The Sunday News
Roberta Katunga Senior Business Reporter
ECONOMISTS have urged the country to focus on value addition and beneficiation of raw materials in order to bridge its trade deficit and reap the benefits of regional integration.Value addition and beneficiation is one of the critical clusters in the country’s economic blueprint the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset).
Regional integration in theory according to economists is a good concept that leads to the expansion and creation of new markets, increasing competitiveness leading to efficiency as well as coming in of new technologies.
However, practically, regional integration can only work when trading partners have something to exchange and research has shown that industrialised countries tend to benefit more as they source raw materials which are primary products and are cheap whereas we import high value goods which are more expensive.
Buy Zimbabwe economist Mr Kipson Gundani said in the past four years, Zimbabwe lost about US$16 billion in unbalanced trade and this was mainly because the country trades in raw materials.
“When a country is tied at the low end of the value chain, it is not advisable to venture into open trade. The answer to the country’s trade imbalances lies in the promotion of local goods and adding value to products like minerals and agricultural products instead of exporting semi-manufactured or raw materials,” said Mr Gundani.
In the region, South Africa remains the country’s largest trading partner accounting for about 70 percent of trade in Africa. According to the Reserve Bank of Zimbabwe exchange control document for April/ May 2015, South Africa accounted for 55 percent of exports in 2014.
The products that are mainly traded to SA include semi-processed agriculture products like cured tobacco and cotton linen and minerals. Zimbabwe in turn mainly imports capital equipment and consumable goods from SA.
Other trading partners include Malawi, Mozambique and Zambia.
“We get maize from Zambia, groundnuts from Malawi and refrigerators from Swaziland among other products.
Regional integration has not benefited Zimbabwe especially if you look at the current account. On average from 2009, we have been importing goods worth US$7,5 billion a year while our exports are valued at about $3,2 billion.
We have an average current account deficit of $4 billion,” said Mr Gundani.
Vice-President Emmerson Mnangagwa said the agricultural sector presents an opportunity for massive job creation through creating industry and processing products that include tobacco, maize, cotton, cattle and barley.
VP Mnangagwa told the international business conference at the Trade Fair last month that by exporting raw materials, the country was also exporting jobs hence the importance of value addition.
According to ABCH Economics the country is likely to remain less competitive because of its major currency, the US Dollar which is stronger than currencies of major trade partners.
“From 2009 when Zimbabwe dollarised, imports have soared, resulting in a cumulative trade deficit of $22,7 billion. With the strengthening of the USD against currencies of Zimbabwe’s major trade partners such as South Africa, Zimbabwe is likely to remain less competitive since its major currency is the USD,” said ABCH Economics.
