Why Zim struggles with trade deficit

Zimbabwe’s balance of trade in merchandise goods has been negative for some time.

For the first 11 months of 2022, merchandise exports grew by 9 percent while merchandise imports grew by 17 percent resulting in merchandise balance of trade worsening from $1,32 billion to us$1,9 billion.

Zimbabwe’s merchandise exports have been consistently trailing merchandise imports every quarter and every year for some time now.

When the balance of trade in goods and services of a nation is negative, it points to the fact that: Firstly domestic import substitution strategy for growth and development of our manufacturing sector is failing to fill-up the retail space with competitively priced grocery items, clothing, durable household goods.

The rate of capacity utilization in the manufacturing sector remains low at less than 60 percent and price competitiveness of locally manufactured goods against imported substitutes from RSA, Zambia and beyond continues to decline fuelled by comparatively higher cost of labour, capital, fuel, electricity and regulatory cost of compliance.

Domestic inflation is more than 25-times higher than that of Zambia and South Africa and local currency continues to lose value against the USD and all regional currencies thereby making imported grocery items cheaper than buying locally produced wheat flour, maize meal, meat, clothes and shoes.

Local manufacturing sector is dying because most of the consumer goods manufactured locally are more expensive than imported brands sold in the local retail shops and in our thriving pavement supermarkets.

We are seeing more companies importing cheaper consumer products from South Africa and as far afield as Spain and Italy (tomato paste, pasta, cheese, powdered milk) because locally manufactured goods are just too expensive for the price-sensitive domestic consumer.

Very few of our “Proudly Zimbabwean” goods contain more than 50 percent local content. Most of our industries are combining 60 percent to 90 percent imported foreign content with only 10 percent to 40 percent local content to produce “Proudly Zimbabwean” consumer products which is of course misleading to the consumer and to the nation.

The domestic manufacturing industry is dying because of high domestic cost of production eroding the competitiveness of Zim manufactured products at home and in the SADC/COMESA regional marketplace.

The negative balance of trade points to the need for the domestic productive sectors – from primary industries ( mining agriculture) to the value-adding manufacturing sectors – to reboot, restructure, recapitalize and modernize in order to regain price competitiveness of locally produced consumer goods in our home market and in our regional markets.

Secondly, looking at trade in agriculture and agro-processed manufactured goods, we see an even bigger and widening sectoral balance of trade deficit.

Imports of agricultural goods over the first 11 months of 2022 increased by 15 percent from US$1,235 billion in 2021 to US$1,425 billion in 2022 while agric products exports rose by 1 percent from US$1.039 billion to us$1.049 billion over the same period.

Thus, the national deficit in Zim’s international trade in agricultural and agro manufactured goods worsened by 92 percent from negative US$195 million in 2021(Jan to Nov) to negative US$376 million in 2022.

Driving the agricultural trading account deficit are imports of soybean and soya products (cooking oil, soya meal), cereal grains (rice, maize, wheat products), dairy products (powdered milk and cheese from EU) all of which can be grown competitively in land-locked countries like Zimbabwe with abundant land.

Like many African countries, Zimbabwe fell prey to European and American trade promotion missions dumping cheap subsidised agricultural produce into Africa diluting the economic and political incentive of African governments to promote local production of grains, dairy, and strategic oilseed crops like sunflower to reduce dependence on food imports.

Sunflower for example is a crop known to grow very well under the dryland conditions of tropical and subtropical Africa of which Zimbabwe is part. Why was Zimbabwe putting billions into irrigated soya production initiatives and not promoting dryland sunflower production for the past 30 years?

Why was Zimbabwe subsidizing imports of cooking oil and powdered milk through the auction system when we could have promoted domestic production?

The agro-processing industry of CZI and farmers unions are complicity in unwittingly supporting the Western Agenda of promoting imports of subsidised surpluses from the Western Hemisphere and playing down the high rate of return from domestic investments in sunflower oilseed production, cotton production and dairy production for national self-sufficiency in food grains, oilseed and dairy production.

To this end, Zimbabwe’s livestock and meat industry really applaud the leadership of our Hon Minister of Agriculture and the President of the Republic (Mnangagwa) for promoting commercial sunflower production, cotton production and livestock production towards achieving national self-sufficiency not only in staple grains but also in cooking oil (and in vegetable fats, oilseed meal for feed security) and animal proteins under there the auspices of all Govt-supported agricultural support schemes.-ebusinessweekly