Zimbabwe started to Look East about 15 years ago, when her relations with western countries turned sour. International isolation and a bad credit record left her desperate for a shoulder to lean on. The Look East Policy sought to expand bilateral and trade relations and offer priority to investors fromMalaysia, Singapore, China, Korea and India. But it focused increasingly on China.
In 2010, Zimbabwe’s exports to China were valued at $237 million, while imports were $557 million- a trade deficit of $320 million. During 2006-10, exports to China grew in value by an average 31% per annum, and imports by some 32%. Of total exports, 7.4% goes to China; whilst 6.2% of our total imports come from China.
The top exports are unmanufactured tobacco, ferro-chromium, chromium ores and concentrates, cotton (not carded or combed), edible nuts, nickel sulphates and granite – all unprocessed commodities. However our top imports from China are all finished goods -cheap clothing, electrical apparatus, exercise books, bicycles and other cycles, generators and engines.
Is such an arrangement a benefit for both parties? We seem to do well- we get to consume products without producing them, and money for capital investment without having to save. The Chinese get to process those raw materials into products they don’t consume, but sell them for a fortune to the world. China’s capital investments, technology, skills and money to Zimbabwe are not earmarked for processing commodities, but to expedite the extraction of commodities at low cost. So where is the real benefit?
We all know very well that commodity exports cannot lead to sustained economic growth. Firstly, commodities are vulnerable to international prices which we don’t have control over. Secondly, and most importantly, our challenge is to generate productive jobs and livelihoods for many people. Value addition has a higher potential for employment creation. The existence of diminishing returns to scale in agriculture, due to fixed factors such as land, implies that the opportunities for employment in the sector are limited. As the population is growing and urbanization is taking place, there is also need for growth in manufacturing employment to absorb those displaced from agriculture. China is not doing anything to promote value addition in our country.
And the influx of low quality and cheap products from China is destroying our manufacturing sector. The recently launched industrial policy acknowledges that lack of adequate control of incoming goods at border posts is allowing a lot of imports to be brought in without paying duties.
In addition, most of Chinese businesses are not compatible withthe Indigenization and Economic Empowerment Act. They are occupying areas preserved for locals – like retailing. If you throw a stone in Harare, it hits a Chinese shop. Theseare the same guys who have been accused of not banking their money, but sending it back home, contributing to our current liquidity crisis.
The launch of the industrial policy last week is a confirmation of how unsustainable Zimbabwe’s trade with China is. Firstly the policy is proposing to protect the industry to counter the surge in the disruptive imports of cheap and “dumped” goods which can easily be produced locally.
If implemented, this would mean the influx of China’s products will be put to an end. Secondly, Zimbabwe is considering introducing export taxes on primary commodities – all our top exports to China.
Interestingly, the European Union’s trade with Zimbabwe amounted to $860 million in 2011 with a trade surplus of $271 million in favour of Zimbabwe. And the recently ratified interim EPA means that our products can enjoy duty free, quota free market access in Europe.
It is high time for Zimbabwe to wake up from slumber and face the facts – China is walking us down the garden path!Post published in: News