The Sunday Mail
Clemence Machadu
Insight
Howdy folks!
The talk about export-led growth is Zimbabwe’s big idea at the moment.
Politicians are telling us that we need to tackle the country’s trade deficit by growing exports so that we can earn more foreign currency.
That also involves increasing domestic production of goods for the export market; that is, your gold, nickel, chrome and other raw materials.
But how sustainable is such a model?
If we quicken the depletion of raw materials without adding value to them, how far can that take us as a nation?
At some point, those resources will run out without putting the economy on a sustainable growth path.
If those resources are therefore not used sustainably, then future generations will be in trouble.
Folks, one of the fundamental principles of public finance management — according to Section 298(c) of our Constitution — is that “the burdens and benefits of the use of resources must be shared equitably between present and future generations”.
The powers that be should really think of themselves as the “good man (that) leaveth an inheritance to his children’s children.” (Proverbs 13:22).
Zimbabwe has been trying to cut on imports in its bid to move towards a favourable balance of payment position.
But over the years, we have continued to incur perennial trade deficits, which we painfully funded with our arms and limps.
This is why it is now important to get down to brass tacks (engage with basic facts) and rethink fresh perspectives to achieve macroeconomic stability.
You will perhaps end up realising that cutting on imports might not be such a good idea after all.
It might actually be a blessing for Zimbabwe to import excessively. I know this might sound controversial; so let’s put some perspective into the discourse.
Folks, while Zimbabwe might be thought of as landlocked country, it is however strategically located to be a regional trade hub.
This is why others prefer to use the term “land-linked”.
What this means is that Zimbabwe can position itself as a re-exporting hub in the region and become the go-to country for neighbours who might need to import something from those who happen to be near us.
You see, exports of any country are classified as either exports of domestic goods or exports of foreign goods.
And re-exports are exports of foreign goods in the same state as previously imported.
This is basically what Zimbabwe has to do to earn foreign currency from the mark-up.
In crafting the next trade policy for Zimbabwe, policymakers should really include strategies on how to optimally unlock the benefits of our strategic location through re-exporting.
Zimbabwe is already re-exporting, folks, albeit at a very low scale.
For example, in 2016 Zimbabwe’s exports were $2,8 billion but re-exports only constituted $9,7 million of that amount.
Government seems to be trying to leverage on re-exporting, but there is scope to first pick the low-hanging fruits in the short term before going for long-term re-exporting projects.
For instance, in the Transitional Stabilisation Programme presented in October, Finance and Economic Development Minister Professor Mthuli Ncube proposed establishing a world class regional fuel dry port at Mabvuku Loading Gantry and Msasa Depot.
According to Prof Ncube, the facility would be a vital regional fuel port that will serve neighbouring countries.
This is a typical re-exporting initiative, long term as it might sound. Focus should be on first growing re-exports that are already underway.
You see, most successful economies do not really thrive on entirely exporting what they produce; they generate foreign currency through re-exporting.
Dubai is a good example.
Hong Kong and Singapore are also re-exporting hubs, which interestingly are some of the country’s major import source markets.
In fact, Singapore is actually Zimbabwe’s second-largest import market after South Africa.
It must also be noted that Singapore is one of the three largest re-exporting hubs in the world. Most of the goods that Zimbabwe buys from Singapore are actually not made in that country.
Similarly, South Africa also benefits this way.
Zimbabweans go there to buy second-hand vehicles imported from Japan. The cars are not allowed to be used in South Africa or even driven on their roads. But we buy them for use here in Zimbabwe and leave South Africa with the greenback.
This is a typical example of re-exporting.
South Africa is simply taking advantage of its proximity to the sea. Which is why we should also take advantage of our geographical advantage.
Zimbabwe is, however, not using its God-given strategic location to grow re-exports. More foreign currency stands to be earned this way. It can really help us narrow our trade deficit. All we need to do is to establish the country as a world-class trade centre by improving our infrastructure, modernising the custom areas, improving the cost of doing business and promoting competitiveness in various sectors.
This is why the next trade policy should put the country in a position where it can tap into all these opportunities.
Later folks!
