eBusiness Weekly
Kudzanai Sharara
Zimbabwe recorded its narrowest trade deficit in nine years as shortage of foreign currency as well as import controls reduced the country’s import bill to U$4,8 billion in 2019 from US$6,9 billion in 2018.
Exports declined last year for the first time since 2015, dropping 2,2 percent, according to figures released this week by Zimstats. But imports fell more sharply, decreasing 30,4 percent. That combination shrank the overall trade deficit by 80 percent, to $548,2 million.
The Zimbabwe economy has run trade deficits for years and months but the last 3 months of 2019 saw net exports being recorded helping in narrowing the overall trade outturn to its lowest deficit in nine years.
The trade outturn comes at a time the country has been struggling to contain its import bill that has averaged US$6 billion since 2010 against average export earnings of US$3,5 billion for the same period.
While exports have been growing from a low of US$2,7 billion in 2015 to US$4,4 billion in 2018 and a slight decline to US$4,3 billion in 2019, the import bill has remained elevated above export earnings resulting in the country reporting trade deficits since 2010.
The deficit, however, narrowed significantly in 2019 as the country struggled to pay for critical imports. Foreign suppliers are owed billions of dollars by local companies and some of those foreign suppliers and funders have since stopped offering credit to local players. The Reserve Bank of Zimbabwe is also set to takeover approximately US$1,2 billion that local companies failed to remit to foreign creditors. Import controls and to a lesser extent import substitution also helped reduce the import bill.
Drop in the importation of critical raw materials
According to statistics released by Zimstat, compared to 2018, 2019 saw significant reduction in the importation of critical supplies such as fuel, electricity, medicaments, steel, machinery and agriculture inputs such as fertilisers and tractors.
While fuel still gobbled the most, in terms of the import bill, there was a significant decline from prior year.
Last year more than US$361 million was used to import unleaded petrol, to a high of US$46 million in June and a low of US$16 million in December.
To show the drop, the monthly petrol import bill averaged US$30 million in 2019 versus an average US$44 million in 2018.
A total US$861 million was used to import diesel in 2019 averaging US$71 million per month, down from an average of US$93 million per month in 2018.
Market watchers say adequate supply of fuel is critical for economic production and productivity but the ongoing shortages points to hours spent idle and in fuel queues at the expense of production. This also applies to the limited availability of electricity where the country is going through crippling shortages and enduring 18 hours without power.
Zimbabwe lost generating capacity at both Kariba Dam and Hwange thermal power station due to receding water levels at Kariba and plant breakdowns at Hwange. Ordinarily, the deficit could have been covered through power imports, but with foreign currency in short supply the country is even importing less than it did when its own power generation was reasonable.
According to Zimstat, electricity imports gobbled US$119 million and averaged US$9,9 million per month against an average of US$13,7 million (total approximately US$164 million) in 2018.
Observers say while it is important that the country manages its import bill, it should not be at the expense of things that are and cannot be produced locally.
“Given the land that we have, we shouldn’t be importing as much food as we are at the moment, even after a drought. We should be investing in irrigation,” said Walter Mandeya of Trigrams Investment.
In 2019, Zimbabwe imported US$26,7 million worth of maize with US$25,5 million worth in the last six months of the year. The imports were meant to fend off hunger following a drought. Other agricultural imports that could help cutback the import bill if produced locally are crude soya bean oil where US$72 million was spent, soya oil cake (US$12 million and stock feeds related where US$16,6 million was spent.
The country is, however, likely to continue making these food imports having spent less in importing critical inputs and material for the agriculture sector. The country imported a monthly average US$2,9 million worth of urea down from a monthly average of US$4,1 million in 2018. Lesser ammonium sulphate was also imported at US$3,7 monthly average down from an average US$9,6 million. Last year, fewer insecticides, worth approximately US$40,8 million were imported down from US$54 million worth in prior year.
Meantime, South Africa remained the biggest source of Zimbabwe’s imports with goods worth US$1,8 billion coming from the neighbouring country.
Singapore comes second with imports valued at US$1,2 billion sourced from there. It is believed the bulk of the country’s fuel imports come from Singapore.
India (US$141 million), Mauritius (US$132 million), Zambia (US$96,3 million) and Mozambique (US$96 million), in that order, are also significant sources of Zimbabwe’s imports. The country’s biggest export destination in 2019 was South Africa with goods worth US$2,1 billion going that way. United Arab Emirates was second with goods valued at US$832 million.
