Unpacking Zim’s trade deficit

23 Nov, 2018 - 00:11 0 Views
Unpacking Zim’s trade deficit

eBusiness Weekly

Kudzanai Sharara Taking Stock
The country’s trade deficit continues to grow hitting $1,9 billion for the nine months to October and now above the $1,8 billion that was recorded for the whole of 2017.

In a way, the trade deficit can be linked to the country’s huge budget deficit, which had reached $2,5 billion by end of September 2018. This is because Government’s debt-fuelled spending revs up consumption, which increases imports especially when the country’s production levels are very low or when it depends on imported raw materials.

This out turn reflects the increased appetite for imports, which gobbled $5,2 billion in the nine months to October, against exports of $3,2 billion for the same period.

For a country whose economy is predicated on agriculture and which redistributed land 18 years ago, the nature of some of our imports is rather embarrassing. Something has  to give and serious adjustment will have to be made going forward.

Experts believe it is our approach to agriculture that is fundamentally flawed. Not many treat farming as a business, and to many it’s a past time hence the low yields, losses, leading to unsustainability of the whole endeavour.

But according to agronomist John Bhasera, there are three fundamentals that can enhance what we produce as a country. These three are productivity, profitability, and sustainability. Once farmers improve on productivity, yields will improve and the costs will come down and the enterprise will be profitable and sustainable. Other key aspects that must be in place for farmers to thrive have to do with having knowledge and financial support.

Most farmers are not employing good agronomic practices, which include choosing the right crop varieties, feeding the soils correctly, planting at the right time, weed and paste control and even basic things such as thorough land preparations. There can be no further excuses given as to why we continue to import basic food items that we can produce ourselves. The success of the Command Agriculture programme in as far as increasing output is a clear sign that we are more than capable of producing and surpassing our food requirements. The large scale (A2) farmers need to be put to task with very clear production targets. These farmers demonstrated capacity to farm and finance those farming operations when they were allocated these farms and it is high time the state demands results.

Another import aspect that is long overdue for serious consideration is giving our land a commercial and market value. Land with a market value also has collateral value, so money can be loaned to every farmer who can work well enough to pay back the lender. The ability to use land to borrow will actually work as an incentive for our farmers to unlock their imagination and make farming a rewarding and sustainable business.

Away from agriculture related imports, a huge chunk of our imports are energy related, something which in my view should be easy to reduce. Petrol, diesel and electrical energy where our big ticket imports for the nine months to October. While we could be quick to point out that we do not produce oil so we do not have a choice but to import, I believe we could import even half of our current intake if we are to put proper transport systems in place. There are just too many cars in the road, and one of the reasons is that people are looking for the convenience that driving in one’s own car brings.

But if we had an efficient public transport system, there wouldn’t be need for everyone to be driving to work in particular. Thousands of cars leave the same suburb in the morning increasing the consumption of fuel, and yet if we had an efficient public transport system most cars would remain parked at home. This will even have a positive impact on the lifespan of the vehicles as they would not be driven as often as now.

Killing the goose that lays the egg

The importance of mineral exports cannot be over emphasised as they are the life blood of this economy. The bulk of the country’s exports comprise among others gold, flue-cured tobacco, ferrochrome, nickel, chrome, and diamonds. Deputy Minister of Mines and Mining Development, Mr Polite Kambamura recently noted that these are the geese that lay the golden eggs. Dr (John) Mangudya (RBZ boss), I am saying that the wild goose that is laying golden eggs, should be supported so that it continues laying more golden eggs,” he said.

While gold exports had been on an upward trajectory since the beginning of the year, in the last two months there were on the decline. Mineral producers, gold in particular, highlighted the impact of failure to access foreign currency for critical imports, this resulted in cut down on production or complete closure of mines.

This obviously has a huge impact on the country’s trade deficit. Had the upward trend continued in October, the trade deficit could have been much lower than the closing levels of $144 million.

 

 

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