Opportunities to grow export of services

Trade Focus
Allan Majuru

THE success of Zimbabwe’s strategy for export growth is dependent on several factors, but two are most dominant.

First, the country needs to diversify its export markets.

Over-reliance on one or a few countries will expose local businesses to shocks that may take place in those marketplaces.

Secondly, the country needs to diversify its export offerings, with special focus on the services sector and value-added products, as the current structure dominated by primary products is not sustainable in the long term.

To address these key issues, President Mnangagwa’s Government has made great strides over the past few years, with new markets opening, requiring diversified value-added products and services.

Already, activities to boost trade in services are paying off.

The country recorded a 119 percent jump in services exports, from US$198 million in 2022 to US$434 million in 2023.

Whilst the growth is commendable, there is room to further improve exports of services through capacity development and market linkages.

The National Export Strategy, launched in 2019 by President Mnangagwa, notes that there is potential for Zimbabwe to generate foreign exchange through the export of services.

The strategy identified the services sector as one area that remains untapped, as it has a huge opportunity to contribute towards export growth, riding on the human capital that the country is endowed with.

To unlock the potential, the strategy identifies the need for effective programmes to enhance the export of services, focusing on sub-sectors such as finance, tourism, transport, business services, education services, medical services, and construction and engineering services.

The interventions to develop the capacities of local exporters of services must ensure that they respond to emerging global issues. They should also be globally competitive.

Services for the changing world

In an increasingly interconnected world, the global economy is undergoing significant transformation.

While the export of goods has been recognised as a vital driver of economic growth, the export of services is emerging as a key source of prosperity for nations around the world.

The export of services plays a critical role in growing a country’s economy, promoting job creation and enhancing innovation.

Unlike physical products, services are intangible and can be delivered across borders effortlessly, allowing nations to reach a wider target.

Harnessing their expertise and competitive advantages, providing services to other countries will allow individual nations to diversify their revenue streams and reduce dependence on traditional industries such as agriculture and mining, as in the case of Zimbabwe.

In terms of exports, trade in services has experienced tremendous growth in recent years.

According to the World Trade Organisation, the value of commercial services exports reached a staggering US$7,7 trillion in 2022, accounting for nearly one-quarter of total global exports.

These statistics highlight the immense potential and significance of the services sector in driving economic growth.

Modes of services exports

To get started, there is need to know the avenues through which services can be exported.

Countries employ various modes to export services by tailoring their strategies to fit specific industries and markets.

However, the most common modes are cross-border supply, where services are delivered remotely through digital platforms; and consumption abroad, where consumers travel to receive services in foreign countries.

Other modes include commercial presence, which involves the establishment of subsidiaries or branches in foreign territories; and the presence of natural persons, enabling the physical movement of individuals to provide services abroad temporarily.

These modes offer flexibility, enabling nations and exporters alike to adapt their export strategies based on their unique circumstances. In the case of Zimbabwe, services such as engineering, finance and architecture can be offered by the movement of natural persons abroad.

The exporter can travel to a target export destination, provide a service and obtain export proceeds, which are recorded via specific forms filled in through banks, the Reserve Bank of Zimbabwe and the Zimbabwe Revenue Authority.

These forms are filled in according to the specific service sector segment. They are key in recording the service export figures.

Finding a unique position

Several countries have been hugely successful in the export of services, positioning themselves as global leaders in this field.

Japan, for instance, is a dominant force due to its technological advancements and highly skilled workforce.

The export of financial services has propelled the United Kingdom to the forefront, while Germany excels in exporting high-value engineering services.

India has emerged as a global outsourcing hub, offering call centre and remote customer services.

The Asian country is capitalising on its abundant pool of talented professionals in the information technology sector.

These examples highlight the potential for countries to carve out niches in specific service sectors and make significant contributions to the global marketplace.

Zimbabwe, too, needs to carve out a niche in the African market, leveraging areas in which the country enjoys competitive advantage.

 Steps to successfully export services

Exporters of services must conduct thorough market research, tailoring their offerings, building strong partnerships, leveraging digital technologies and complying with international trade regulations.

Adopting these strategies and considering various factors will allow exporters to maximise their chances of success in the global marketplace.

Exporters of services need to conduct thorough market research in their identified target markets.

This will give them an understanding of the requirements to enter that market, market trends and information on competition.

Findings from such research will inform the exporter’s strategy.

Services should then be tailored to suit the precise needs, tastes and preferences of the identified market.

This will enable local companies to adapt their services accordingly.

In addition, companies should highly consider building strong relationships with local partners and stakeholders as it is crucial for successful international expansion. Partnering or affiliating with a reputable local service supplier can be an effective way to do business in a foreign market.

Such partnerships can also help establish credibility and trust, which are essential in attracting clients in the targeted markets. One can benefit from the partner’s expertise on local laws and customs; knowledge of market opportunities, players and challenges; required local qualifications and accreditations; and established contacts that could become potential clients.

Allan Majuru is the chief executive officer of ZimTrade.