Kudzanai Sharara Taking Stock
The country’s import bill for the month of March is at its highest in more than two years, putting pressure on the country’s foreign payment obligations. With the overall, foreign payments backlog having reached $600 million by September 2017, the country’s ability to get good supplier credit terms is certainly to remain under the spotlight.
Some importers are already feeling the hit after suppliers reduced credit terms or revoked them completely as local companies fail to pay on time. For some companies the backlog runs into millions of dollars and suppliers have since closed the taps.
But the import bill keeps growing, reaching $605,7 million in March, a two year high, having increased by 5,37 percent from $574,8 million.
More local companies are obviously going to be hurt the further the import bill grows. Falling export proceeds have also worsened the situation. Between February and March, export proceeds had taken a 20 percent tumble to $288,5 million, a seven-month low. This means there will be pain and some local importers, for example Nampak Zimbabwe, are already feeling it, with parent company Nampak South Africa reluctant to extend more raw materials on credit as the payment backlog reached $45 million at some point.
How did we get here?
Fuel consumption is an obvious one, with imports of unleaded fuel having grown by 33 percent to $47,4 million. But then again its hard to explain why petrol consumption continues to increase in this country. Are we importing more cars?
The car import numbers don’t show it though except, imports of motor vehicles for the transport of goods of payload. Are more people taking to driving to work? Will petrol consumption remain that high if we had an efficient public transport system that would reduce the need for everybody to drive around?
Then there is diesel, whose imports jumped from $66 million to $84,45 million, a 27,95 percent jump. For this, there might be an explanation. For years, fuel dealers have been accused of mixing diesel with paraffin but now that government has put up excise duty on paraffin, the practice is no longer viable, the uptake of diesel has since increased. One can also not rule out international fuel price increases with crude oil having gone up above 70 cents.
Is it time to worry?
With exports also falling, the country’s trade deficit has risen by 61,74 percent to $317,23 million compared to $196,13 million recorded during the same month last year. This should be a worrying trend considering efforts and measures that have been put in place to try and grow exports coupled with other efforts and measures to curb imports.
Amid rising imports and industry collapse, Government introduced Statutory Instrument 64 of 2016 to try and cushion industry from stiff competition from cheap imports. This saw the country’s trade deficit declining to $2,3 billion in 2017 from $3,3 billion at some point, but the trend in the past twelve months has been worrying as imports keep rising while exports are starting to come down.
More worryingly is that some of the increases in imports were in products that we should be able to produce as a country. For example, maize seed imports went up to more than $2,5 million from $383,875 and for a country that prides itself in having good soils and boasts a seed house that has representation across the continent, these are things that we should not be importing.
There has also been significant growth in the importation of rice. According to the Zimbabwe National Statistics Agency, the country splashed $13,1 million on rice imports in February 2018 alone and an almost similar figure in March. While this might speak to the increase in change in diet towards rice it is also worrisome as we should be able to grow rice in this country.
Thankfully, Government with the support of listed entity Seed Co and other seed houses is busy researching on the best rice which we can grow locally and which can produce better results. Lands, Agriculture, Rural Resettlement minister, Perrence Shiri recently said the government, together with Seed Co, were carrying out final feasibility studies of rice growing and were touring various rice-growing countries to acquaint themselves with technology and viable methods of growing the cereal. The country imports over 250 000 tonnes per annum.
The Reserve Bank of Zimbabwe (RBZ) has also been on an offensive, in an effort to cut the deficit by promoting exports through export incentives of more than 17 percent for some exporters, but this has not reflected in export proceeds which have been coming off.
Between February and March, export proceeds had taken a 20 percent tumble to $288,5 million, a seven-month low. This brings to question whether the export incentives are working. There is need to have a re-look at our policies both for import curbing and export promotion.
A starting point on the import side is to look at whether we are prioritising importation of capital goods and raw materials to make sure that local companies continue to produce, even for the export market.
On the export side which should have a clear policy on how we can grow and promote exports. Just giving monetary incentives is clearly not working.