(Last Updated on January 14, 2016 by Editor)
ZIMBABWE – One of the local daily newspapers recently ran a little story which, accordingly, must have passed unnoticed, yet it has meaning more than the column inches allocated to it.
It was to the effect that Zimbabweans last year spent $7 million on chocolate imports. We don’t have figures offhand of how much is spent annually importing synthetic hair and other such products which massage our vanity.
Now figures released by the Zimbabwe Statistics Agency reveal that the country’s trade deficit for the 11 months to November last year hit $3 billion, up from $2,97 billion in the previous comparative period.
A trade deficit is the difference between total official exports as a country and total official imports. In this instance, Zimbabwe exported goods valued at $2,5 billion against imports of $5,5 billion.
This year exports are projected to rise to $3,7 billion against a forecast decline in imports to $6,2 billion from a projected $6,3 billion last year. We are still in deficit.
Zimbabwe’s exports last year were dominated by tobacco, gold, nickel and diamonds. Imports comprised largely fuel, medicines, maize and vehicles. But a visit to a termini for buses coming from South Africa, Zambia and Tanzania will show that people bring in beds, shoes, tinned foods, soft drinks, washing powder, cooking oil and many other products which are manufactured locally. They include chocolate, artificial hair and hair care products.
A trade deficit is a function of a number of factors and when it is too high it shows a bad imbalance between import and exports. A healthier situation is to export more than you import to create reserves for a rainy day.
Two factors working against Zimbabwe in the equation are a strong currency, the United States dollar which dominates the basket of currencies in use since dollarisation in February 2009. That means while prices of local products have remained relatively stable and therefore predictable, the country is unable to compete in regional markets.
South Africa remains the country’s biggest trading partner in Sadc. The collapse of its rand currency in the past few weeks, notching a record R17,9 against the US dollar this week, spells bad news for Zimbabwe. That means it is cheaper for retailers and individuals to import goods for resale than to purchase them locally.
The second factor, related to the above, is that locally-produced goods are too expensive for both local consumers and the export market. Labour has been cited as the biggest cost factor in an economy which has been too slow to buy into latest technologies and lean production methodologies. That in part explains why there are almost no primary consumer goods in Zimbabwe’s basket of exports.
A third factor is that there is little value addition and beneficiation to the tobacco, gold and diamonds Zimbabwe exports, meaning the returns are low as a proportion of the exported quantities. Add to this falling commodity prices on the international markets and the country’s trade deficit is compounded.
Having said that, what we can’t run away from is our appetite for foreign products, cheap ones for that, from clothes to soft drinks and shoes, all of which are manufactured locally.
It is true that local prices are relatively high compared to the region. But that is the price we have to pay for the convenience of using a strong currency. What is called for is sacrifice to allow local industry to import modern machinery to reduce the cost of labour. But we make the cost of borrowing by the productive sector too high when much of the money is taken out to buy finished goods when there are local substitutes.
As a nation we need to tame our appetite for foreign goods. This is in the national interest. It is our economy we are destroying by resorting to needless imports in the name of choice. No amount of foreign direct investment can substitute for prudent use of our foreign reserves.
Does it make sense that the country is in dire need of foreign currency to import maize because somebody used the money to import chocolate, second hand clothes or to import a musician to come and sing for one evening and take away $40 000 as payment?