Can Zimbabwe take advantage of Africa’s new free trade zone?

Multimedia

Wednesday, 3rd March 2021
6:37:20pm

Many African countries - including Zimbabwe - have pinned their hopes for economic renewal on the African Continental Free Trade Area (AfCFTA) agreement that came into force on 1 January 2021.

The AfCFTA – initially set to commence on 1 July 2020 but delayed due to the coronavirus – seeks to boost intra-Africa trade.

As of December 2020, 54 countries had signed the agreement while 34 countries have deposited their instruments of ratification, according to Wamkele Mene, the AfCFTA secretary general.

If implemented fully, the trade pact could boost regional income by 7% or $450bn, speed up wage growth for women, and lift 30m people out of extreme poverty by 2035, according to the World Bank.

Landlocked and expensive

Zimbabwe has signed and ratified the AfCFTA.

A report from the World bank shows that Zimbabwe and Côte d’Ivoire – where trade costs are among the continent’s highest – would see the biggest gains of the AfCFTA, with each increasing income by 14%.

But economists argue Zimbabwe needs to put its house in order first for it to benefit.

Zimbabwe used to have a robust manufacturing sector, which would have put it first in the queue of countries that could benefit from the AfCFTA.

Decades of mismanagement, however, have created an economy of importers rather than producers.

The Southern African country relies on imports of nearly everything from furniture, chemicals, clothing to even toothpicks from its neighbouring country South Africa and its ‘all-weather friend’, China.

Lack of productivity and competitiveness

Prosper Chitambara, an economist in Harare, tells The Africa Report that Zimbabwe will not immediately benefit from the trade pact.

“We have low capacity in all key sectors of the economy and in particular the agricultural and the manufacturing sectors. [Our] competitiveness and productivity gap is huge and this renders us incapable of competing with the rest of the African nations,” he says.

He adds that the country needs to strengthen the industrial sector and address challenges in the agricultural sector.

“We need to increase investment in critical productivity enhancement sectors like in infrastructure and in particular irrigation, as well as transport and energy infrastructure. These are the key enablers to unlock value within agriculture, industry and the rest of the economy,” Chitambara explains.

Breadbasket no more

The Southern African country, which was once the breadbasket of Africa, will import an estimated 1.1m tonnes of grain in the 2020/2021 marketing year, according to the UN Food and Agriculture Organisation.

Nearly 8 million people, about half of Zimbabwe’s population, are food insecure, according to the UN’s World Food Programme.

Economist Victor Bhoroma says Zimbabwe’s exports are mostly raw materials and that local industries are not competitive regionally.

Manufacturing’s discontents

“Zimbabwe’s low manufacturing capacity utilisation means that local industries cannot compete with regional peers such as those from Zambia, South Africa, Angola and Namibia that have enjoyed longer periods of economic and currency stability, and policy consistency,” he explains.

Bhoroma says the major setbacks for Zimbabwe to benefit from the trade pact include low industrial capacity utilisation, high cost of doing business and complex taxation procedures, policy inconsistency –especially on monetary reforms – inefficient foreign exchange policies and porous borders that make it hard to prevent smuggling.

-The African Report