Zim companies need to be innovative: Comesa

HARARE - The Common Market for East and Southern Africa (Comesa) economic bloc of which Zimbabwe is a member, said local companies should be innovative if they are to survive when its regional customs union is launched.

Economic experts had argued against the establishment of the customs union in 2009, fearing that Zimbabwe did not have the capacity to export many products due to working capital constraints for local manufacturers, despite long-term benefits to members in terms of increased trade.

Maclay Kanyangarara, a Comesa official said the customs union would present both opportunities and threats to local companies.

“Government and local firms need to do more to prepare to take part in the union. Expanding into the Comesa region would provide local firms with alternative markets of more than 200 million people,” he said.

“Zimbabwean firms must strategically position themselves because what is now needed is just to boost revenue inflows through adding value to regional exports. The removal of trade barriers will enable local companies to increase their exports within the region and rake in the much needed revenue to recapitalise operations.”

Market analysts however, contend that government needs to juggle the need to protect local businesses from competition with ensuring that the interests of consumers are served.

Some have argued that without a proper recapitalisation plan Zimbabwe could end up being used as a dumping ground as an influx of South African imports are already adversely affecting local manufacturers who are battling with power outages and low capacity utilisation.

“It should be noted that 17,5 percent of Zimbabwe’s tariff lines already comply with Comesa customs union, 18,6 percent are below and 63,9 percent are above and will have to be reduced,” said an economist with a local industrial body.

“Zimbabwe’s readiness to join the union becomes dubious when one looks at the current policy environment and the challenges facing industry such as inadequate capitalisation, liquidity constraints, high operating costs, insistent power outages, competition from cheap imports, antiquated machinery and depressed demand. All these negatively impact on export competitiveness.”

The economist said increased power tariffs in the country have aggravated the problem, the cumulative effect of which has seen capacity underutilisation of around 50 percent, adding that these factors are making it difficult for the manufacturing sector to compete with imported products.

“Research shows that 81 percent of firms are facing competition from imports, and 48 percent of the products manufactured locally are not competitive compared to imported ones. These are not good conditions for opening up our borders. The majority of local firms have indicated that they require at least five years of protection for their products to be competitive,” he said.

Intra-regional trade in the Comesa is expected to increase from an average of $3 billion annually to at least $15 billion by 2015 when the customs union becomes fully operational.

Statistics from the Comesa secretariat early this year demonstrated that Zimbabwe’s trade with Comesa countries has rebounded by at least 30 percent from an average of $80 million in the late 1990s to $300 million this year.

Trade volumes increased by an average of 10 percent yearly in spite of a drop in earnings between 2004 and 2008 due to economic challenges.

Zimbabwe’s main exports to the regional trading group include minerals, agro-processed foods, textiles and financial services. - John Kachembere

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