Neighbours reconsider their dependence on SA
Economists and business leaders in Zimbabwe believe it would be foolish for the country to waste a good crisis and now is the time to reduce its reliance on South African imports and infrastructure…
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22 July 2021
It was Austrian statesman Klemens von Metternich who said, “When Paris sneezes, Europe catches a cold.” Metternich was referring to the impact France had on Europe, particularly in the aftermath of the French Revolution in 1789 and, just over a decade later, when Napoleon Bonaparte seized power as a dictator.
Metternich, who died when he was 86, also lived through the second French Revolution of 1848, observing the upheavals that these three events brought to Europe. His famous words have since been appropriated to show how circumstances in one dominant country can affect other countries elsewhere.
The saying can aptly be used to describe the situation between South Africa and its neighbours in the sub-region, especially Zimbabwe.
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Writing on Twitter almost immediately after the outbreak of the riots that rocked South Africa this past week, Busisa Moyo, a respected business leader in Zimbabwe, presciently warned: “The disturbances in SA will affect the entire region. We will all feel it in the next few days.”
Moyo, the chief executive of a company that manufactures cooking oil, soap and other products and the chairperson of the government’s Zimbabwe Investment and Development Agency, also advised Zimbabweans to “conserve cash, food and other necessities”, adding that “the region, especially Zimbabwe, is not ready for a life without a functional Durban port and key roads, the N3 and N1”.
According to estimates, the riots caused damage worth $2 billion. While calm is returning to its southern neighbour and the N3 that connects Durban to the commercial capital Johannesburg has been reopened, Zimbabwe is still counting the cost of the riots.
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Butler Tambo, a Zimbabwean independent economic analyst, says what has been happening in South Africa is tragic and blames it on the government’s failure to address the country’s status as “the most unequal in the world”.
“Sadly, it’s the same poor who will suffer even more as jobs will be lost in those factories, wholesalers and shops. The elites will likely cash in on their insurances – that is, if their losses were insurable, if there is such a term. The insurance industry in South Africa might not survive this carnage. Capital flight will rise and the much needed FDI [foreign direct investment] will become elusive.”
Tambo highlighted South Africa’s dominance and importance in the southern Africa region by borrowing from Metternich, saying, “When South Africa sneezes, the whole of the Southern Africa Development Community catches a cold.”
Long winter of discontent
And the “winter” that Zimbabwe is currently experiencing may become longer and harsher than usual. “Countries like Zimbabwe with an industrial capacity utilisation of less than 60% are landlocked and rely on South African ports of entry for vital imports,” Tambo said.
“Prices of basic commodities in Zimbabwe will further skyrocket, that is, if the products will still be there on shop floors. Unemployment will rise in South Africa, meaning that an estimated one million Zimbabweans in that country will become part of the unemployed.
“Diaspora remittances from South Africa will significantly drop, meaning massive and abject poverty for Zimbabwean families reliant on remittances from that country. Add to this tragic tale the lockdowns and restrictions under Covid, and it becomes a ghastly sight. When the opportunities for employment shrink in South Africa, the next chapter is that xenophobia will rear its ugly head again and foreigners will be blamed for the mess lying ahead.”
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The latest statistics from the Confederation of Zimbabwe Industries (CZI) show that Zimbabwe imports 58% of its raw materials from South Africa, while only 7% are imported from other countries in the Southern Africa Development Community. Europe is the source of 13% of Zimbabwe’s imports and China accounts for 11%.
Sekai Kuvarika, the chief executive of the CZI, says Zimbabwe’s industry is definitely going to be affected by the unrest in South Africa as most of its raw materials come from South Africa.
“We may not be able to immediately quantify the impact, but Zimbabwe’s industry is certainly going to be affected in the short to medium term. Our industry’s capacity utilisation improved to nearly 58% over the last year, up from about 36% in 2019. The closure of the major routes used for the transportation of raw materials and other goods – though they may now have reopened – means that production will be affected. This in turn might see a dip in capacity utilisation in the short to medium term,” Kuvarika said.
Unequal trading partners
Years of economic decline owing to reasons that include political misgovernance, cyclical droughts and a lack of foreign direct investment have seen Zimbabwe’s industrial capacity utilisation dropping as companies have been struggling to adopt new technologies or retool.
The consequent lower production levels have resulted in a shortage of goods, with the country having to rely on its southern neighbour for numerous imports, including luxury goods. Zimbabwe is South Africa’s biggest trading partner in the region, but the statistics are skewed heavily in favour of the latter.
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According to the United Nations Comtrade database of international trade statistics, Zimbabwe’s value of exports to South Africa was $1.73 billion during 2020, while South African exports to Zimbabwe were valued at $2.23 billion in the same period.
Zimbabwe imports machinery, including vehicles, boilers, electric and electronic equipment, cereals, iron and steel as well as fertilisers. South Africa buys mostly minerals, including precious stones, tobacco, raw hides, cotton and fruit.
A 2019 World Bank report confirms South Africa as Zimbabwe’s biggest trading partner, followed by Singapore and China in third place. According to the report, imports from the latter two countries also pass through South Africa.
Unintended consequences
Researcher Prosper Chitambara of the Labour and Economic Development Research Institute of Zimbabwe says Zimbabwe should consider increasing the use of other ports of entry in Mozambique, Namibia and Tanzania for its imports.
“It is important in the medium to long term for Zimbabwe to make use of other routes for imports, especially those that do not necessarily originate from South Africa. It is clear that too much reliance on South Africa can have serious negative consequences, as we are seeing in the current scenario,” he said.
Alois Burutsa, the general manager of Buy Zimbabwe, a lobby organisation that seeks to promote the consumption of locally produced goods and services, sees a silver lining for the country to the dark cloud that engulfed South Africa.
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“What we are saying as Buy Zimbabwe is that we need to greatly reduce our dependency or reliance on foreign products, foreign raw materials and foreign finished products, and consume locally produced goods and services.
“We are also in full support of the government’s local content policy, as it is now more critical for us as a nation to localise our value chains and start getting our raw materials locally so that we become as self-reliant as possible as a nation to avoid such exogenous shocks,” he said.
For a while now, there has been some disquiet – if not outright dislike – in some quarters about South Africa’s “big brother” image, which stems mainly from its economic dominance in the region. The disturbances have no doubt been devastating, but they may yet provide a firm basis for the “rainbow nation” to reflect on and address lingering concerns over inequality in the country itself, and over its regional superiority.
