A Client Survey conducted by the International Trade Center (concluded that lack of access to market information is the number one problem for developing and least developed countries. Zimbabwe is not spared, as some agricultural produce rots in the fields, because of lack of adequate local demand.
There are also manufacturers who are producing quality products competitively but face the same challenge of being unable to access the foreign market, due to lack of information.
Export questions
Most businesspeople who want to export ask these questions: Which industries or products are promising for export development? What are attractive markets for export diversification? Who are my competitors? What are my country’s strength and weaknesses? If answers to these questions are not readily available, as is the curremt case, then we are not yet serious about trade development.
Without sufficient information, we cannot advance export diversification by venturing into new markets and products. Export diversification has the advantage of making our economy less vulnerable to volatility in terms of export revenues and adverse shocks on demand or terms of trade. Diversification also creates learning opportunities that lead to new forms of comparative advantage and allow us to make the most of preferential access granted by developed countries.
Mineral wealth
Our major export diversification advantage lies in the fact that we have abundant natural resources and a strong human capital base. Our mineral wealth could turn the fortunes of our economy around, thereby improving our standard of living. Zimbabwe is estimated to have 13 million tonnes of gold and 16,5 million tonnes of diamonds, underground. Gold’s future years of extraction, at the current extraction rate, is 650,000 years. We also have the largest known reserves of coal-bed methane in Sub-Saharan Africa. This is not to mention the 30 billion tonnes of iron ore and 26 billion tonnes of coal. It would take us 5,000 years to extract our nickel, 1,329 years for chromite and 1,167 years for platinum. These resources allow us to venture into new products for export.
Intelligence system
There is a need for an intelligence system which analyses trade flows and market access conditions, as well as identifying export opportunities for products and markets. Because of lack of information, some companies are exporting to countries with whom we have preferential trade arrangements, but we don’t have the required certificates of origin. Exporting to Zambia and South Africa, for instance, must happen under preferential terms, since these countries are members of COMESA and SADC, respectively. However, without carrying a certificate of origin, the goods will be levied duty at Most Favoured Nation rate; thereby compromising the competitiveness of the respective product.
Export procedures should not only be simplified but should also be made known to all stakeholders. Exporting to India because it offers a price that is five percent higher than South Africa may not make sense because of proximity. South Africa may not be the best market even if it’s buying bananas for $1 each, but charging an ad valorem tax of 100 percent; when Zambia is buying at $0.80 but at zero duty rate. These are some of the basic dynamics to be addressed by the exporter.
You might have the best price, but if you face a tariff disadvantage, your product will ultimately be more expensive. Since you cannot know all the export dynamics, institutions such as ZimTrade, Confederation of Zimbabwe Industries, RBZ and Ministry of Industry and Commerce should come in to help exporters with information.
Identifying an attractive market for export development is not child’s play. There are many factors to consider, such as the size of market, dynamism of the market, openness of market, tariff advantage in the market, proximity to market, non-tariff measures that which exist, logistics, just to mention a few.
As we seek to checkmate the trade deficit, which stood at $1,9 billion between January and April, let us make sure that exporters have adequate information to help them access attractive markets.
Post published in: Opinions & Analysis