Zimbabwe gets about 61% of its foreign currency earnings from exports. In the first half of 2018, exports reached $2.1 billion compared to $1.6 billion over the same period last year. The top exports coming out of Zimbabwe are gold, raw tobacco, platinum, black tea, black granite, nickel matte and ferro alloys and these are exported to various destinations namely, South Africa, the United Arab Emirates, China, Botswana and Malawi among others. However, Zimbabwe is ranked a distant 124th out of 221st on the list of the world’s largest exporting economies. This means there is a huge opportunity to do more to increase exports. The country needs foreign currency more than ever now.
According to the Reserve Bank of Zimbabwe Quarterly Review for March 2018, gold and tobacco contributed 29.3% and 14.5% respectively to the total exports. In addition, they noted that South Africa absorbed 53.1% of the country’s total exports. The major exports to South Africa were platinum group metals, gold and nickel. This shows that there is great room for other commodities to be exported. With our neighbour South Africa being our biggest export absorber, there is a guaranteed market and due to our proximity, transport issues are minimal.
Trade development and promotion organisation Zimtrade, has been on a drive to help capacitate businesses to export. Zimtrade have identified a number of markets for avocados, fresh cut roses and petals in Netherlands, honey in the European Union, sweet potatoes in the United Kingdom among others. It is important to note that many of the opportunities are in agriculture products as Zimbabwe is a largely agro based economy. There is, therefore, great opportunity for existing, potential and emerging exporters in agriculture and many other industries in the country.
Increased foreign currency earnings
At a time when Zimbabwe is reeling under tough economic conditions, foreign currency earnings are a huge boost for any business. Exports are guaranteed to bring in this foreign currency. It is a fact that additional foreign sales over the long term increase overall profitability in business. Foreign currency is a critical factor of production in Zimbabwe where the same foreign currency is a local currency due to the multi currency system currently in use. With adequate foreign currency, businesses can invest in increasing production and developing new and better products.
Funded through bond notes, the export incentive was introduced to boost local production and reduce the import bill. Initially it was pegged at 5% but has now been revised to at least 12%. This is another good reason to go into exports. Profitability is rewarded. Even though the exchange rate between the bond note and other major currencies like the US dollar and the Rand is continuously taking a tumble, the incentive is still worthwhile.
Value addition and beneficiation
It should be borne in mind that most minerals and commodities that Zimbabwe is exporting are in a raw state. An opportunity exists for businesses to add value to their exports so that they can be sold at an even higher prices. Although this would require a huge capital investment, the resultant spin offs cannot be under estimated. Platinum mining companies have already started pulling resources together to build infrastructure to value add their product and many other sectors need to follow suit to fully benefit from exports.
Exports help expand markets
When you export, you are literally expanding your market. You no longer rely on the local market alone. In a shrinking economy such as what is currently prevailing in the country, an expanded and diversified market is the answer. Locally, buying power for many people is limited. Currency problems have eroded disposable income for many and the problem is exacerbated by the resultant inflation. Export markets are generally more stable as products are bought directly in foreign currency. By selling to multiple (local and export) markets, businesses can diversify and spread their risk. This is the way to go for local companies.
Despite all the advantages of exporting under the prevailing economic environment, there are challenges which both government and businesses should take cognisance of. Production costs are high and this leads to uncertainty as to whether local products can compete with products from other countries on the export market. Secondly, the local economy is non vibrant and there is inadequate institutional strategic support directed at potential exporters. Furthermore, some businesses are unable to meet the required quality standards and the cost of compliance is too high for new players to come into exporting. These and other challenges need to be overcome if export markets are to be exploited fully and profitably.
Government and the business community need to focus on key strategic initiatives which will make the job easier for exporters. Both government and business need the foreign currency and exports are the only sustainabe way of accessing it.