Challenges affecting export sector in Zim

Source: Challenges affecting export sector in Zim | Sunday Mail (Business)

Dr Gift Mugano
The problems of export are sector-wide. The major problems currently impeding the expansion of the export sector relate to weak competitiveness in which several factors play a part. The basis of trade is production.
Currently, the difficult macroeconomic environment obtaining in Zimbabwe has resulted in a situation of widespread “production aversion”, where producers and entrepreneurs tend to shy away from investment in production capacities because of perceived uncertainties; costs are high leading to uncertainties about the price of the final products as to whether they can compete with similar products in the international and domestic markets. Insufficient production results in insufficient exports.

Furthermore, Zimbabwe’s export trade performance is constrained by a variety of factors including poor competitiveness of local goods in international markets due to the strengthening of the United States Dollar against regional currencies; high transactional costs for imports and exports, low foreign direct investments; high cost of compliance due to over regulation and excessive penalties, high manufacturing base namely high costs of utilities; limited access to trade financing and export incentives; non- vibrant domestic economy; inadequate institutional and strategic support directed at trade development; inability by firms to meet standards in export markets; vulnerability to shocks associated with dependence on global markets particularly on South African economy; illegal sanctions and withdrawal of preferences in key markets; lack of access to information on available markets; high country risk and demand for cash upfront payment by suppliers for raw materials; and old equipment and poor firm capitalisation levels as well as policy inconsistencies.

Other specific challenges relates to the difficulty in trading across the borders and logistical challenges.

Ease of trading across borders

Zimbabwe ranks 148 out of 190 economies on the ease of trading across borders indicator of the World Bank ease of doing business ranking.

A major reform which affected the country’s ranking as cited in the report was that Zimbabwe made trading across borders more difficult by introducing a mandatory pre-shipment inspection for imported products.

Logistics performance

The logistics performance of a country is measured using Logistics Performance Index (LPI), which is published by the World Bank every two years depicts the LPI of countries on the basis of indicators on a score of 1 to 5 (5=Highest, best performing). These indicators are:-

Efficiency of clearing process

Quality of trade and transport infrastructure

Ease of arranging competitively priced shipment

Competence and quality of logistics services

Ability to track trade consignments

Domestic logistics costs

Timeliness of shipment with expected delivery time

In the 2016 LPI, Zimbabwe ranked 151 out of 160 economies.

Table 1 shows the country’s performance on the indicators, with comparator countries. Overall, Zimbabwe is the least performer on logistics performance index compared to all its comparator countries on its performance on the logistics performance index, as shown in Table 1.

These challenges still exists regardless of the fact that Government undertook doing business reforms from September 2016. In as much as there a number of reasons why doing business reforms are moving at a snail pace, one of the key factors is the absence of an institutional set up to deal with the doing business reforms.

Dr Mugano is an author and expert in Trade and International Finance. He has successfully supervised four Doctorate candidates in the field of Trade and International finance, published over twenty – five articles and book chapters in peer reviewed journals. He is a Research Associate at Nelson Mandela University, Registrar at Zimbabwe Ezekiel Guti University and Director at Africa Economic Development Strategies. Feedback: Cell: +263 772 541 209. Email: gmugano@gmail.com.

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