Zim firms to get export insurance
THE Reserve Bank of Zimbabwe (RBZ) is discussing with banks an insurance package for exports, as it moves to tackle a high political risk premium that has affected international trade.
Zimbabwe’s import bill has been rising while exports have been retreating, fuelling a widening trade deficit estimated at over US$700 million in the first quarter of 2015.
Imports stood at US$1,6 billion at the end of the first quarter, against exports of US$717 million.
And trade experts have been warning against the dangers of maintaining a high import bill.
These include suffocating domestic producers by committing substantial funds to purchase foreign products, many of them available on the local market.
Firms have been sacking workers in the past three weeks, with over 20 000 workers having been fired in a frenzy of dismissals following a Supreme Court judgement that gave employers the same rights as workers in employment contracts.
The judgement said employers could sack workers on notice in the same way workers could quit employment on notice.
The judgement removed the need for retrenchments, which required sanction from government and also entailed giving affected workers packages.
Industry and Commerce Minister, Mike Bimha, said the RBZ had agreed to mobilise funding, estimated at not less than US$7,5 million, for the country to join the African Trade Insurance agency (ATI), which was set up by the Common Market for Eastern and South Africa (COMESA) to cover exports.
Launched in 2001, ATI has supported over US$13 billion worth of trade and investment across Africa, and government says joining the agency would open doors to more markets for local products.
“Before the end of the year we will be a member of the African Trade Insurance,” said Bimha during a Confederation of Zimbabwe Industries congress held in Gweru recently.
Bimha said Zimbabwe had been attending ATI meetings as an observer because it had failed to pay membership fees.
“But I am happy that when the governor (of RBZ John Mangudya) was appointed, we brought the issue to him and from September, we are going to be a member. (Mangudya) said local banks will contribute half the money and the other half will come from the African Development Bank. We have not been paying. COMESA, in its wisdom, set up the African Trade Insurance and other countries have been benefiting. In the past three to four years we have been going to meetings as an observer. What is painful is that the idea of the African Trade Insurance was started in Harare and at one time they wanted to set up its headquarters in Harare. But because of the problems that were there at the time, it was set up in Nairobi. You can also get loans from the African Trade Insurance,” Bimha said.
ATI provides political and trade credit risk insurance products with the objective of reducing the business risk and cost of doing business in Africa.
It says top of its mandate is driving up investments into member countries and “two-way trade flows between Africa and the world”.
“We facilitate exports, foreign direct investment into and trade flows within the continent,” the agency says on its website.
“ATI was created to fill a market gap in trade and investment risk mitigation in Africa. In the late 90s, risk mitigation tools for credit and political insurance were not available for many African countries, and where the cover existed, it was very costly. In addition, the relatively small volumes of trade and investments into these countries did not justify the establishment of national export credit agencies. The only viable solution was to form a multilateral agency that would provide more cost-effective use of underwriting capital, reduced over-head costs and the ability to encourage private sector insurers to assume risk in Africa.”