Southern Africa: Will Zim Fully Enjoy FTA Benefits?
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Financial Gazette (Harare)
22 August 2008
Posted to the web 28 August 2008
Hama Saburi
Harare
ZIMBABWE, whose economy has been reduced to a basket case owing to years of mismanagement, is among the 12 southern African states that committed themselves to setting up a free trade area (FTA) at the weekend, but concern mounted this week that the country may not get a fair deal from integrating its sickly economy with the rest of the region.
Analysts said while the Southern African Dev-elopment Community (SADC) FTA launched in South Africa on Sunday was a noble initiative for countries seeking to expand their share of the market, the nine-year-long recession has severely weakened Zimbabwe's economy to an extent where local industries might buckle in the face of the resultant cutthroat competition.
Zimbabwe is among the 12 southern African states comprising the FTA whose roots can be traced back to 1996 when the SADC Trade Protocol was signed.
Analysts expect the SADC FTA to bolster regional exchange of goods and economic integration for a market of about 247 million people and a vast economy worth more than US$430 billion.
The FTA will also do away with the rigid customs rules and facilitate the smooth movement of goods across the borders.
The SADC FTA bloc also includes Angola, Botswana, Zambia, Malawi, Lesotho, Madagascar, Mauritius, Mozambique, Namibia, Seychelles, Swaziland, Tanzania, the Democratic Republic of Congo (DRC) and South Africa - the continent's economic powerhouse.
Angola, Seychelles and the DRC have yet to sign the agreement.
A FTA is created when a group of countries eliminate tariffs and non-tariff barriers on substantially all trade among them.
It had been envisaged that producers and consumers would pay no import tariffs on an estimated 85 percent of all trade on goods in the initial 12 countries by the end of this month.
It remains to be seen whether the 12 countries will meet the August 31 deadline.
Economic analysts said Zimbabwe remained the weak link in efforts to boost regional trade due to a festering socio-economic crisis threatening to destabilise the entire southern region.
The manufacturing industry, which together with the agricultural industry form the backbone of the Zimbabwean economy, shrunk by about 28 percent last year, according to results of a survey conducted by the Confederation of Zimbabwe Industries.
Nine years of a rapid recession have reduced a once robust Zimbabwean economy into a basket case ravaged by the highest inflation in the world conservatively put at 11,2 million percent.
The eight-digit inflation figures and the associated cost increases emerge against the backdrop of a massive reduction in disposable incomes, combining to destroy the real sector with thriving informal traders taking its place.
Recent figures released by the central bank also give some insights into the impact of the crisis on exports.
In the six months to June this year total export shipments of goods declined by 14 percent from US$882,7 million in the comparative period last year to US$758,97 million.
Industry has had to contend with serious shortages of foreign currency and electricity not to mention the Soviet Union-style price controls that have forced manufacturers to scale down on production or close their factories altogether.
This has created a boon for imports. Foreign products have flooded the domestic market, raising fears that the country could be turned into a dumping ground for cheap imports.
An economist with a local commercial bank warned this week that the country might hasten its economic collapse by joining the FTA headlong.
"I think the timing for Zimbabwe's participation in the FTA is wrong given the quantum of problems facing the country. We might have a situation where other countries benefit at our expense. We may be used as a dumping ground," said the economist.
He said Zimbabwean companies no longer enjoy the critical mass to produce at competitive prices, adding that the small to medium size enterprises were also in danger of losing ground to companies from vibrant economies in the FTA.
"The only way out for us (Zimbabwe) is to put our house in order, politically and economically, so that we can compete at the same level with other SADC states," added the bank economist.
South African President Thabo Mbeki, who is the new SADC chairperson, said the FTA was a collective milestone in the region's ongoing integration programme.
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Said Mbeki: "Today we can say with pride that our collective efforts have borne fruits, and that we have successfully met the objective we set ourselves.
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