‘Export diversification key to enhancing economic resilience’
AT a time when global mineral prices are tumbling, inducing a strain on raw material-exporting developing economies, the national trade development and promotion agency has urged the productive sectors to diversify their exports so as to realise more high-value earnings.
Zimbabwe is one of the commodity-reliant economies in Africa with mineral exports accounting for top foreign currency earnings annually.
Around year 1992, Zimbabwe’s export product composition was highly diversified with the top 10 export products such as mineral and mineral related products, tobacco, textiles, agricultural products, clothing, processed foods and beverages, chemicals, and leather and hides competing for the global market attention.
In a recent update, ZimTrade said there was a need to work more towards diversifying exports and weaning the country from reliance on raw commodity exports, which are vulnerable to fluctuating global market forces.
“Countries that are commodity dependent or have a narrow export basket usually face export instability, which arises from inelastic and unstable global demand. As such, export diversification is one means to alleviate these challenges,” said ZimTrade.
“Diversification of exports and the country’s economic dependence is important for Zimbabwe as it builds a resilience of countries to absorb external economic shocks.”
Economic experts define export diversification as the move from “traditional” to “non-traditional” exports and in the Zimbabwean case, this points both to product diversification, which is increasing the basket of commodities the country exports, as well as market diversification in terms of trading partners.
The trade organisation further noted that high dependence on a few export products puts a country at risk, as effects of any changes, be it economic, political, policies amongst others, that may take place in the markets for such commodities will filter through to the exporting country.
Various studies have also shown that countries with more diversified exports generally experienced faster economic growth, hence variations in export diversification levels explain the observed growth differences across Africa.
“Diversification can also enhance growth and the potential for structural change. For example, a shift towards development and promotion of value-added products creates a huge potential for industrial revolution within the economy and a shift from being simply agriculture-based to an industrial economy, which might have agribusinesses as one of the cogs in the machine,” said ZimTrade.
“Export diversification in the direction of more sophisticated products will be beneficial for Zimbabwe’s economic development.
“By diversifying the export portfolios, the country can potentially access a more stable revenue stream than by concentrating on just a few products and markets.”
For the country to meet the export growth targets, ZimTrade says there is a need for rapid export growth, which will in turn require progressive improvements in competitiveness and a diversification of the country’s export base.
Zimbabwe is already seized with implementing the Export Promotion Strategy, which seeks to achieve export earnings of around US$14 billion by 2030.
These are being enhanced by an increased focus on domestic value addition as well as promoting re-industrialisation. —–ebusinessweekly
