The Sunday Mail
Trade Focus
Allan Majuru
ZIMBABWE’s overall exports in 2021 were the highest the country has ever recorded in history.
The total exports amounted to US$6, 03 billion in 2021, indicating a 37, 3 percent increase from the US$4, 39 billion recorded in 2020.
The jump in exports, which exceeds the 10 percent growth, as espoused in the National Export Strategy, follows the spirited re-engagement drive undertaken by President Mnangagwa’s Second Republic complemented by export development and promotion events implemented by ZimTrade.
For example, the President was recently in Kenya attending the Zimbabwe-Kenya Joint Permanent Commission where he engaged his counterpart, President Uhuru Kenyatta, on the need to enhance trade between the two countries.
The Heads of State agreed on a raft of measures designed to ease movement of goods between the two countries, including eliminating trade tariffs.
Following President’s engagement in Kenya, ZimTrade — the country’s trade development and promotion organisation – is conducting a market survey to establish Zimbabwe’s products and services with potential to trade in the East African country.
Activities undertaken by the Government and related bodies such as ZimTrade represent the bigger chunk of what needs to be done to grow the nation’s exports.
The other important factor is that of logistics, finding the best options to land products in export markets.
Placing logistics at the centre
The continuous growth in Zimbabwe’s trade and global trade alike is heavily dependent on the effectiveness of support structures such as 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 global export community.
It is no secret that overall logistics performance is positively and significantly correlated with exports and imports therefore this should be a key consideration as businesses venture on their export journey. The main policy implication of improved trade related logistics, combined with a conducive business environment, can positively impact international trade.
For example, the outbreak of the Covid-19 pandemic highlighted the extent of globalisation and the need for enhanced transport and logistics network. The pandemic caused a major disruption to food supply chains in the wake of lockdowns triggered by the global health crisis. The movement of food through the channels of international trade was especially affected by lockdown measures.
As borders closed and demand for certain food items dropped, food producers reliant on selling their crops via distant export markets were highly vulnerable, particularly those producers focused on perishable food and agricultural products like fresh fruits and vegetables or specialty crops.
It is therefore imperative for existing and would-be exporters to understand more about logistics and know the key concepts to be considered when the business seeks to export its products.
Logistics for international trade
Logistics, in simple terms, involve the management of transporting products from a point of origin to the product’s point of consumption or use while at the same time meeting customer requirements.
Logistics is all about transporting the right product, to the right customer, in the right condition which means the right packaging, the right quantity, at the right place, at the right time and at the right cost.
First and foremost, for businesses to understand logistics, its networks and key aspects, it’s important to understand some ‘basic’ terms aligned to transport and logistics when it comes to international trade.
In order to facilitate trade and commerce around the world, an institution called the International Chamber of Commerce (ICC) publishes a set of terms commonly known as ‘incoterms’, which is an abbreviation of international commercial terms.
Incoterms are globally recognised and their purpose is to prevent confusion in foreign trade contracts by clarifying the obligations of buyers and sellers. Parties and businesses involved in international trade often commonly use them as a kind of shorthand in order to help them understand one another and the exact terms involved as part of their business arrangements. Some incoterms apply to any means of transportation, while others apply strictly to transportation across water.
The various incoterms provide a universal and globally recognised set of rules and guidelines which help facilitate trade.
Fundamentally, they provide a common language which traders use to set terms of trade.
Typical business activities that call for the use of incoterms include aspects such as filling out a purchase order, labelling of a shipment for transport, completion of a certificate of origin, or documentation of a free carrier agreement (FCA).
Some common examples of incoterms which businesses in exports will likely come across and need to be cognisant of include Delivered Duty Paid (DDP), Delivered at Place Unloaded (DPU), and Ex Works (EXW).
These terms are especially important for an exporter as they will have a bearing on the quoted price.
Often buyers will ask for prices, in most instances quoting or mentioning some of these incoterms in the inquiry and if a business fails to take into consideration some of the terms in the inquiry, this often results in huge misunderstandings, and losses to businesses.
Logistics and packaging
The close and important relationship between logistics and packaging is often something that a number of businesses do not give much thought to.
However, when it comes to international trade, it’s important to make sure the product gets transported and delivered in the perfect state for its intended use and getting the right packaging helps ensure this.
The selection of packaging has a direct bearing on freight costs. Freight charges are often based on weight. For example, packaging honey in plastic containers is often cheaper than in glass jars.
The selection of the type of packaging also has an impact on transportation based on the fragility of the packaging, for example, packing frozen products in cardboard boxes as compared to plastic, or at least having a plastic lining within the box has an impact on how the product will get delivered to the market, especially considering the possibility of some of the products melting.
Having the right packaging also provides important information to the transporters as well as to the end user.
Some of the information includes for example “fragile” or “this side up” or storage instructions and detailed handling instructions.
Packaging also makes transportation easier. There are many items that would be very difficult to transport without the right packaging.
For example, if a fresh produce exporter is to try and export fresh produce without packaging it, it provides for a lot of headaches and potential loss-areas for the exporter.
The right packaging allows businesses to transport the goods most conveniently.
Taking into consideration the right packaging with logistics in mind also helps businesses to ensure that their products arrive undamaged at their end location, saving both time and money.
Logistics play a significant role and improved trade logistics infrastructure, which includes roads, railways, ports, air and dry ports, warehousing infrastructure and labs and testing facilities are all necessary to achieve a sustainable and balanced economic growth and development for all parts of Zimbabwe.
Businesses should put careful consideration into their packaging just as much as they do in their production processes in order to ensure protection of their product. This will ensure that the product is delivered in its perfect state to the export market.
Some incoterms
DPU: Delivered at Place Unloaded — DPU indicates that the seller (exporter) delivers the goods to a terminal and assumes all the risk and transportation costs until the goods have arrived and been unloaded. After that, the buyer assumes the risk and transportation costs of the goods from the terminal to the final destination.
DDP: Delivered Duty Paid—DDP indicates the seller (exporter) assumes all the risk and transportation costs. The seller must also clear the goods for export at the shipping port and import at the destination. Moreover, the seller must pay export and import duties for goods shipped under DDP.
EXW: Ex Works — Under Incoterm Ex Works (EXW), the seller (exporter) is only required to make the goods available for pickup at the seller’s business location or another specified location. Under EXW, the buyer assumes all the risk and transportation costs.
FOB: Free on Board —Free on-board shipment terms indicate the seller (exporter) delivers the goods on board a designated vessel named by the buyer. The buyer or seller may assume all the risk and transportation costs depending on whether the goods are sold under the FOB shipping point or FOB destination point.
CIF: Cost, Insurance, and Freight— Cost, insurance, and freight (CIF) terms indicate the seller (exporter) must deliver the goods to a designated port and load them on a specified vessel, assuming responsibility for paying all transportation, insurance, and loading costs. After that, the buyer assumes the cost and risk associated with transporting the cargo from the designated port to its warehouse or business.
