The Sunday Mail
South Africa continues to be Zimbabwe’s biggest trading partner. Last year, Zimbabwe exported more than US$1,9 billion worth of goods and services to Pretoria, which is 71 percent of the country’s total shipments.
However, Harare, in turn, took in more than US$2,3 billion worth of products from SA, which is 38,4 percent of the country’s total imports. That is why cooperation between the two economies is considered important.
In the recent past, the South African government has voiced its concern over indigenisation and Statutory Instrument 64 of 2016, which materially impacts on Pretoria’s trade with Zimbabwe. Last week, The Sunday Mail Business reporter AFRICA MOYO (AM) caught up with SA Minister of Trade and Industry Rob Davies (RB), who was in the country for the Zim-SA Bi-National Commission.
He opened up on some of the crucial issues affecting the two economies.
AM: Rob, can you walk us through the areas of cooperation that Zimbabwe and South Africa have agreed on through the Bi-National Commission.
RD: Well, the last time that President Mugabe visited, we signed memoranda of cooperation, and I think what we have agreed now is to start the actual detailed work, to identify the areas of economic cooperation.
We understand of course that the Zimbabwean economy is facing challenges and that resulted in, among other things, Statutory Instrument 64 (of 2016).
We are in a process of trying to resolve a few issues between us and those issues, including the fact that we believe – and I think the Zimbabwean colleagues agree – that any measure which is a deviation from the Sadc Trade Protocol has to be taken to the Sadc Trade Ministers Council for Ministers for trade derogation.
That is what we agreed at the last meeting we had, and it was also agreed that Sadc will provide technical assistance to Zimbabwe.
We will be going for a further meeting round about March next year and I think we will be able to reach an understanding that will allow South African products that are not competing with products that are made in Zimbabwe, because our point of principle is that where capacity utilisation is at risk, we loosen, we don’t play hard ball, but we don’t want to see deviation of imports from us to extra-regional players at our expense, so we got a request to (the) Zimbabwe Government so that a number of lines of products that we want to supply here will be looked into.
So that is one of the issues.
We need to exchange more information about the investment climate in Zimbabwe (especially about) a number of the new measures that are being announced, including the Special Economic Zones and the rules around investment, so that we are able to convey accurate information to our investors in South Africa who may be interested in coming to Zimbabwe.
I think that is what we are looking at, as well as other things that we could assist Zimbabwe with, which we could discuss further with the Government.
There is cooperation in transport, which will be signed tomorrow (last Thursday) by the minister of transport. So, I think in general terms that’s where we are.
AM: Can you tell us more about the regional integration drive. How far has South Africa and Zimbabwe gone in this respect?
RD: I think we have similar views about what international trade issues are about or what they should be about and that kind of stuff. I think we also have similar views about the industrial pillar in regional integration, in particular the Sadc framework that was adopted at the special summit convened when Zimbabwe was chairperson of SADC.
We are looking forward to the next special meeting of Sadc, which is going to adopt the actual action plan. So we think that industrialisation is for all of us actually.
AM: But it is widely viewed that South Africa, because it is a regional giant in terms of industrialisation, is reluctant to promote the regional industrialisation initiative. What is your take on that?
RD: Well, let me just start by saying that our approach to regional integration is that we may look around the world and we see countries that are industrialised successfully. All of them – take China, take India (for example) – even if they started to produce industrial products and export them to the developed world, they found out that that is not a model that is going to work indefinitely, partly because the global market in the developed world is constrained because the developed world themselves are trying to re-industrialise.
So it’s not an unlimited access, unlimited quantum of manufacture of goods that creates those markets. What China is trying to do is a consumption-led growth path of their own, rather than an export of products.
Also, they are trying to move into the area of innovation, the Chinese model. As a result, we find ourselves getting lesser prices from commodities (and) they are affecting our income, foreign exchange and so on.
But as Africa, colonialism divided us into 54 different countries. We believe as South Africa, we cannot simply industrialise off the South African economy and consumption, we need to have a regional market that even reaches beyond our existing regional communities.
We should end up in the continent. The Tripartite (Free Trade Area) is very important. I think after a long debate, and we are part of the debate, the consensus that we have is that rather than focus on trying to deepen integration within our existing communities – in other words, we move Sadc into our customs union, our monetary union, something like that – the focus of our attention now ought to be on broadening integration across our regional communities.
The tripartite is the first crack at that. But when we do that, we need to do that with a developmental paradigm. That developmental paradigm says that the issues of small trade percentages of our total trade into regional (markets) is not all about tariffs, not even about trade facilitation, customs arrange
AM: But, really, what progress has been registered in establishing a free trade area?
RD: There are two processes. One is what I have mentioned, which is the tripartite Sadc Community, the Common Market for Eastern and Southern Africa (Comesa) and the East African community (EAC) that is 26 countries; that’s about 600-to 700 million people and its US$1,2 trillion of GDP.
So, it’s everyone from Egypt, the East Coast, down to us.
So it includes EAC members, it includes members in Comesa and those who may not be in Comesa; it includes members who may be in Sadc and those who may not be in Sadc.
So it’s a group of countries. We have already agreed on the legal text that was adopted about a year ago in Sharm El Sheik in Egypt. They are in the process of negotiating the trade in goods arrangements. We are not trying to open the arrangements that are already in existence.
The focus is on negotiating with those in the big bloc who don’t have any preferential arrangements between themselves. In our case, as I said, we have to negotiate as Sacu. Our biggest negotiations in the bloc are with the EAC and with Egypt.
There are a few others – Ethiopia, Djibouti, Eritrea and Sudan – outstanding. We are very close to concluding those schedules and there is another round of negotiations in December. We will see if we conclude; if not, it won’t be long into the New Year before we conclude.
AM: Local businesspeople say in as much as South African companies are coming into Zimbabwe, they are not being afforded the same opportunity in South Africa. Is South Africa willing to help them?
RD: It’s actually fairly easy. If you want to be a foreign investor, you meet the requirements as a foreign investor, it’s very open.
We have a one-stop-investment shop called Invest Africa, which offers one-stop services.
So Zimbabweans who want to establish businesses in South Africa are welcome. We also have a foreign economic representative based at our embassy here who can assist in Harare.
So, if they need any information about that, we have the Zimbabwean expatriate community in South Africa. I have been to a number of businesses operated by them. I think there are opportunities and it’s not closed by any means.
For example, in Seshego near Polokwane, there is an industrial park and there is a Zimbabwean company that makes fruit juices and things like that.
AM: There are interest groups that are pushing Zimbabwe to join the Rand Monetary Union (RMU), especially now that there are cash shortages. Would you think this would be a prudent decision?
RD: Well, the decision is a sovereign choice of Zimbabwe. I don’t think we want South Africa to lobby for Zimbabwe to join the RMU or anything like that.
I do know that authorities in Zimbabwe are very much aware of what is happening. If your currency is the strongest currency in the world – the US dollar – that does mean you become uncompetitive.
If the rand devalues against the dollar, that means your exports are more expensive in our market and our exports to you are much cheaper – that’s a fact of life.
But it’s not anything that we, particularly as a Government of South Africa, are pushing for. It’s a sovereign decision of the Government of Zimbabwe.
AM: There are some issues that have been raised by South African businessmen in the past, particularly the difficulties in penetrating the local market. Are South African businesses still finding it difficult to invest into Zimbabwe?
RD: I think the issue we are trying to get some clarity on is on indigenisation. The complaints we have are from people who come to invest and they find afterwards that the indigenisation has been done in a way they didn’t expect.
That is the issue we have got.Bribery, well, not so much. Indigenisation – I think we need some clarity on that. What are the rules that apply? We have our own Black (Economic) Empowerment (BEE). You come to South Africa, you want a license or you want access to a Government incentive, we expect you to achieve some level of Black Economic Empowerment.
Some investors may not like it but many actually do realise that it is important. So, we have it as well, but the rules must be consistent. We have a unit in our department that helps people, for example, to find a way of complying.
I think that is the sort of thing that we expect to find here – consistency, certainty. I know there are different arrangements for different sectors and also in Special Economic Zones, but we need to get the information consistently applied, you know, and with sufficient certainty that we can encourage investors to come to look for opportunities here.
