The Union was launched in June 2009 with a three year transition period aimed at allowing the 19 member states to align their national tariff structures to COMESA’s common external tariff structure.
A Customs Union is a step ahead of the Free Trade Area, where members agree to have common external tariffs when trading with the rest of the world. The common external tariff of COMESA stipulates that a rate of zero percent will be applied to capital goods and raw materials, 10 percent to semi-finished goods and 25 percent to finished goods.
In 2011, 17.5 percent of Zimbabwe’s tariff lines were already complying with the common external tariff, whilst 18.6 percent were below. But the biggest concern is that 63.9 percent of our tariffs were above the common external tariff. Lowering these would mean a huge revenue loss for us.
Apart from the issue of revenue loss, the Union is likely to result in deindustrialisation. The common external tariff of 25 percent means that many countries will start to increase their exports to Zimbabwe.
These cheap imports will heavily competing with our local products, both in terms of price and quality. Our local industries are currently operating with antiquated machinery and the costs of doing business, such as labour, are enormous. This has already resulted in local products being expensive at home and not competitive on international markets.
We cannot afford to be a supermarket for other nations. Many jobs are created because of the manufacturing sector, and once we let the sector go bust, we will end up with an unsustainable unemployment rate. Unemployment is already very high, at 80 percent. The situation we are witnessing in the industries right now is already indicative that if we cannot sustain our manufacturing sector at Free Trade Area level, then it would be worse at Customs Union level, when the common external tariff for finished goods will be relatively lower.
Joining the COMESA Customs Union would also cripple some tools in the Industrialisation Development Policy, that are meant to boost our manufacturing sector.
But as much as joining presents many threats to the economy, there are also opportunities that can arise. Zimbabwean manufacturers will benefit from zero percent import duty on both capital goods and raw materials. This is also in line with the dictates of the strategies of the IDP, which is advancing for zero percent import duty on raw materials.
This means manufacturers will be able to afford to replace their antiquated machinery with modern and efficient machines. If companies start to import their raw materials at zero percent, their competitiveness will also be significantly enhanced as this will lower production costs.
Post published in: Agriculture