Zimtrade cautions on over-reliance on SA

Published: 04 April 2014

Zimtrade on Friday warned that over reliance on South Africa as the main trading partner puts the economy at risk and called for local companies to diversiy export markets.

A study of 50 firms that Zimtrade commissioned dubbed "The Local Export Manufacturing Capacity Survey" revealed that South Africa was the country's largest trading partner in terms of both imports and exports.

"This is a serious economic risk in that, should anything happen to the South African market, Zimbabwe is left in a precarious position," Zimtrade cautioned.

"There is therefore need to diversify our export markets to mitigate this trade risk." Zambia, Mozambique and Botswana are also some of the countries local companies are exporting to on a lower scale. The study also revealed that most local products were facing stiff competition from South African and Chinese goods.

"The survey indicated that 69.9 percent of the firms have higher costs of production in comparison with their competitors thereby rendering them uncompetitive in foreign markets," Zimtrade said. It noted that local companies were disadvantaged as most foreign firms received incentives and support from their governments to reduce the cost of exporting.

The study also confirmed the low levels of capacity utilisation in local industry as productivity levels were less than 50 percent due to difficulties in accessing finance, high cost of capital and a shrinking market due to stiff competition from imports.

Expensive raw materials and labour, it was established, were among the top major cost drivers for the firms.

To support local firms improve productivity and export levels, Zimtrade recommended a review of taxes for exporting companies, introduction of a fund to support struggling firms, reform of the domestic business regulatory framework and rationalisation of tariffs.

The trade promotion body urged the government to reduce both technical and non-tariff barriers such as corruption which increased the cost of doing business.

Zimtrade called for re-orientation of trade facilitation organisations such the Zimbabwe Revenue Authority to ensure they played a complimentary and facilitative role in trade development and promotion.

- New Ziana