The Sunday Mail
Trade Focus
Alla Majuru
MAI Chimuti (not real name) is a small business owner, with products that have been finding a market in a small neighbourhood in Gaborone, thanks to her friends who have been helping in sourcing customers.
The demand for Mai Chimuti’s leather products is growing and one buyer from a popular retail shop in the area indicated interest to list some of the products.
Having her products in a formal setting in Gaborone will be a breakthrough for Mai Chimuti who has been trying to do more in exports so that she earns the much-needed foreign currency to import machinery that will improve the quality of her leather products.
The potential is even much bigger as the retail shop owner in Gaborone has several stores around the country and getting things right with the first order will make it easy to supply the entire chain.
For the first order, Mai Chimuti is asked to supply belts and sandals worth around US$950 and the potential to grow this order in the coming months is high.
Here is where the problem starts.
For a long time, Mai Chimuti has assumed formal exports are a preserve of established exporters and for small businesses like hers, smuggling will get the job done faster.
This seems to have been working previously as Mai Chimuti often asked other travellers crossing the border to carry her two or three products, which they will deliver to the customer in the neighbouring country.
So, like she has always done, Mai Chimuti packs her products in huge bags and goes to the road to find a cross border trucker who will help smuggle her goods.
They agree on a fee, exchange contact details and once the truck leaves, Mai Chimuti goes back to her shop hoping in a day or two, the buyer in Gaborone will confirm receipt of the order.
Five days later, Mai Chimuti gets a call from the agitated shop owner who wants to know when the products will be supplied.
In shock, as she thought by now she will be getting an update on actual sales, Mai Chimuti calls the truck driver, but the phone number is no longer reachable.
Both the driver and her leather products have vanished without trace.
This is when reality sinks in for Mai Chimuti. She has lost much more than products, as she has lost a potential buyer who would have set her on a successful export journey.
Mai Chimuti’s story could be familiar especially among small businesses, as most have faced challenges associated with their failure to leverage on bi-lateral and multi-lateral trade agreements that Zimbabwe is part of.
Trade agreements are designed to stimulate and encourage trade between countries or group of countries that sign the agreement, by giving one another preferential treatment in the reduction or elimination of customs duties as well as removal or relaxation of quantitative restrictions.
For example, duty and import related taxes could constitute a large percentage of the final price for cross border transactions.
Thus, a reduction or elimination of the duty can give the exporter a substantial advantage in terms of cost over competitors from countries that do not have similar trade agreements.
It is important therefore for businesses to note that, as part of the economic diplomacy agenda driven by President Mnangagwa, the Government has been pursuing approaches that will make it easy for Zimbabwean companies to land products in export markets with ease and at a competitive price.
The President has for a long time indicated that mutually beneficial trade with external parties will stimulate economic growth and help address some of the challenges faced by local industry.
To help local enterprises, the Government has signed several agreements targeted at improving the ease of doing export businesses, which in most cases offer preferential and relaxed conditions for Zimbabwe-produced products and services.
For example, the COMESA Simplified Trade Regime operational in Malawi, Zambia, Zimbabwe was introduced to make it easy for small-scale cross border traders by simplifying and harmonising customs and border procedures and improving efficiency of border clearance process.
This is one of the many examples of what has been put in place to integrate small businesses in export markets.
To help understand some of these agreements and what they offer, ZimTrade — the national trade development and promotion organisation — has put in place a Guide to Zimbabwe’s Trade Agreements whose purpose is to provide exporters and importers with an overview of the Trade Agreements that Zimbabwe has entered with other countries.
Using the document, local companies can develop export strategies based on which agreement offers best options for their businesses.
Existing preferential Bilateral Trade Agreements
Zimbabwe currently has four operational preferential bilateral trade agreements under which exporters can benefit.
These agreements were entered with Botswana, Malawi, Mozambique, and Namibia.
The Zimbabwe-Botswana trade agreement ratified in 1988 offers reciprocal duty-free trade on all products grown, wholly produced, or manufactured wholly or partly from imported inputs subject to a 25 percent local content requirement.
With Malawi, this is a reciprocal trade agreement that has been in place since 1995, with 25 percent domestic value-added requirements.
In Mozambique, the focus of the agreement that has been in place since coming into force in 2005 is to eliminate tariff and non-tariff barriers and to cooperate in customs and trade promotion.
The agreement provides for duty-free trade between the two members with the rules of origin specifying a 25 percent domestic value added.
Excluded from the agreement are refined and unrefined sugar, Coca-Cola/Schweppes soft drinks, firearms, ammunition and explosives, motor vehicles and cigarettes.
With regards to Zimbabwe-Namibia, there is a reciprocal agreement in effect since 1992, subject to rules of origin that require at least 25 percent local content for manufactured products and that Zimbabwe and Namibia should, as exporters, be the last place of substantial manufacturing.
Multilateral Trade Agreements.
Zimbabwe has been implementing the SADC Trade Protocol since 2001.
This Protocol is an agreement between SADC Member States to reduce customs duties and other barriers to trade on products from each other.
By lowering customs duties and removing other barriers to trade, the SADC Member States intend to promote economic growth and regional integration.
For exporters within SADC Member States, they enjoy preferential tariff rates that are granted to products that meet the SADC Rules of Origin and are accompanied by a SADC Certificate Origin.
In addition to this, Zimbabwean exporters also enjoy trading under the COMESA Free Trade Area, designed to promote regional integration through trade development and to develop their natural and human resources for the mutual benefit of all their peoples.
COMESA also has a Simplified Trade Regime (STR), which helps small traders to benefit from the preferential rates enjoyed by commercial traders when importing or exporting goods within the COMESA Bloc.
The regime is operational between Zimbabwe and Zambia, and Zimbabwe and Malawi and is used for goods that have been grown or wholly produced in the COMESA Region.
The trader will complete a simplified customs document (declaration form) and a simplified COMESA certificate of origin.
These documents are filled in at the border post by the trader and are stamped and certified by a customs official.
Agreements with European Union and United Kingdom
Zimbabwe has signed agreements with European Union (EU) and United Kingdom (UK), which offer duty free and quota-free market access to local exporters.
The basic approach used in these agreements for determining a qualifying product is that it must be wholly produced locally from local materials, or at least have been substantially transformed locally, based on the respective qualifying criteria that are specified at the product, category or sector level as applicable.
Africa’s free trade area
The African Continental Free Trade Area (AfCFTA), whose trading started in January this year, deepens the economic integration of the African continent by creating a single market for goods and services and facilitating easy movement of persons.
The agreement offers Zimbabwean companies with access to a population of more than 1, 2 billion consumers in growing economies that are expected to reach US$29 trillion by 2050.
For local companies that are quick to ride on the advantages of such an agreement, this will help diversify their exports as well as open better access to raw materials from the rest of Africa.
With access to more raw materials, technologies, and a larger market, the AfCFTA will allow Zimbabwe to improve its export basket, currently dominated by commodities and low-value-added products, to include higher-value-added products that yield higher returns.
As these opportunities open, it is important for businesses to note that only companies that have registered under the agreements will enjoy the benefits thereof.
Register for trade agreements
In order to qualify under most of the bilateral and multi-lateral trade agreements it is necessary for the company or exporter to register with the Zimbabwe Revenue Authority (ZIMRA).
To enable the ZIMRA officials to verify the eligibility of the products, the company or exporter is required to submit supporting documents such as an application letter, CR14, list of products intended for export, valid tax clearance certificate, and a factual cost analysis of the products intended for export.
A sample of the application letter to ZIMRA is available in the ZimTrade’s Guide to Zimbabwe’s Trade Agreements that can be downloaded on its website www.tradezimbabwe.com <http://www.tradezimbabwe.com>.
Certificates of origins must also be completed and submitted to ZIMRA.
Obtaining certificates of origins
For all trade agreements except the EU-ESA, exporters are required to submit Certificate of Origin to ZIMRA as part of the documentation and declaration process.
This is a documentary proof that goods or products meet the rules of origin requirements as specified by the Trade Agreement.
The certificates of origins can be obtained at ZimTrade offices in Harare, Bulawayo and Mutare.
Allan Majuru is ZimTrade chief executive
