Zim exports pick up as world markets open

28 Jun, 2020 - 00:06 0 Views
Zim exports pick up  as world markets open

The Sunday Mail

Trade Focus
Allan Majuru

WHEN Zimbabwe and many other countries from around the world were forced into lockdown to curb the spread of the coronavirus, there were concerns from business on how this would affect the economy.

This came from the understanding that lockdowns resulted in reduced consumption of non-essential commodities.

Six months into the year, the question remains: To what extent has the deadly coronavirus disrupted business, particularly exports, which are the anchor of Zimbabwe’s economy?

According to figures released by ZimStat, between January and May this year, exports declined by 24,89 percent from around US$397,7 million to US$298,7 million.

This decline is within the World Trade Organisation projections that “world trade is expected to fall by between 13 to 32 percent in 2020 as the Covid-19 pandemic disrupts normal economic activity and life around the world”.

During the same time imports also decreased by 5,85 percent from US$383,5 million in January to US$361,1 million in May.

It is encouraging though that exports have started picking up, even when the world markets have not fully opened. This is indicative of the potential for the country to grow exports once world markets fully open.

Between April and May this year, exports took a huge jump from around US$200 million to US$299 million mostly due to an increase in exports of minerals and tobacco.

This increase will be easily sustained by value addition as well as increased production of goods that are currently in demand around the world.

For example, with changes in consumption behaviour and people paying attention to what they eat, there has been an increase in consumption of goods considered to be super-foods because of perceived health benefits.

These include avocados, macadamia nuts, beans, peas and blue berries.

Zimbabwe already enjoys competitive advantage in these goods and with increased production, the country can maximise.

Zimbabwe has a wide range of opportunities in processed foods particularly in areas such as fruit juices, fruit and vegetable canning, among others.

This will increase export earnings as products will fetch more on the international market.

Like many African countries, Zimbabwe is exporting low-value raw and semi-finished products only to import them back as expensive finished goods.

The Provincial Export Clusters, currently being developed by provincial leaderships working with ZimTrade, could also be used to springboard new farmers to the export market.

For example, Manicaland Province is earmarked as a horticultural centre and Rusitu Valley in Chimanimani is targeted to be a pineapple hub.

Already, ZimTrade, the nation’s trade development and promotion organisation, is working with 22 small-scale farmers to capacitate them so that they can easily access the European market.

Once they have an Ecocert organic certificate, it will be easy to increase small-scale pineapple producers in the area to more than 500, a number that can meet growing demand for Zimbabwe-produced pineapples.

With new exporters added because of establishing export clusters, the country could be cushioned from shocks in the global economy.

Taking a further look at recent data by ZimStats, one can consider that the knock on exports experienced in the past few months was not heavy when comparing the same period last year.

This is because the country’s export performance has generally been low between the months of March and April.

For example, exports fell from US$365,5 million in February to around US$272 million in March.

During the same period last year, exports fell from US$349,5 million in February to US$295,9 million in March.

The country recorded total exports of US$200 million and US$277 million in the months of April in 2020 and 2019 respectively.

Thus, the decline in exports during the months is not unusual, although the decline this year was steep.

This is because the period between February and April is when most countries, including Zimbabwe, had instituted strict measures and curfews to contain the spread of Covid-19.

These measures saw a huge disruption within the supply chain as demand fell.

For example, the hotel industry across the word was almost halted as people were restricted from moving across cities and countries.

These restrictions saw a reduction in demand for Zimbabwe’s horticultural produce, which had started to pick up as the country was just starting to realise good harvests from the rainy season.

Other produce considered non-essential at the onset of the lockdown such as flowers, also became difficult to transport, leaving farmers with a product they could not export.

Exports of flowers, however, have started to recover as some markets have opened with local players starting to export their produce to European markets.

Zimbabwe exports a wide variety of horticultural produce, however, there has been a decline of 9 percent in the share of the horticultural sector.

Over the years, the industry experienced increased exports in four main categories which are fresh produce (mostly vegetables), citrus and sub-tropical fruits, deciduous fruits and flowers.

In the past few months, the low demand for fresh produce in hotels, which are the largest consumers of local produce, contributed to the decline in exports.

In addition, food demand especially in most African countries is generally linked to income and in the case of the Covid-19 outbreak, income-earning opportunities have greatly impacted on food consumption.

Following the outbreak of Covid-19, most countries around the world started to implement a number of policy measures aimed at avoiding the further spread of the disease, some of which have greatly affected the movement of raw materials which are crucial for export production.

Local manufacturing companies have now begun following the current good manufacturing practices to help ensure the consistent quality and safety of food products by focusing attention on five key elements which are people, premises, processes, products and procedures.

It must be noted that although Covid-19 impacted on product demand, the country could still have had a soft landing in the drop in exports between January and May if most export products were value added.

This is because value added export products earn more, create employment and improve livelihoods of Zimbabwe’s citizens.

During the period under review, Zimbabwe’s exports were dominated by primary commodities such as
semi-manufactured gold (26 percent), nickel mattes (20 percent) unmanufactured tobacco (16 percent), nickel ores and concentrates (11 percent), ferrochromium (5 percent), diamond (3 percent) and platinum (2 percent).

On the other hand, imports were mainly composed of petroleum oils (21 percent), maize (11 percent), electrical energy (3 percent), soyabean oil (2 percent) and pharmaceuticals (2 percent).

Going forward, there should be investments in production, manufacturing and processing sectors while import substitutions are used to improve the country’s earnings.

For example, if the agriculture sector is adequately financed and farmers within arable lands fully utilise their capacities, the import bill could be reduced by almost 15 percent in one season that we do not import maize and soya bean oil.

The reduction could even be bigger if we consider other agric-based raw materials that are being imported and going into the manufacturing sector.

With the outbreak of coronavirus, there is a need for the adoption and execution of actions that will promote and grow local production of good quality affordable raw materials to enable production of good quality affordable consumables as well as encourage production of high-quality competitive export products.

Further, shocks within the economy can also be reduced if the export destination is diversified.

For example, Zimbabwe’s major export destinations for the period were South Africa (43 percent), United Arab Emirates (26 percent), and Mozambique (9 percent).

Thus, if demand in South Africa is to fall drastically, that will have a ripple effect on local production.

This also applies to import sources, which were dominated by South Africa (45 percent), Singapore (19 percent) and China (8 percent).

 

Allan Majuru is the chief executive of ZimTrade.

 

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