The Sunday Mail
Clemence Machadu
Howdy folks!
As we begin the New Year, expectations are high, with folks looking up to the new dispensation to turn around the socio-economic status of the country for the betterment of the populace.
Achieving that goal, however, requires Government to deal with deficits which have been cornering the previous dispensation to take extraordinarily devious measures which have affected the country’s liquidity after the gap between physical and liquid cash widened excessively.
This is why Zimbabwe has been advised by the International Monetary Fund to work on fiscal consolidation.
The new administration should be applauded for deploying the necessary political will to address this and is already taking measures to reduce Government expenditure while also attempting to grow revenue.
Our international trade drive should also be supported to foster economic sustainability.
The country’s trade flow recorded an impressive performance last year owing to a number of factors, including export incentives, improved domestic production, import-substitution and the priority list for foreign exchange utilisation which was crafted by the central bank.
Folks, it is good news when exports grow and in our case, they have to be above imports so that the country’s huge trade deficit can be dealt with.
And it happened in November 2017 when exports for the month rose to US$578 million, with imports at US$493 million.
Zimbabwe, for the first time in dozens of months, actually posted a trade surplus of nearly US$90 million in that month.
In terms of overall performance last year, excluding December whose data is yet to be made available, we can see that the country’s trade deficit narrowed significantly to US$1.45 billion, compared to US$2.18 billion in the first 11 months of 2016.
The narrowing down of the country’s trade deficit was mainly thanks to the dynamic growth in exports, with imports only growing minimally.
Between January and November, exports went up 38 percent, with imports modestly going up by 4.4 percent.
As Zimbabwe is running with fiscal consolidation measures aimed at dealing with deficits, those deficits should not be limited to budget deficits alone.
Focus should also be paid on making sure that the country continues to narrow its trade deficit so that it can move towards actually realising surpluses consistently as the year progresses.
This will also help improve the country’s foreign currency situation.
You see, if our exports continue to grow above exports as was the case in November 2017, while imports continue to be suppressed, we will be in a position to meet all our import requirements with the revenue generated from our exports and also remain with a little bit to plough back into the economy.
What is not sustainable about the current situation is that we are not eating what we kill.
We are depending on foreign currency generated somewhere to import things, some of which are ridiculous.
Folks, dealing with the trade deficit requires Government to look at both sides of the trade coin; the exports side and the imports side.
For starters, there is need for more measures aimed at fostering export diversification.
A look at the country’s trade-flow shows that while our exports go to less than 100 countries, our imports come from more than 160 countries.
Again, while Zimbabwe exports about 1 500 of products, it imports more than 4 600 types of products.
What this means is that Zimbabweans have expanded choices and preferences.
This should signal producers to rethink their product lines.
While there is scope for imports to actually come down further, the question is: Can the local industry manage to meet the diversity that local consumers are looking for?
It is really not about imports being cheaper all the time that is driving preference for imports, but about local substitutes not really meeting the particular requirements of folks.
Be that as it may, given the current liquidity situation, it is also about people, especially traders, exercising restraint and playing a role to safeguard the little available foreign by not importing goods whose local substitutes are already there locally.
For instance, how do we justify the importation of mineral water to the tune of US$13,8 million during the 11 months of last year?
What is wrong with our locally made mineral water?
Zimbabwe also spent US$4,6 million on importing meat offals; dried fish (US$2.4 million), cheese (US$2,3 million), fresh grapes (US$3,08 million), apples (US$2,4 million) and peaches (US$204 000).
These are really some of the items that can be produced locally, with appropriate support.
Zimbabwe has abundance of raw materials to actually produce some of the products that are being imported right now.
Do we really need to spend US$1,3 million on dog food importation in 11 months, or US$3,48 million on toilet paper, with US$4,8 million also spent to import facial tissues and US$3,13 million on exercise books?
I can also mention other imported items such as disposable napkins (US$10,2 million) and toothbrushes (US$1,077 million).
Zimbabweans even spent US$245 000 last year to import hand-operated floor sweepers, mops and feather dusters.
Mitsvairo nezvikorobho shuwa?!
We can certainly make zvikorobho nemitsvairo locally and save the much-needed foreign currency to buy other critical things like fuel, electrical energy and machinery.
We cannot afford to import just about everything.
Let us be inspired by countries like Ethiopia and Zambia which actually appreciate local traditional foods and even serve them in their hotels as opposed to importing foreign foods.
Local is naka!
However, in coming up with tariff measures to deal with imports, Government should be careful to do it by the book.
Already, Government has admitted that while it has been implementing a tariff regime that balances the sustainability of industry, balance of payments, regional and multilateral trade obligations, there were instances where it saw itself “partially contravening the Free Trade Area obligations”.
We do not live in isolation and it is important to respect our commitments to regional and international integration.
Remember, we also have exports we want to sell in other countries and regions. The Golden Rule must, therefore, prevail.
On the other hand, local producers should also make sure that they reconfigure their production systems to cater for wider preferences.
Folks, we really should not expect to diversify our exports without first engaging in product diversification.
Right now, as alluded to earlier, Zimbabwe’s exports are concentrated to a few countries in the region, which is not sustainable.
The growth of exports in November 2017, for instance, was mainly thanks to phenomenal growth of exports to South Africa from US$204 million to US$424 million in that month.
In the short term, the strengthening rand might actually see exports across the Limpopo growing, but the concentration of exports to one country is not sustainable.
It will result in shocks if the exchange rate changes or if policies in that country restrict exports from Zimbabwe.
In light of the above, Government should also support the local industry to recapitalise and be able to produce competitively and meet the variety of preferences for both local and foreign consumers at the same time.
While details of the funding commitment from Afreximbank are yet to be provided, it is important to ensure that our manufacturing sector is prioritised in the provision of funds from this facility at concessionary rates so as to intensify the value addition drive.
Later folks!
Clemence Machadu is an economist, researcher and consultant. He writes in his personal capacity.
