The Sunday Mail
Trade Focus
Allan Majuru
Zimbabwe’s strategic geographic location in southern Africa offers untapped opportunities for local industries to export easily into neighbouring countries.
Unlike the common statement that Zimbabwe is landlocked, one undoubted fact is that the country is land-linked, having direct links to five neighbouring countries: Botswana, Mozambique, Namibia, South Africa and Zambia.
Through these neighbours, Zimbabwe has further easy access to six more countries, which are: Angola, Democratic Republic of Congo (DRC), Kingdom of Eswatini (formally Swaziland), Lesotho, Malawi and Tanzania.
Apart from this geo-location advantage, Zimbabwe enjoys cordial political relationship with its neighbours, coupled with a long history of cooperation in development and regional integration affairs.
So, what does this mean?
Zimbabwean manufactures and distributors have a unique opportunity — anchored primarily on advantages related to logistics operations — to increase exports into neighbouring countries, which, in turn, creates supply links to more countries.
As exporters are concerned about availability of opportunities, a recent market survey conducted by ZimTrade, the national trade development and promotion organisation, in May 2019 revealed that Zambia offers opportunities for Zimbabwean products and services in the fast-moving consumer goods (FMCG) and mining supply sectors.
Zambia is strategically positioned as a gateway into the central African markets such as the Democratic Republic of Congo (DRC) and Central African Republic, and is one of the key markets in central Africa for businesses looking to increase brand awareness, generate new ideas and form new partnerships.
The current trade figures show that Zimbabwe has not fully using its competitive advantage to become Zambia’s top trade partner. Statistics from Trade Map indicated that although Zambia is amongst the top five export markets for Zimbabwean products, Zimbabwe accounts for less than 2 percent of Zambia’s total import bill. With the short distance of around 500km between Harare and Lusaka, there is room for Zimbabwe to grow exports to Zambia from the current US$66 million recorded in 2018.
This is against a total import bill of US$177 million from Zambia, creating a trade deficit of US$111 million.
To close the current trade deficit, local industries can leverage on current major exports into Zambia to expand and introduce new commodities into that market.
In 2018, Zimbabwe’s major exports to Zambia were fish, tea, unprocessed tobacco, cement, sugar cane, among others.
Through taking advantage of these products already in the Zambian market, there is a huge potential for Zimbabwe to supply processed FMCGs to the Zambian market at low tariff rates riding on the Common Market for Eastern and Southern Africa (Comesa) and Southern African Development Community (SADC) trade agreements that the two countries are signatories to.
For example, Comesa implemented Simplified Trade Regime (STR) to help small traders benefit from the preferential rates enjoyed by commercial traders when importing or exporting goods within the Comesa trading bloc.
Zimbabwe has an agreement on the STR with Zambia and Malawi.
The STR is a customs clearance procedure used by small-scale cross-border traders importing or exporting goods from one Comesa member state to the other.
STR is used when the small-scale cross-border trader is exporting goods valued at US$1 000 or less per consignment.
However, the goods should be listed on the Comesa STR Common List.
The survey conducted by ZimTrade further revealed that there is an increasing demand in Zambia for FMCG goods that include processed foods and beverages, personal care products and toiletries as well as mining supplies.
Zambia’s retail sector
One of the fast-growing sectors in Zambia is the retail sector.
A study conducted in 2016 reported that the Zambian retail sector was growing by 12,4 percent annually.
Zambia is, thus, an opportune market for local manufacturers of FMCGs.
The retail sector in Zambian is multi-layered in structure. The top strata of the market is made up of upmarket retail chains, most of which are well stocked with South African brands.
This segment is typically known by distributors as the ‘modern trade’.
Outlets in the modern trade are well-structured, spacious and well-adorned.
Over the past five years, Zambia has witnessed a surge in upmarket retail chains. The growth is being fuelled by a growing size of consumers in the upper-middle class, who have more disposable income. It is being further propelled by the entry of foreign brands into the market, as well as accelerated construction of shopping malls in which these hypermarkets are domiciled.
While modern outlets offer premium market space for consumer goods, they typically require suppliers to sacrifice more. Their bargaining power enables them to operate on longer payment terms for suppliers.
One of the ways that local manufacturers can use to open doors into such outlets is to be internationally certified.
Food manufacturers will thus need to consider international food certifications like Food Safety Systems Certification.
Suppliers will also need to assure such outlets their commitment to offer brand support, point-of-sale merchandising and in-store activation, among others.
Apart from the modern trade, there is also a lesser formal segment which distributors often call the ‘General Trade’.
These are smaller and less-structured outlets that are often owned and run by families.
This segment also includes local mini-markets, convenience shops and local stores.
Since these outlets have limited space, they usually buy smaller quantities but frequently throughout the month. They are also relatively flexible in terms of payment terms and after-sales support.
A third segment which is also growing in Zambia is what distributors often term the ‘informal trade’. These are even smaller, less-structured outlets that operate as mini-wholesalers for vendors and traders.
Most of these are located in nuclei near bus-termini and also downtown. These are even more flexible and most of them buy their supplies on a cash basis. It is relatively easier to secure orders from these types of outlets for new suppliers.
It is, therefore, important for suppliers of FMCGs entering the Zambian market to consider all these layers as they craft their route-to-market strategies.
Getting commodities into Zambia
One of the effective ‘route-to-market’ strategies that local manufacturers can employ when entering the Zambian market is to use a distributor who is based in Zambia.
Distributors who are already listed with the main retailers leverage on their existing relations with the retailers, as well as their experience in the market to introduce new brands with ease.
A medium to long term option to enter the Zambian market involves an exporter establishing a distribution warehouse in Zambia that will serve as a reservoir for their stocks.
Opening a warehouse in Zambia will enable the manufacturer to cut out the ‘middlemen’ and yield better profits.
It also reduces incidences of stock-outs considering the usual rate of stock-turn typical of most FMCGs.
ZimTrade services
When dealing with international markets, access to information is always important. However, it is not always easy, especially for small businesses.
As such, ZimTrade offers services such as the recent survey in Zambia, export development and export promotion.
In export development, ZimTrade has been assisting local companies to build their capacity and enhance their export competitiveness. This is achieved through technical intervention programmes, conducted in partnerships with organisations such as the Netherlands-based PUM and SES of Germany.
Companies are also trained in marketing and branding for international competitiveness, among other programmes.
To expose Zimbabwean products to the Zambian market, ZimTrade is facilitating the participation of over 20 local companies at the Zambia Agricultural and Commercial Show (ZACS), which will be held from July 31 to August 5 2019.
The show will provide a forum for Zimbabwean companies to exchange information, showcase their products and services in business-to-business meetings with potential buyers from the region and beyond.
Recently, ZimTrade successfully facilitated the participation of nine companies at the Copperbelt Agricultural Mining Industrial Networking and Enterprise Expo (CAMINEX) that took place in June 2019.
CAMINEX is the only mining, agricultural and industrial trade expo that takes place in the Copperbelt region of Zambia.
Opportunities which were identified in the two sectors were supply of products such as FMCGs, safety clothing, iron and steel products, and electric transformers.
In the services sector, the following opportunities were identified: management advisory, marketing, legal, banking and insurance, silo maintenance and cleaning services.
Allan Majuru is the chief executive officer of ZimTrade
