Zimbabwe is not yet ready to participate in the Africa Continental Free Trade Area (AfCFTA) owing to industry’s low-capacity utilisation triggered by years of deindustrialisation, the Confederation of Zimbabwe Industries (CZI) has said.
The implementation of AfCFTA, which has a potential to boost intra-African trade by more than 50% through elimination of import duties and 100% through elimination of non-tariff barriers, begun on January 1,2021. The continental market has about 1.3bn people. In terms of the numbers of participating countries, which is 54 member States, AfCFTA is set to be the world’s largest free trade area.
But, in its latest report, the CZI said Zimbabwe’s situation was dire as industries were constrained to take ‘full advantage’ of AfCFTA.
“As things stand now, the country is not ready for AfCFTA given years of deindustrialisation, decline in local value chains and limited retooling. The local industry is constrained to take full advantage of the AfCFTA.
“Thus, the industry needs to come up with long term export strategies that take the AfCFTA into consideration such as growing export markets and retooling or upgrading production processes to become efficient and be able to competitively compete with the rest of the continent,” CZI said.
CZI said the current capacity utilisation of 47% in industry was significantly low, meaning that firms were not operating at optimal levels to enjoy economies of scale that reduce per unit cost of production to render exports price competitive.
The high cost of doing business environment emanating from over regulation, heavy taxation, complex import and export procedures, utility and infrastructure deficiencies further constrain AfCFTA readiness for local companies.
CZI also said Zimbabwe needed to develop local value chains to ensure that most of the raw materials needed for industry were sourced locally.
Currently, most companies rely heavily on imported raw materials, which requires foreign currency.
Zimbabwe is experiencing an acute shortage of foreign currency, with the foreign currency auction system failing to meet demand.
This has forced some companies to source foreign currency from the parallel market to import critical raw materials.
Industrialists said there was need to create mutually reinforcing value chain linkages between agricultural and non-agricultural sectors of the economy.
CZI also said agriculture production must be strengthened while policies aimed at incentivising mineral beneficiation are critical.
Therefore, this calls for robust implementation of strategies and policies by both the government and the industry to ensure that the country is ready to take advantage of the AfCFTA.
The government is encouraged to tax for growth not for revenue collection to allow business to compete on the international market.
CZI urged the government to negotiate for more time in AfCFTA for liberalisation to allow for domestic industry to retool and upgrade production processes.
Industry said there is need to deliberate economic policies to crowd in private sector funding in agriculture, beneficiation at source in mining, lower cost of production in manufacturing and competitiveness in service sectors to improve funding and export quality.
Zimbabwe needs to upgrade rail and road Infrastructure funding to facilitate cheaper access to market, CZI said.
A stable supply of key enablers such as electricity, water and fuel would also guarantee uninterrupted production.