (UK) left the European Union (EU) after enjoying membership for almost five decades.

This undoubtedly has implications on global trade, particularly for countries that had been trading with UK through agreements with the EU bloc.

To understand these implications, it is important to look at trade within the EU, focusing on trading patterns between the UK and EU member states.

The EU is an economic and political union that now has 27 member countries, which include the Netherlands, France, Germany, Austria, Portugal and Italy.

Movement of goods within the bloc is not restricted and countries enjoy free trade and simplified border customs.

There is also free movement of goods and labour across borders, which easily facilitates trade and economic activity.

This free movement of goods means countries can import or export more depending on areas of strength, hence most countries in the EU have advanced industrial processes for niche products and or services.

For the UK, this trade arrangement with the EU saw the country importing goods worth an estimated US$338 billion from the bloc in 2019 alone, representing 49 percent of its total imports, according to Trade Map.

The simplified trade framework within EU also benefited countries such as Zimbabwe, which found a market in the UK through trade agreements with EU and or trade relations with other EU member states.

For example, Zimbabwe, together with three other countries — Madagascar, Seychelles and Mauritius — signed the interim Economic Partnership Agreement (EPA) with the EU in 2009.

The interim EPA allows Zimbabwean qualifying products to enter European markets, including the UK, duty-free and quota-free if they meet the required standards and certification.

According to Trade Map, this arrangement, whose provisional application started in 2012, saw Zimbabwe becoming one of the top 10 exporters of horticultural produce to the UK in 2018.

Although some of the exports were direct, some were being re-exported by the Netherlands, which is also a top destination of Zimbabwean fresh                                                                    produce.

Through interim EPA, Zimbabwean products remained competitive when re-exported through the Netherlands, thanks to the trade agreements that the two countries enjoyed under EU.

Arguably, Brexit will, therefore, likely impact on companies that have been finding route to the UK market through agreements between EU member                                                          states.

So how can local companies increase direct exports to the UK and cushion themselves from the likely impact of Brexit?

As the old saying goes, “The earliest bird catches the fattest worm”.

Countries that are realigning their export strategies into the UK now will stand to benefit more when the transition period                      ends.

This is the same with companies that intend to increase their presence in the UK.

Whilst the rest of the world has until the end of 2020 to transition, local companies do not have this luxury as there is urgent need to start forging stronger relations with UK buyers and distributors.

In 2020, the UK will continue abiding by the EU rules of trade engagements whilst a new trade deal would be negotiated before the December 2020 deadline.

In preparation for the December 2020 deadline, local companies must position themselves to take advantage of emerging new markets that were traditionally supplied by EU member states.

The products that the UK was importing the most from the EU, which Zimbabwe can also supply, include articles of iron and steel, furniture, ceramic products, manufactured tobacco and nickel mattes.

Local companies can also supply cotton and fabric, hides and skins, as well as an array of horticultural produce.

Overall, there is need for the country to increase productivity levels as supply consistency and good product quality will matter most when supplying the UK market.

In addition, the UK is a major importer of organic foods and Zimbabwe’s horticulture sector is known for producing the best organic products in the world.

To earn more from locally produced organic foods, there is need for local producers to be acquainted with certification standards that are required if they are to make it into the UK market.

The UK market is also moving towards superfoods; that is, foods that are low in calories and high in nutrients, and Zimbabwean companies have every opportunity to supply the much-needed products.

For example, Zimbabwe has abundant mopani worms, whose demand as a high-protein source is growing.

With creative packaging options and capacity building support, communities in areas such as Gwanda in Matabeleland can focus on exporting the mopani worms to the UK, in line with Government’s agenda to have all provinces develop niche export products.

Other superfoods options that local exporters can target include avocados, herbal tea, blueberries, bambara beans, sweet potatoes and groundnuts.

Apart from identifying and taking advantage of these opportunities, there is also need for Government support, which will make it easy for local companies to penetrate the UK market.

Areas of support include bilateral trade agreements with UK, which can borrow some of the opportunities offered under the EU interim EPA.

In anticipation of more trade opportunities emanating from Brexit in the UK, ZimTrade conducted an outward seller mission to the UK in 2019.

The outward seller mission proved that there is potential for exports to the UK to be increased.

Feedback from the mission indicated that the companies which participated had quality products and that potential buyers were willing to source those products from local companies.

Zimbabwe can also leverage on its Diaspora community in the UK to increase the level of exports to that country.

There is a huge population of Zimbabweans living in UK and they can assist in championing trade within their communities.

Members of the Diaspora can become marketing agencies for domestic companies, and this is a powerful conduit through which they can continuously help develop local businesses.

Zimbabweans living in other countries can take on various roles in developing export markets for their homeland, which include leader/reputation builder, middleman, or enforcer of national brands.

In this regard, local companies must court the Zimbabwean Diaspora community in the UK as potential business partners who can source buyers in foreign markets, as well as conduct much-needed research to ascertain market requirements and penetration strategies.

 

Allan Majuru is ZimTrade’s chief executive officer

 

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