BY SHAME MAKOSHORI ZIMBABWE’S main industrial lobby, the Confederation of Zimbabwe Industries (CZI) last Friday said the country’s manufacturing sector would struggle to make a mark in regional trade if authorities take long to arrest rampaging inflation.
In 2020, regional economies rolled out the Africa Continental Free Trade Area (AfCFTA), a US$3,4 trillion bloc with access to about 2,5 billion people in 54 markets.
It is the biggest such trading pact by the number of participating countries.
Sanctions-hit Zimbabwe was expected to leverage on the broader bloc by tapping into robustly expanding peers to make up for shrinking domestic markets, where buying power has been eroded by the vexing crisis blamed on economic mismanagement.
Under ACFTA, tariffs would be removed in 90% of goods originating from the region.
But in its 11-page report, CZI warned that Zimbabwe was now completely out of sync with regional fundamentals, and all opportunities had been affected.
It said cost hikes experienced in regional economies over a year were being experienced within a month in Zimbabwe, whose 191% annual inflation rate is more than double that of second-placed Angola.
The CZI said Zimbabwe’s 21% month-on-month inflation rate was way above the annual figure in most regional peers, demonstrating an economic decay that is militating against the country’s efforts to scale up regional trade.
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
“In May 2022, Zimbabwe had the highest annual inflation rate compared to its regional counterparts,” CZI said in its paper titled 2022 Inflation and Currency Developments Update.
“To underscore how damaging the inflation situation in Zimbabwe is, the month-on-month inflation in May 2022 of 21% was higher than our neighbouring countries’ annual inflation. With prices of goods increasing over a month at rates that are well above what our counterparts are experiencing over a period of 12 months implies that Zimbabwe’s industry is at a disadvantage and if things continue in this direction, the industry will struggle. Africa is becoming one big market due to AfCFTA, and there is need to address our macro-economic environment, if Zimbabwe is going to have any chance to compete,” CZI noted.
It debunked authorities’ argument that global inflation and other crises such as the war in Eastern Europe were behind the current rot.
“While inflation is a global challenge at the present moment, it is also obvious that the attribution of external factors to Zimbabwe’s inflation is not correct as neighbouring countries that are equally exposed are not showing a similar trend,” CZI added.
Last month, Industry and Commerce minister Sekai Nzenza said she believed Zimbabwe had built the foundation to compete in AfCFTA.
In a paper released during a tour of Gweru-based companies, Nzenza said recoveries in firms like Bata Shoe Company, cement maker Sino Zimbabwe and yeast maker Lessafre showed domestic firms were building the blocks to tackle stiffer competition from bigger African producers as the continent opens up.
“What was demonstrated by Sino Zim, Lessafre and Bata (three firms with operations in Gweru) is the investment in production of high quality goods and services showing that Zimbabwe is ready to compete in global supply chains including the AfCFTA,” Nzenza said.
“This development, coupled with improved consumerism and increased export generation will anchor government’s bid to raise the standards of living in Zimbabwe,” she added.
There have been concerns that lack of capital in Zimbabwe’s manufacturing sector, which requires up to US$2 billion to scale up production, would be a stumbling block to trade in a bigger market.
And in a recent interview with the Zimbabwe Independent, a United Nations Economic Community for Africa executive said a strong Zimbabwean financial system would be a crucial factor in the quest to shore up trade under AfCFTA.
- Follow us on Twitter @NewsDayZimbabwe