The commencement of trading under the Africa-wide free trade area in January 2021 is a significant progress that will improve Zimbabwe’s exports into the rest of the continent.
Undoubtedly, the easing of trade restriction in Africa – which will make it easy for local companies to export – will contribute to the achievement of Vision 2030 and national economic targets.
In fact, one of the broad objectives of the recently launched National Development Strategy (NDS 1) is to “rebalance the economy through increasing the contribution of value-added exports to total exports from 9 percent in 2020 to 20 percent in 2025.”
The message is clear, the revival of Zimbabwe’s economy will require increased exports, especially of value-added goods and services.
So, the projected impact on the African Continental Free Trade Area (AfCFTA) on the national economy cannot be overemphasised.
As the continental trade agreement opens, larger economies also present exports opportunities for local businesses and should not be viewed purely as threat to local industries.
For example, Nigeria has a market for Zimbabwean products such as sugar, fish, malt, black tea and peas.
There is also a market for wood furniture and construction materials such as doors and windows, indicating that if local companies work hard, they can tap into all African countries, regardless of size.
What is now crucial is for Zimbabwean businesses to seize the opportunity to increase the presence of their products in African countries.
To support the expansion of Zimbabwean products across the continent, President Mnangagwa’s Second Republic has been preparing local companies, particularly on areas of enhancing export competitiveness so that local products can perform well in all African countries.
So, the stage has been set and for local companies, the time is ripe to claim African markets.
The AfCFTA is a continent-wide agreement that is targeting transforming Africa’s economy by dismantling trade barriers among countries in the continent, as well as deepening integration through improved infrastructure development, investment flows and enhanced competition.
AfCFTA will progressively eliminate tariffs on intra-African trade, making it easier for African businesses to trade within the continent and cater to and benefit from the growing African market.
Cooperation between customs authorities over product standards and regulations, as well as trade transit and facilitation, will also make it easier for goods to flow between Africa’s borders.
Further to this, the agreement seeks to undo a century-old trade arrangement where African countries trade more with countries outside the continent than amongst themselves.
This old system has seen Africa exporting mostly raw materials and importing finished goods, which in turn has subdued the development of regional and continental value chains.
So, in this regard, the AfCFTA brings together all the 55 AU Member States, covering a market of more than 1.2 billion people, including a growing middle class, and a combined Gross Domestic Product (GDP) of more than US$3.4 trillion.
As trade is made easier, the AfCFTA will create a single market for goods and services in the continent.
As the agreement largely depends on simplified immigration systems, AfCFTA will also target improving movement of business persons, which will also be an enabler for movement of investment across African borders.
The AfCFTA will also strengthen intra-African trade through better harmonization and coordination of trade liberalization and facilitation and instruments across the Regional Economic Communities (RECs).
Local companies are also set to benefit by participating in regional value chains, which will enable them to specialise in those productive processes and activities where they have competitive advantages.
The easing of trade between African countries, which AfCFTA intends to do, will facilitate the establishment of regional value chains in which inputs are sourced from different African countries to add value before exporting externally.
This will also open access to technology and brand names while also accelerating export diversification and growth.
In most economies within the region, the focus is on completing all production process within value chains internally, creating challenges related to outsourcing some components from other countries within the region so that they can become more competitive.
Given these benefits, what perhaps is the major question is what are the low hanging fruits for Zimbabwean companies?
Low hanging fruits for Zimbabwean businesses
The continent-wide free trade area presents immense opportunities for local businesses to diversify their exports as well as opens better access to raw materials from the rest of Africa.
With access to more raw materials, technologies and a larger market, the AfCFTA will allow Zimbabwe to improve its export basket, currently dominated by commodities and low-value-added products, to include higher-value-added products that yield higher returns.
So which products will provide better value?
The 2017 Observatory of Economic Complexity report states that Zimbabwe has global comparative advantage in 86 products, including minerals and horticultural produces.
Identifying where, out of these 86 products and their value chains, one has capacity to value-add could be a starting point in leveraging on the continental trade agreement.
First, Zimbabwe enjoys favourable climatic conditions which is suitable for production of a variety of plants.
Local businesses can fully utilize this advantage to specialize on niche products for exports.
Horticulture remains one the key foreign currency earners for Zimbabwe and is a low hanging fruit that can be used by local businesses to establish and increase market share other countries.
Value addition for horticulture produces would also ensure that local enterprises maximize on revenue, as processed products earn more than raw materials.
Zimbabwe has some of leading value-added products such as cordials and other soft drinks that are in demand across the globe.
These could be used as key products to support growth of export earnings.
Other sectors that can support the key products are clothing and leather.
Zimbabwe has one of the best cotton in the world and used to produce and export fabric across the world in the past.
Support to the cotton value chain which promotes value addition of our cotton is one of the interventions that can be done to prepare Zimbabwe to benefit from this continental trade agreement.
Further to this, Zimbabwe currently has abundant raw hides that can be value-added through processing into various leather products. Currently, there are eight tanneries in Zimbabwe, and these can produce leather products for exporting into the region, whilst setting up pace to supply the rest of the continent.
Thus, using some of the current successful export products as a benchmark for penetrating foreign markets, local businesses should consider maximizing on product efficiencies within the Southern African Development Community (SADC) and Common Market for Eastern and Southern Africa (COMESA) regions.
There is also a need to map logistics requirements in terms of competitively transporting goods to those markets.
Surveys conducted by ZimTrade – the national trade development and promotion organisation – in South Sudan and Angola has shown the need to come up with efficient transport routes to certain markets as the demand for Zimbabwean products is increasing across the continent.