The Sunday Mail
Allan Majuru
Trade Focus
Zimbabwe’s unique position in Southern Africa offers easy access to markets in the region, a vantage point that other countries do not enjoy.
To demonstrate the easy access, Zimbabwe is a gateway through which South Africa has been using to supply countries in the north — Zambia, the Democratic Republic of Congo, Malawi and Mozambique.
Given the potential in regional markets, it is important for local companies to be better equipped so that they know where to place their products and market requirements, as well as create strong relations with buyers.
To ensure this materialises, ZimTrade, the national trade development and promotion organisation, conducted a market survey of Mozambique in March this year to explore products and services with market potential as well as establish contact with potential buyers.
The survey focused on finding opportunities in the fast-moving consumer goods (FMCGs), agricultural inputs and implements, construction as well as the engineering sector.
With regards to location, the market survey was confined to Maputo. Findings, which will also be presented in brief here, were presented to local companies during a virtual seminar held last week. The seminar, which is normally held physically, was moved to virtual platforms to ensure safety of participants considering the risks associated with Covid-19.
Understanding
Mozambique as a market
Mozambique, a market well-known for quality of fresh seafood, is the world’s 36th largest country, endowed with rich, extensive natural resources and its economy is mainly based on agriculture.
The government of Mozambique is prioritising agriculture as one of the key areas for economic development. The industrial processes in Mozambique are concentrated in food and beverages, chemical manufacturing, and petroleum production.
The recent discovery of gas fields is set to transform Mozambique’s economy and the people’s standard of living by providing direct employment to approximately 60 000 citizens.
This will also enhance its resilience and competitiveness. The gas exploration activities will create mainstream and downstream export opportunities for Zimbabwean companies, for example, demand for food and beverages will grow. The increase in investment in the energy sector is also expected to create opportunities in construction, including engineering services. With regards to trade, Mozambique is open to foreign trade, which contributes significantly to the country’s Gross Domestic Product (GDP).
Mozambique’s largest trading partners, South Africa and Portugal, have established projects in the country and are increasing their supplies. Leveraging on the political relationship between Zimbabwe and Mozambique, the country is one of the markets with potential for Zimbabwean products and services.
Already, Mozambique is ranked among Zimbabwe’s top export markets after South Africa and United Arab Emirates.
In 2019, according to Trade Map, Zimbabwe’s exports to Mozambique amounted to US$354,3 million against imports of US$90 million. The exports consisted of US$94 million worth of processed foods, building and construction for US$48,5 million, and agricultural inputs and implements worth US$23,6 million. Zimbabwe exports of value-added goods to Mozambique were dominated by sugar and sugar confectionery, tea and coffee, paper and packaging as well as timber.
Zimbabwe’s imports from Mozambique were mainly composed of petroleum oils and electrical energy.
The current performing products to Mozambique, coupled with trade relations between the two countries, provides a strong base for local companies to increase exports.
Both Zimbabwe and Mozambique are signatories to the Southern Africa Development Community (SADC) Trade Protocol, which stimulates and encourages trade by giving one another preferential treatment in the reduction or elimination of custom duties.
Duty and import related taxes could constitute a large percentage of the final price, giving local manufacturers a substantial advantage in terms of cost over competitors from countries that do not have similar agreements.
Zimbabwe has potential to increase its exports to Mozambique by exporting products like pharmaceuticals, machinery parts and equipment, poultry and agricultural inputs. More potential lies in the services sector and these include engineering and teaching.
Processed foods
Mozambique is heavily dependent on imports for most of its processed foods, home electricals, toiletries, detergents, beverages, frozen foods and other FMCG categories.
Mozambique’s FMCG sector is dominated by international brands from South Africa, Portugal, Brazil and United Arab Emirates.
Currently, most imports are from South Africa. But Zimbabwean products can penetrate, especially in the middle and northern provinces where prices are between 20-30 percent more expensive compared to southern provinces.
The highest population concentration is in the northern provinces which gives even greater opportunities for consumer products. The success of South African brands and proliferation of its retailers in Mozambique lies in real estate investments where South African investors are constructing shopping malls in Maputo. This is something that Zimbabwean retailers can consider so that they have solid grounding in Mozambique. The trend is that South African retailers source from South Africa first.
Construction
There is a resurgence in the construction sector, motivated by the reconstruction work in the areas that were damaged by cyclones Idai and Kennedy. More than US$1,5 billion has been committed to this project to date and government is working on securing an additional US$2 billion required.
Mozambique is set to export gas and oil in 2022 and the related infrastructure development is set to trigger a property boom in the northern provinces. Several projects will be conducted in Mozambique and will provide both direct and indirect business opportunities with the most significant opportunities for Zimbabwean companies being in construction, and agricultural inputs and implements sectors.
This presents opportunities for Zimbabwean firms to participate in joint tenders for building and construction as activities, mainly in Manica and Sofala provinces are anticipated to kick off in the near future.
Potential also exists in the provision of materials for construction activities that will take place in the provinces which have been affected by the cyclones as well as services in the engineering sector. Mozambique procures most of its material from South Africa mainly because of proximity, but Zimbabwean companies have also the potential to supply products like wooden door and window frames, roofing tiles, PVC pipes, gum poles and timber among others. Although some of the main distributors that include Build It and Builders Warehouse have their buying units based in South Africa, there are also indigenous hardware suppliers who can be a channel for Zimbabwean suppliers to penetrate the market.
Inputs and implements
Farming is mainly communal, and subsistence and the majority do not use fertilisers and chemicals. As the country’s economy is based on agriculture, there are opportunities to value-add on technologies as some farmers are using traditional farming methods, low-yield seed varieties and manual cultivation techniques. Another opportunity in the sector is provision of agricultural skills and expertise as well as quality seeds. With proper marketing, local producers can seize the market as there is a lack of extension services, knowledge and skills.
Distribution of inputs is fragmented as the retail structures are not well established compared to other sectors. All these challenges offer opportunities for Zimbabwean products. Zimbabwean companies have the potential to supply products like seeds, chemicals, treated poles for fencing, tractor drawn implements, hand tools, chemicals and fertilisers. The seed market in the country is growing with most of the seed coming from South Africa, there are also some Zimbabwean seed houses that have set-up in Mozambique, especially in the western districts. There is potential for Zimbabwean companies to embark on seed production and supply the market with other seed varieties. Since the greater part of farmers in Mozambique are based in the rural areas, hand tools (hoes, ploughs, cultivators) as well as ox-drawn implements have great potential.
Market consideration and access
Overall, Zimbabwean companies are encouraged to have local representation in Mozambique. This could be working through distributors or to open distribution offices or warehouses in key markets. Product adaptation is also key especially on packaging and labelling which require Portuguese translation.
There is need to ensure that all products are labelled in Portuguese as this can determine the success or failure in the market, even when negotiating for deals. Focus should also be on the middle and northern provinces where Zimbabwean products can effectively compete with South African sourced products, especially on pricing. For Zimbabwean companies to make a breakthrough into the Mozambican market, a medium to long term strategy coupled with local partnerships is recommended and this includes the establishment of warehouses which are a core part of the infrastructure necessary to facilitate the functioning of the products supply chain.
It is also important for Zimbabwean companies to be innovative and work on product quality and quantity improvement as well as market penetration strategies, which can result in tapping the Mozambique market at the same time exploiting the new opportunities that the country offers.
As globalisation and international trade grows, so does competition for markets and overseas companies are posing a threat to the existence of most Zimbabwean companies as they struggle to withstand the competition and secure market share.
Local companies need to develop new business models and work together in consortiums, both SMEs and large companies to gain access to the Mozambican market that is reflecting great potential.
Allan Majuru is the chief executive of ZimTrade.
