Enhancing export competitiveness vital

09 Jan, 2022 - 00:01 0 Views
Enhancing export competitiveness vital

The Sunday Mail

Trade Focus
Allan Majuru

ZIMBABWE’s location at the heart of Southern Africa places the country at a competitive advantage in terms of proximity/speed to markets, hence the adage, Zimbabwe is not landlocked, but land-linked.

The country relatively enjoys shorter distances to all countries in the region, compared to competition.
Therefore, if local companies get it right on production costs, Zimbabwean goods will be competitive in export markets.

This is because Zimbabwe’s proximity to countries in the region has potential to contribute to reduction in the cost of logistics, which in turn will make local products affordable in export markets.

For example, the road distance between Harare and Lusaka is around 500 km.

If competitors from Johannesburg, South Africa want to access the same market, they must meet the cost of an additional 1 230km as the distance to Lusaka is around 1 730 km.

To unlock the potential related to proximity to regional markets, it is encouraging to note that President Mnangagwa’s Second Republic is placing priority on improving the transport sector, starting with road and railway rehabilitation.

Considering the strategic importance of the road network in enhancing accessibility as well as promoting domestic and regional trade as a key transport corridor, the National Development Strategy 1 (NDS1) — launched last year by President Mnangagwa — identifies the urgent need to rehabilitate national road networks, particularly those that link the country to the rest of the region.

The NDS1 policy says:

“In this regard, the NDS1 will target to increase the number of kilometres of road network converted to meet Southern Africa Transport and Communications Commission (SATCC) standards from 5 percent to 10 percent by 2025 and to increase the number of kilometres of road network in good condition from 14 702km to 24 500km by 2025.”

Currently, the Government is implementing the Emergency Roads Rehabilitation Programme (ERRP2) that is targeting to repair roads that were damaged by heavy rains received during the rainy season.

The Government is also prioritising rail networks, which are crucial if the country is to reduce the cost of landing products in export markets. Under NDS1, plans are to improve secure investment towards railway infrastructure development as well as increasing freight cargo from 2, 6 million tonnes per annum in 2020 to 6, 7 million tonnes per annum by 2025.

Whilst improved road and rail networks are a component of the entire logistics chain, the current efforts to rehabilitate road and railway networks indicate commitment by the Government to improve the transport sector.

There is no doubt that continuous growth in national exports is heavily dependent on the effectiveness of trade support structures such as transport networks and logistic services.

Logistics play an integral role in supporting commercial activities of Zimbabwe and as a gateway to harness fully the opportunities provided by the African Continental Trade Free Area.

According to the International Trade Centre, “a competitive logistics environment has direct implications on international trade and development.”

Arguably, overall logistics performance is positively and significantly correlated with exports and imports, hence need to prioritise the sector as the country harnesses the potential provided by the continent-wide trade agreement.

There is a need to consider improving linkages in the country and shorten the cost and distance between cities.

This is one way to improve the value-addition process, as raw materials are moved from source to manufacturer with ease.

Improving inter-city logistics will also go a long way in developing stronger value chains. The connectivity of various inter-dependent production sectors (agriculture, manufacturing, agri-food, tourism, amongst others) of the domestic economy is strengthened through an efficient transport and logistics system.

As railway is usually the cheapest mode of transport, current efforts to resuscitate networks should see to it that industrial areas are connected to the national network.

Why improving logistics matters

Logistics and transport play a fundamental role in increasing the competitiveness of African industries in both the services and manufacturing sectors.

According to the World Trade Organisation, the efficiency in logistic services is one of the key factors that determine the ability of a country to participate in regional and global supply chains.

“Even if tariffs on export markets are zero, if firms in a country confront high cost and inefficient logistics, they will not be able to compete with firms that benefit from an efficient logistics environment.”

Thus, there is no doubt that improving logistics will lead to shorter shipping times, increased economic growth and more cross-border trade.

This in turn will improve the competitiveness of Zimbabwean products in the export markets. So how can local companies participate in improving logistics to ensure better product competitiveness?

For small businesses, they need to take advantage of consolidating their products into one truckload as a group to reduce administration, labour, as well as transportation costs.

Consolidating helps reduce costs related to logistics and with more supply chain visibility and collaboration, small businesses can consolidate a wide range of products and meet customer expectations.

Most buyers are requiring smaller and more frequent orders and consolidation will result in shorter lead times, which in turn will boost customer confidence.

Further to consolidation, establishing regional warehouses and dry ports will also improve logistics for local exporters.

Warehouses are a crucial part of the supply chain and are critical for economic development and growth.
They improve the supply of various products and services to targeted destinations across the world.

If a lot of goods are shipped from point A to point B, especially over a long distance, products can be stored closer to customers thereby drastically reducing transport costs.

Large-scale regional warehouses will allow for logistics and manufacturing clusters to form across Africa as an interconnected network, enabling more intra-regional trade.

Currently, ZimTrade is working with partners and the private sector to establish a regional warehouse in southern African countries, which will be used as storage service facilities for local exporters, retailers, and manufacturers.

The regional warehouse being developed will make it easy for Zimbabwean companies to store their goods in advance and sell them in export markets, as per the requirement, as there is a gap between the time of production and the time of consumption.

For the concept to be successful, logistic companies will also be expected to play their part and invest in large storage and transportation systems.

These systems backed up by the development of appropriate technology, such as drones, and smart phones will create a situation that allows for regular and speedier deliveries.

Enabling policies

It is important to address issues that may adversely impact on the country’s ability to integrate into the single African market and derive meaningful benefits.

Improving infrastructure accessibility through appropriate policy changes is crucial to making the supply chain competitive and cost-effective. Policy reform for logistics requires cooperation where the whole supply chain is given an overhaul so that barriers in one country do not affect companies in another.

Inroads into policy reforms have begun with the Non-Tariff Barrier reporting mechanism launched by COMESA.

The mechanism enables stakeholders to report and monitor the resolution of barriers encountered as they conduct their business in the COMESA, EAC and SADC regions.

It is also important for the logistics industry to work closely with policy makers to deliver on the inclusive socio-economic growth of the country.

The Government becomes the enabler within the supply chain through rehabilitation of transport infrastructure, harmonisation of laws and regulations that affect trade and other interventions that promote trade.

Allan Majuru is the ZimTrade chief executive. This article was first published on June 27, 2021 and has been republished due to public demand.

‘The regional warehouse being developed will make it easy for Zimbabwean companies to store their goods in advance and sell them in export markets, as per the requirement, as there is a gap between the time of production and the time of consumption.’

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