Call for value addition as trade deficit widens

Zimbabwe’s trade deficit for the six months to June has widened to US$1. 058 billion prompting calls for value addition in order to increase value of exports and reduce imports.

The deficit widened from US$887 million in the same period last year, representing a 19,3 percent increase in the trade difference.

Exports topped US$3,230 billion in the period under review but were lower than US$3,318 billion received in 2022.

Imports topped US$4,288 billion in the year to June which was higher than the US$4,069 billion import bill at the same time in 2022.

Economist, Professor Tony Hawkins, said the nation needs to invest in equipment to process raw materials into goods for better fortunes.

“We just need to walk the talk on beneficiation and we are good, look at our tobacco, yes we get much export revenues, but we could be making more if we were processing it into cigarettes and everything associated with it. So in short I am not shocked to see the situation that we are in,” the professor said.

Gold, which is one of the top foreign currency earners, generated income of US$652,75 million in the first half of the year.

This is due to lower than usual gold production as deliveries to Fidelity Gold Refiners, came in 13,6 percent lower at 13,4 tonnes from the same time in 2022. This is despite the fact that gold prices have been between 6 percent higher this year than the same period last year.

Platinum export revenue for the six months to June 2023 was at US$95 million as prices are 16,22 percent down in the year to date, but 4 percent higher than the same period last year.

Nickel exports have also seen a decline in export revenue in the year to June, as export revenue topped US$423,8 million.

Nickel mattes have been one of the country’s top export earners in the past three years, but six months into the year it has generated US$526 million.

Imports on the other hand have been on a steady increase with petrol and diesel costing the country US$7,5 million and US$7 million respectively. Wheat and maize import bill also increased by US$36,7 million and US$44,9 million respectively. This is due to an increase in imports for stock feeds and blending wheat which has seen prices soar due to the conflict in Ukraine.

The country was on its knees in the first quarter due to excessive loadshedding which spanned as long as 19 hours a day, and had to import to cover the gap. In the period under review Zimbabwe imported US$107,9 million worth of electricity.

The oil sector is among the sectors that have proved that localisation of funding and embracing value addition plays a key role in the growth of the economy.

Oil Expressors Association chairperson, Busisa Moyo, said the sector is still behind its peers but definitely is catching up on the region.

Moyo noted: “We are currently on the next stage where we are working backwards to localise the value chain suppliers or the ecosystem that supplies that final product. Despite being behind our competitors regionally, we are going in the right direction.

“If we continue to grow by 20 percent every year it means we are saving foreign currency, we are creating jobs in the primary production in the farms but also every job created in the farm has a job created downstream. This means of what we put on the shelves as the final a larger proportion is made from local products definitely capacity utilisation goes up.’’

With the government supporting retooling within selected value chains through the International Monetary Fund Special Drawing Rights (SDR) facility, manufacturers are upbeat that the move will increase capacity utilisation for underperforming sectors.

Tararama Gutu of the Association of Cotton Value Adders of Zimbabwe said; ‘‘We will certainly be shot capacity utilisation if we get funds to retool and address challenges we are facing and be able to supply products to various divisions.’’

“Our capacity utilisation is currently hovering around 20 percent. We appreciate the inclusion of the leather sector earmarked for development. Some of the challenges we are facing include retooling and skills and the support from the government is set to address that and look at 40 percent utilisation in the next two years and 75 percent in 2030,” noted Jacob Nyathi from the National Leather Working Group.

A state of the industry report presented to the cabinet earlier this month shows that the manufacturing industry’s total value of added products increased from 15,7 percent in 2019 to 18,4 percent in 2021.

Confederation of Zimbabwe Industries President, Kumbirai Matsheza, says the development is a positive response to government policy interventions.

“The current gains in the manufacturing sector have a positive bearing on the economy to such an extent that if the current climate is sustained then the country is poised for good times as evidenced by the massive investments that are translating into the current growth,” he said.-ebusinessweekly