The Sunday Mail
Trade Focus
Allan Majuru
THE processed food sector plays a critical role in the overall growth of the Zimbabwean economy.
This is one sector that has seen steady growth in exports over the past few years, recording a 18 percent growth from US$98 million in 2019 to US$115 million in 2020, according to ZimStat.
The growth of the sector indicates its inherent export potential, considering that locally produced processed foods are renowned for high quality across the world.
Zimbabwe’s agriculture sector is also growing and this should make it easy for manufacturers to source raw materials locally, which in turn will improve the competitiveness of the nation’s processed foods sector.
Already, the Government, through the National Development Strategy 1 launched last year by President Mnangagwa, is looking at leveraging on the country’s competitive advantages, particularly with regards to the configuration of natural resource endowments, good climatic conditions and skilled human capital.
The starting focus will be on enhancing food processing subsectors that the country has comparative advantages in.
These include sugar, coffee tea, fruit concentrates and fish or aquatic products.
As production is enhanced, local businesses have huge potential to competitively supply processed foods to regional markets such as Zambia, Botswana, Democratic Republic of Congo and Malawi, riding on bilateral and multilateral trade agreements.
With the kicking in of the African Continental Free Trade Area (AfCFTA), the size of the market that local enterprises can access at low tariffs has ballooned.
Further to this, the general price stability on the world market creates market opportunities for exports, thus contributing to enterprise development and employment creation.
The growth in the sector’s exports also has a positive spin-off on the agriculture sector, which is the backbone of the processed food sector.
World trade performance
The global trade in processed foods products has been increasing significantly during the past years, owing to several reasons such as the growth of the general population and middle-class societies in most markets.
The adoption of bilateral and multilateral trade agreements – which target reducing import tariffs and creating favourable trade conditions – as well as urbanisation and trade policy reforms that allow the countries with comparative advantage in food production to expand their exports to those countries in food deficits are also some key factors contributing to the growth.
From 2015-2019, the global import bill of processed foods grew from around US$663,7 billion to around US$754,3 billion, representing a 13,7 percent growth, according to Trade Map.
The top imported products in 2019, most of which Zimbabwean companies can supply, were food preparations (US$48 billion); bread, pastry, cakes, biscuits and other bakers’ wares (US$38 billion); wine of fresh grapes (US$37 billion); alcohol, spirits, liqueurs (US$34 billion); and cheese and curd (US$33 billion).
Other top imported products included preparations used in animal feeding (US$32 billion); cane sugar (US$22 billion); and milk and cream (US$21 billion).
Available data from Trade Map shows that the major importers in 2019 were United States of America (US$85, 6 billion), Germany (US$47 billion), China (US$40, 4 billion), United Kingdom (US$38, 4 billion), France (US$33, 5 billion), and Netherlands (US$32 billion).
Zimbabwe already enjoys favourable trade and or political relations with most of the top importers and this can be used as the basis for increasing exports of processed foods to the market.
For example, the United Kingdom (UK) and Netherlands are top importers of Zimbabwe’s horticultural produce and the relations with current buyers could be used to springboard more processed foods into the market.
The current trade arrangement between UK and Eastern and Southern Africa (UK-ESA) EPA is opening up the UK market, which has a significant population of Zimbabwe’s Diaspora.
There is room for Zimbabwean businesses to utilise the Diaspora living in the UK who can become product champions within their resident communities.
Local companies can use Netherlands as a gateway to the rest of the European Union, as the former is one of the largest re-exporters in the trading bloc.
Exporters can also leverage on the interim Economic Partnership Agreement (EPA), which allows for Zimbabwean qualifying products to enter European markets duty-free and quota-free if they meet the required standards and certification.
Germany, China and France are markets that remain accessible to Zimbabwean exporters and could provide lucrative options for local manufacturers of processed foods.
Apart from these international markets, Zimbabwean manufacturers have a shot at African economies and can ride on either proximity or bilateral and multilateral trade agreements.
Some of the top imported processed foods in Africa that offer opportunities to Zimbabwean manufacturers include cane sugar, milk and cream, soya bean oil, food preparations, preparations used in animal feed, tea and prepared or preserved fish.
According to Trade Map, Africa’s major importers of processed foods in 2019 were Algeria (US$4 billion); Egypt (US$3,9 billion); South Africa (US$3,5 billion); Morocco (2,8 billion); Nigeria (US$2,5 billion); Libya (US$1,5 billion); Angola (US$1,49 billion); Kenya (US$1, 4 billion); and Sudan (1, 1 billion).
South Africa is already Zimbabwe’s largest trading partner, and this could make it easy to land more existing and new products into the market.
Processed food products with potential in South Africa include cereals, animal or vegetable fats and oils and their cleavage products, prepared edible fats, and meat products.
South Africa also has a demand for Zimbabwe’s known quality products such as cordials and tea.
For Angola, there is demand for processed foods such as dairy products, tinned foods, processed meats, fruit juices and cordials.
Apart from South Africa and Angola who are some of the leading importers in Africa, local companies can also consider other markets in the region and can leverage on trade agreements.
Competitiveness
To tap into the export opportunities, Zimbabwean manufacturers need to address their competitiveness.
In this rapidly changing environment, there is need to upgrade technological and human skills to boast their performance and competitiveness.
Manufactures also need to capacitate their employees to meet the demands of the rapidly changing trading environment.
Investment in key areas such as research and development will also make it easy for producers to continuously improve their products in line with consumer tastes.
Further to this, the ability for local companies to compete in regional and international markets also depends on how they take advantage of existing trade agreements and trade policies.
Zimbabwe has signed several multilateral and bilateral trade agreements with different countries that should benefit the exporting companies through creating an enabling environment to do business.
These include Southern African Development Community (Sadc), Common Market for Eastern and Southern Africa (Comesa), Generalised Systems of Preferences (GSP) and the Interim Economic Partnership Agreement (iEPA) with the European Union.
Zimbabwe has four operational Preferential Bilateral Trade Agreements with Botswana, Malawi, Mozambique, and Namibia.
Through these Trade Agreements, Zimbabwe has shown commitment to the removal of non-tariff barriers and progressive reduction in tariffs to ensure export competitiveness.
Allan Majuru is ZimTrade’s CEO
