Zim to miss out on Africa trade
ZIMBABWEAN companies could lose out on the opportunity to trade on Africa’s first free trade area to be established soon if they fail to fully embrace international standards.
Named the Continental Free Trade Area (CFTA), the bloc will be Africa’s biggest free trade area, which is seen playing a significant role in the continent’s socio-economic growth and development.
It will boost intra-Africa trade and investment.
But there is a catch to it: Only products meeting international standards will find it easier to move around the bloc.
Questions are already being raised over the quality of products being produced in Zimbabwe, a development which undermines efforts to make the country globally competitive.
Over the past decade, Zimbabwe’s products have significantly lost competitiveness in regional and international markets due to relatively high production costs.
In addition to high utility tariffs and other overheads, local companies are hamstrung by erratic supplies of electricity and water.
Due to the shortage of electricity, the majority of Zimbabwean companies are forced to utilise generators to power their plants and other operations, a situation which ultimately translates into high production costs, resulting in local products becoming more expensive and less competitive.
As a result, the production costs incurred by companies end up more than trebling when compared to costs otherwise incurred when power supplies are reliable.
Apart from that, Zimbabwean companies are battling to sustain high wage bills. The labour costs which are considerably higher than those of its regional peers are among the factors affecting Zimbabwe’s competitiveness.
In addition, there are regulatory and policy inconsistencies by government which are hampering the recovery of industry.
Zimbabwe has not been spared by the scourge of sub-standard imports, mainly from China, that have largely compromised the safety of workers and consumers.
There has also been a worrying increase in products being smuggled into the country and evading paying taxes in a development that negate measures to protect the local industry.
Poor industrial production, productivity and competitiveness have resulted in the country having to, however, rely on these imports with the imports bill reaching an ominous US$563,7 million in July this year.
This has resulted in the crowding-out of Zimbabwean products, constraining the viability of companies, which have now resorted to downsizing, retrenching or at worst total shut down, a development which has dampened efforts to rejuvenate the country’s industrial production.
Industry and Commerce Minister, Mike Bimha, has warned that failure to comply with standards would result in loss of confidence among consumers in local products and would hurt competitiveness.
“The moment you talk about competition, playing in the global arena, issues to do with standards become key and quite critical,” Bimha said.
“Zimbabwe, through the implementation of Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset), thrives to increase productivity and enhance competitiveness both regionally and internationally.
“The utilisation of standards is therefore a critical element in achieving this goal as both national and international standards protects the consumer, enhances organisational productivity and innovation and increase international trade by ensuring that products made in Zimbabwe can be exported to other countries,” Bimha told the captains of industry attending the Standards Association of Zimbabwe (SAZ) CEOs conference in Nyanga last week.
“However, over the years, and especially after the introduction of the multi-currency regime in 2009, Zimbabwe has been subjected to not only heavily subdued and transhipped imported goods but more worryingly, is the substandard nature of goods in terms of both technical and health standards.
“I would like to take this opportunity to encourage all CEOs and managers to embrace and fully capitalise on the use of standards in their organisations as standards offer a set of marketing tools for organisations of all sizes,” he said.
Zimbabwe’s manufacturing sector, which used to account for as much as 25 percent of gross domestic product, is in dire straits due to the myriad of challenges it faces such as poor infrastructure as well as shortages of capital.
It is against this background that significant de-industrialisation has been experienced with most companies operating at below 40 percent of their capacity.
The decline in industry performance comes at a time when the economy — which showed signs of improvement during the four-year coalition government, growing an average of seven percent between 2009 and 2012 — is deteriorating, with this year’s targeted growth already revised downwards from 3,2 percent to 1,5 percent, with indications that the economy is facing imminent collapse due to a combination of economic mismanagement and bad governance.
For industry to develop and increase export capacity, the economic enablers such as power supply, the rail and road networks and other utilities have to be reliable as these remain key to improving competitiveness of Zimbabwe products.
The efficient delivery of these enablers will allow industry to increase production cheaply, increase exports and in turn increase liquidity in the economy.
The banking sector also plays an important role through mobilising surplus funds for re-deployment to the productive sector.
SAZ’s director general, Eve Gadzikwa, said standards enhance companies’ capabilities to compete in the global arena as well as protecting consumers and promoting innovation.
“Zimbabwe must act now to embrace standards in order for us to protect the consumer and to promote innovation,” said Gadzikwa.
“For the future development, in line with government’s economic blue print called the Zim-Asset or in line with Southern African Development Community’s Industrialisation Strategy or in line with the CFTA , all these policy directions are saying: ‘let’s embrace standards and let’s use them to promote innovation and consumer protection’,” she said.
“We are recognising the fact that Zimbabwe is in transition in terms of some of the policies which are coming into effect such as the Consumer Protection Act, which is realising that Zimbabwe was becoming a dumping ground. Let’s use that to protect our consumers.
“There is also the Zimbabwe Quality Standards Regulation Authority which is coming into effect. Let’s make use of that policy to ensure that we protect consumers.”
Zimbabwe’s largest platinum producer, Zimplats’ chief operating officer, Stanley Segula, emphasised the importance of standards but urged companies to do more than compliance.
“Looking at the mining industry, it’s becoming more difficult and more risky because the ore bodies have become deeper to as much as two kilometres,” said Segula.
“The (ore) grade has changed, the cost of mining has gone up. I am sure you are tracking what is happening in the mining industry where the metal prices have slumped. This comes with complexities and it’s no longer enough to remain in compliance.
“When we talk of compliance, we are talking of regulations. The regulations alone can no longer take us anywhere.
“Regulations don’t ever talk of continuous improvement that is adapting to the challenges that are unravelling. For example, mines are getting deeper, more complex, the employees are no longer the traditional employees. They know their rights. We need to do more of corporate citizenship, which means organisations should go beyond regulations even benchmarking with international best practice,” said Segula.
Therefore, it had become critical to craft policies that protect industry.
Apart from government showing political will to institute reforms to improve doing business ranking, Zimbabwe also need to work on policies that attract foreign investment to get funding it so desperately needs.
Zimbabwe is currently ranked 170 out of 180 countries on the World Bank’s ease of doing business rankings.