The success of Zimbabwe’s exports is hinged on how many local companies can harness easily accessible opportunities, particularly in regional markets which offer quick wins for local exporters, including small enterprises that normally find it difficult to access international markets.
Coupled with President Mnangagwa’s economic diplomacy being pursued by the Ministry of Foreign Affairs and International Trade, whereby Zimbabwe is prioritising economic interests when engaging other countries, and harnessing existing bilateral and multilateral trade agreements, there are indications that more regional markets will soon become accessible to exporters of all sizes.
This will make it easy for the country to grow its exports.
To prepare for this, ZimTrade — the national trade development and promotion organisation — completed a market survey of the Limpopo Province of South Africa in November 2021.
The survey had a specific focus on Fast-Moving Consumer Goods (FMCG) and the building and construction sectors, to identify products and services with the potential to take up Zimbabwean products.
Limpopo Province, which borders Zimbabwe’s Matabeleland South and Masvingo provinces to the north and northeast, was identified as an untapped entry point into South Africa that could change how local companies access the entire market down south.
Already, the province is part of the Trans-Limpopo Spatial Development Corridor, which was designed to promote trade and economic development between the Limpopo Provinces and Matabeleland North and South provinces of Zimbabwe.
This reflects on the broader trade relations between Zimbabwe and South Africa, which can benefit local firms if they can unlock areas of potential in the neighbouring country.
South Africa is Zimbabwe’s largest trading partner, taking a total of US$1,7 billion worth of local products and services in 2020, according to Trade Map.
Although there is need to address the structure of exports to South Africa which is currently skewed towards primary products, there is no doubt that identification of new opportunities will help grow exports of value-added products.
Opportunities in Limpopo
With a population of around six million people, the province’s economy is structured in such a way that the primary and tertiary sectors are the most important drivers of the economy.
In Limpopo, besides the size of the population and spending power, other key growth drivers of the economy include population density, infrastructure development, downstream industry effectiveness, economic policy and business legislation.
The survey conducted by ZimTrade revealed that there is growing demand of FMCG, and building and construction material across the Limpopo Province.
The Limpopo Province has a thriving FMCG sector, which the survey identified as having a lot of potential.
Although South African processed foods sector is dominated by the country’s manufacturers, Zimbabwean products are making major inroads into the country, riding on the quality and better taste.
Zimbabwean products that are in some shops in Limpopo include canned foods, tea and coffee, macadamia, avocados, sugar, cooking oil, and meat.
There is potential to supply more using this current product range as entry points.
Regarding distribution channels, the FMCG sector is divided into official and informal markets.
The formal market primarily sources from distributors while the informal market primarily sources from wholesalers.
Twelve wholesalers and retail chains have been recognised as eager to carry Zimbabwean goods and push them into the market.
Modern trade, general trade and informal trade are the three distribution alternatives available for Zimbabwean companies targeting to supply processed foods to Limpopo Province.
Modern trade is made up of major retail chains or franchises that operate in various nations and are located in up-market shopping malls that cater to the upper and middle classes.
For companies who are developing a strong entry strategy to Limpopo, brand strength, price competitiveness, supply consistency, product certification, and in-store product support will all be important factors to consider when choosing modern trade.
In most cases, using a listed distributor is most advised.
General trade options involve using channels that are usually family-owned retail stores located in residential areas, convenience locations targeting middle to low-income clients.
These can be found in residential neighbourhoods as well as the central business district with main factors being price competitiveness and turnover rate, with vendors and traders as targets.
When using general trade as an entry point, price competitiveness, product availability, and turnover rate are critical issues.
Building and construction materials
In real terms, the construction industry in South Africa was anticipated to grow by 6,1 percent in 2021, up from a 16,5 percent negative growth in 2020, indicating a growth in demand for materials.
Currently, there is significant rural transformation as individuals make purposeful efforts to build and develop well-established structures in their rural communities.
There are planned investments in the housing, energy, agricultural, transportation, water and sanitation, and digital infrastructure sectors.
The Government of South Africa has a 10-year infrastructure investment plan totalling US$124,7 billion.
Some products with potential include Zimbabwe-produced window frames and door frames that are considered strong in the market.
Timber and timber-related items, such as doors and boards, PVC pipes, paints, electrical products, roofing material, wire and steel products, and others, all have potential.
In addition, there is potential in civil construction services for homes, roads, water, and sewer systems.
Regarding route to market, Limpopo boasts a large number of well-established hardware businesses that sell a variety of building and construction materials and these could be used by Zimbabwean suppliers.
Potential buyers in the hardwares indicated that they preferred suppliers to deliver their products.