Posted on November, 11, 2024 at 10:43 am
ZIMBABWE’S trade statistics through the third quarter of 2024, recently released by ZimStat, reveal significant insights into the country’s import and export landscape, highlighting which sectors are prospering, which are faltering, and where potential improvements could be realised.
With a population of roughly 15 million, Zimbabwe remains primarily rural, with over 60% of its citizens relying on agriculture as their main livelihood.
Agriculture contributed 12% to the nation’s GDP in 2022, following wholesale and retail trade at 18,7% and mining and quarrying at 13,2%.
Although Zimbabwe operates under a multicurrency system where the local Zimbabwe Gold (ZWG) circulates alongside the US dollar, over 80% of transactions are estimated to take place in hard currency.
The economy also benefits from substantial diaspora remittances, which add nearly US$2 billion to annual income.
As of September 2024, Zimbabwe’s export value reached US$5,138 billion, showing a slight decline from US$5,161 billion the previous year.
Imports, however, rose to US$6,835 billion, resulting in a trade deficit of US$1,697 billion — up from last year’s deficit of US$1,499 billion.
Over the past six years, this trade imbalance has continued to grow at an average rate of 17%.
That is true, but in order to do so, we need to understand exactly what it is importing and exporting, and how much is being channelled toward it.
The largest import this year has been petroleum oils, accounting for 17% of the import bill at US$1,176 billion.
Given that diesel and petrol are in high demand for transportation and power generation, the related import of motor vehicles, which stood at US$373 million, further shows Zimbabwe’s reliance on fuel.
According to Zimbabwe Energy Regulatory Authority (Zera), Zimbabweans had up to August used 704 million litres of diesel and 365 million litres of petrol. I opine that if the electricity challenge is resolved we will start to see these numbers going down.
Additionally, the nation’s electricity shortage has driven the import of US$158 million worth of electrical energy.
Another essential import this year has been maize, with the country spending US$416 million on this staple crop — accounting for 6% of the import bill.
Due to an El Niño-induced drought, Zimbabwe was forced to rely heavily on maize imports.
Although this might sound like an excuse, I think if Zimbabwe wants to reduce that deficit, this should never happen whether there is a drought or not
With maize as our staple food, I think we should at least be getting enough to feed ourselves.
To ensure domestic food security, the government must build dams, and invest in irrigation systems.
I will not even play the “once breadbasket card”, but the fact that tobacco continues to do well is a testament to show that Zimbabwe can be food-sufficient.
The prices of maize also need to be market-determined to encourage proper investment in this sector.
Turning to the positives, Zimbabwe pocketed US$1,574 billion from gold in the period under review, a 17% increase.
Gold prices have since gone up, contributing to the rise in earnings. Gold has always been a major foreign currency earner for the country.
The small-scale or artisanal miners have contributed between 60% and 70% of total output every year.
Although exporting gold is good from a foreign currency generation perspective, the fact that 31 cents from every United States dollar in export come from gold poses a concentration risk.
Tobacco, known as “the golden leaf”, generated US$750 million in revenue, while exports of tobacco-containing cigarettes added US$75 million.
Zimbabwe’s tobacco export model is largely dependent on raw product exports, financed through contract farming.
As a result, foreign financiers receive a significant portion of the proceeds.
The country’s reliance on raw exports highlights a missed opportunity for value addition within the tobacco industry.
Other notable exports include nickel mattes, ores, and concentrates, which brought in US$1,118 billion, diamonds at US$192 million, chromium at US$120 million, and platinum at US$76 million.
Global commodity price declines affected revenue from these minerals, and as with gold, reliance on mineral exports exposes Zimbabwe to economic risks from fluctuating global demand.
While mineral exports remain dominant, there are encouraging signs of export diversification.
For example, Zimbabwe exported US$19 million worth of crocodile products, US$11 million in tea, and US$8 million in oranges.
These smaller but unique exports highlight a shift towards diversification, which, if scaled, could mitigate risks tied to primary commodities.
Hozheri is an investment analyst with an interest in sharing opinions on capital markets performance, the economy and international trade, among other areas. He holds a B. Com in Finance and is progressing well with the CFA programme. — 0784 707 653 and Rufaro Hozheri is his username for all social media platforms.
Source: News Day