Zambia Mulls Tit for Tat

Sep 09, 2016

Zambian exporters are piling up pressure on their government to come up with retaliatory measures to block imports from Zimbabwe, in what could be a big blow to Harare, which counts Zambia among its biggest export destinations.

    

Zambia is one of the biggest export destinations for locally manufactured products, with 31,9 percent of Zimbabwean exports destined for Lusaka, according to the Confederation of Zimbabwe Industries' 2015 Manufacturing Sector Survey.

The retaliatory move being proposed in Lusaka comes three months after Zimbabwe imposed a blanket ban on the importation of 42 product lines that are also manufactured by local companies. The ban was effected to protect struggling domestic producers.

Statutory Instruments (SI) 64 of 2016 imposed the controversial bans that have also been condemned by informal traders in Zimbabwe. Last week, the Zambia National Farmers Union (ZNFU) reported on its website that Zambia was toying around with the idea of restricting importation of key products from Zimbabwe in response to the imports ban.

"The Ministry of Commerce Trade and Industry convened a stakeholders meeting on Thursday, 25th August 2016, to consult on possible options for government to counter the banning of Zambian exports into Zimbabwe," said the ZNFU.

"The meeting was as a result of the different measures implemented by the Zimbabwean authorities to ban Zambian exports into their country. Some of the exports from Zambia that are banned in Zimbabwe include soya cake, and other manufactured products."

"Going forward, government of the Republic of Zambia will implement measures to retaliate against the banning of Zambian exports by Zimbabwe," the ZNFU reported. Zambia Association of Manufacturers executive director, Maybin Nsupila, told the Financial Gazette this week that after Zimbabwe's moves, their country might have no option but to retaliate.


"Zimbabwe's actions have led to several manufacturers losing millions of (United States) dollars in lost business opportunities. Our association has been trying to get this issue addressed, but we have leant, however, that the authorities in Zimbabwe have shown no interest or commitment to stopping their actions which are against the spirit of regional integration," Nsupila said.

With Zimbabwe now heavily dependent on maize imports from Zambia, a ban by the Zambians would adversely affect Zimbabwe's food security. "Clearly for us in the association the way out, the last option, if a trading partner is not acting in accordance with provisions of regional trade treaties, the only option is to retaliate," Nsupila added.

Other business stakeholders in Zambia said the prevailing sentiments in the country were that government should retaliate and ban Zimbabwe's exports into the country, a reaction that may result in the isolation of Zimbabwe. SI 64 of 2016 has already sparked the ire of South African manufacturers who supply about 70 percent of the good imported into Zimbabwe.

The South African government has asked Zimbabwe to reduce tariffs on 112 products South Africa ships across the Limpopo River into Zimbabwe. Harare's SI has seen Zimbabwe being accused of violating a number of regional trade agreements, which makes free trade possible in the region. Among the violated trade protocols is the Southern African Development Community Protocol on Trade, which allows free trade within the regional bloc.

Zimbabwe is also signatory to the Common Markets for Eastern and Southern Africa trade protocols, the Cotonou Agreement between the European Union and African Caribbean Pacific countries and the World Trade Organisation. The trade protocols eliminate import duties and all other restrictions in internationally traded goods.

The Financial Gazette can report that in Zambia, exporters have been enraged. If their proposals are implemented by government, there could be a backlash against Zimbabwean products destined for that country. Zimbabwe implemented the trade restrictions, arguing that it was necessary to support the development of its local industries, which have endured close to two decades of economic turbulences.

According to a press statement issued by Zimbabwean Minister of Industry and Commerce Mike Bimha in June, the aim of SI 64 was not to ban the importation of the goods in question, but rather to regulate them. "Further, the main purpose of SI 64 is to promote the revival of our local industries and the support so provided to the relevant local producers is not to be open-ended but time-bound and sector-specific," said the statement. The local industry is supposed to use the protection from imports to "retool and bring in new technology and address production inefficiencies".

Economist John Robertson said the country relied heavily on imports that it had banned and could not afford a unilateral ban on imports.

"The real problem is that we still need most of the imports being banned because the country has reduced our ability to make most of the products now being banned, and the ones we can make are usually of insufficient quantity and at too high a price, so we still need to import some of them. Prohibiting those imports will cause scarcities, reduced sales and reduced company profits and government will therefore lose revenue from VAT and company profits taxes and many Zimbabweans will lose their jobs, so pay as you earn tax revenue will go down too," Robertson said.

Under the SI, government banned the importation of products such as cosmetics, milk products, canned beans, vegetables and fruits, potato crisps, cereals, bottled water, among others.

"Zimbabwe is causing its own isolation from the rest of the region through these measures and through others as well. The country is now even a hindrance to traffic in transit through Zimbabwe to other countries. Dozens of police road blocks and dozens of permits and licences have caused a lot of the traffic to sideline Zimbabwe by taking routes through Botswana at Kazungula. A bridge is under construction there and it will be finished by early 2017. Then traffic between South Africa, Zambia, the Congo and Malawi will bypass Zimbabwe.

"Zimbabwe deserves the aggressive treatment it is receiving from the region right now. To deserve better treatment, we have to deserve it by sticking to agreements, attracting investors and repairing years of economic damage," Robertson added.

 

Credit: Financial Gazette Zimbabwe

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