'Zim can reduce trade deficit with SA'

Published: 21 June 2015

Zimbabwe has the capacity to turn around its $2,2 billion trade deficit with South Africa if the country starts producing more goods, economic analysts say.

This comes after President Robert Mugabe on Wednesday told the media that Zimbabwe "will never" balance its trade with South Africa due to geographical and demographic differences between the two economies.

"South Africa is more developed than Zimbabwe and is far larger than Zimbabwe. The balance of trade could never be in favour of Zimbabwe - we shall always have a deficit because we are smaller," Mugabe said.

Statistics from Zimstat show that in 2014 Zimbabwe imported $2,5 billion worth of goods from South Africa, and exported goods worth about $170 million to Africa's second largest economy.

South Africa remains the biggest trade partner for Zimbabwe on the continent and internationally, trading in agriculture and textiles.

However, prominent economist John Robertson believes that if the Zanu PF-led government had not mismanaged the economy Zimbabwe could be having a trade surplus against South Africa and other trading partners.

"We have been spending millions of dollars annually to import maize since the advent of the land reform exercise in the year 2000, and if we produce enough to feed ourselves and to export then we can reduce our trade deficit," he said.

Robertson noted that the demise of Ziscosteel and other manufacturing industries robbed Zimbabwe the opportunity to produce - for exports - goods that are in high demand on the international market.

A University of Zimbabwe economist who preferred anonymity said government must implement supply side policies, which aim to improve the productivity and competitiveness of the economy, in an effort to make Zimbabwe exports more competitive and attractive.

"The first step in getting Zimbabweans back to work is to balance our trade with other countries," she said.

"Eliminating the trade deficit would lead to the creation of at least a million new jobs directly, and over three million new jobs indirectly," she said.

Zimbabwe's balance of trade has remained in negative territory in the last few years fuelled by economic decline that has hit on productivity while promoting imports.

In 2014, the country recorded a trade deficit of $3,3 billion with the Reserve Bank of Zimbabwe (RBZ) citing in part the retreat in international commodity prices, lack of competitiveness as having hit on the country's trade balance.

According to the Zimstat data, maize, rice, wheat, crude oil and cane topped the list of imports while exports included tobacco, minerals, cotton, wood products and cigarettes.

The RBZ in its January monetary policy statement said lack of export competitiveness combined with other factors such as limited access to affordable lines of credit hit on the economy's ability to boost its performance as runaway imports continued to milk the economy of funds necessary to build foreign currency reserve buffers.

The strengthening of the United States dollar against major currencies has also not helped Zimbabwe's case.

Zimbabwe adopted use of the United States dollar in 2009 after dumping its inflation ravaged local unit.

Government has however blamed locals for importing unnecessarily trivial and non-productive goods that are choking the ability of the local industry to recover.

As part of measures to curtail imports, government, in its 2015 budget, hiked duties on a number of goods and products that dominate imports while reducing duties on raw materials to boost local productivity and export competitiveness.
- dailynews

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