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Business Reporter

Economic experts have called for a multi-pronged approach that prioritises export diversification and value addition to limit Zimbabwe’s exposure to external commodity price shocks.

They pointed to the recent tumble in commodity prices as a stark reminder of how vulnerable the country’s export earnings are to external shocks.

This comes as Zimbabwe’s trade deficit ballooned in December 2023, driven by a sharp decline in exports and a marginal dip in imports, according to data released by the Zimbabwe National Statistics Agency (ZimStat) on Monday.

Zimbabwe’s export basket is dominated by minerals, which accounts for roughly 80 percent of the country’s foreign exchange.

While these resources bring in the much-needed foreign currency, their dominance of the export basket poses significant risks.

“The concentration in a few mineral and agricultural commodities exposes Zimbabwe to external price shocks and limits its ability to generate broader economic benefits,” Harare-based economic analysts Carlos Tadya said.

According to ZimStats, the value of exported goods plummeted by 19,2 percent compared to November 2023, falling from US$681,3 million to US$550,6 million.

Imports, on the other hand, decreased slightly by 1,1 percent, from US$828,4 million to US$819,4 million.

The widening gap between exports and imports resulted in a trade deficit of US$268,7 million for December 2023, a staggering 82,8 percent increase from the US$147 million recorded in the previous month.

The trend, some analysts said, painted a worrying picture for Zimbabwe’s economic recovery, as a sustained trade deficit can lead to foreign currency shortages, currency depreciation, and ultimately, hamper economic growth.

They suggested that exports diversification, boosting domestic manufacturing, and attracting foreign investment to increase productive capacity were crucial steps to expand the export basket.

In addition, implementing policies that incentivise exports and discourage unnecessary imports could prove beneficial.

Industrial supplies, which constituted 93,1 percent of all goods exported in December 2023, bore the brunt of the drop.

This suggests potential challenges within Zimbabwe’s manufacturing and processing sectors.

While some traditional exports like semi-manufactured gold, tobacco, and nickel mattes remained among the top 10 exports, their contribution was not enough to offset the overall decline.

The slight decrease in imports provides some solace, potentially indicating efforts to curb spending amid the widening trade deficit.

However, the continued dominance of industrial supplies and fuels and lubricants among imports highlights Zimbabwe’s reliance on foreign goods for its production and energy.

Among the top 10 products exported in December 2023 were semi-manufactured gold, 28,8 percent, tobacco, 17,9 percent, and nickel mattes, 15,7 percent.

Mineral fuels and mineral oil products comprised 21,3 percent of exports, followed by machinery and mechanical appliances 10,3 percent and cereals 9,8 percent.

The country’s major export destinations in December 2023 were South Africa, 30,5 percent, the United Arab Emirates 28 percent and China (15,2 percent.

Combined, these three countries accounted for roughly 73,7 percent of the export value.

Major source countries for imports in December 2023 were South Africa, 40,1 percent, China (11,4 percent, Bahrain, 7,6 percent and Bahamas (5,4 percent.

Some analysts said encouraging the growth of sectors like horticulture, manufacturing, and tourism could provide new sources of foreign currency and create a more resilient economy.

In addition, streamlining regulations, reducing red tape, and providing access to finance are also cited as crucial to attract investment and nurture export-oriented businesses.

In recognition of the potential of value-added products, the Government has come up with specific initiatives in the tobacco and lithium sectors.

In tobacco, the initiative encourages processing leaf into cigarettes and other finished goods, potentially increasing export value and creating jobs.

Under the Tobacco Value Chain Transformation Plan — approved by the Cabinet in 2021 — the Government is targeting to increase the level of value addition and boost cigarette production to 30 percent from 2 percent.

Similarly, the Government banned export of raw materials in a bid to encourage investments in beneficiation and value addition to capture more value from the lithium sector.

This strategic move injected fresh impetus into the African nation’s quest to become a major player in the burgeoning electric vehicle (EV) revolution.

Following its 2022 acquisition of the Arcadia Lithium Mine for US$422 million, Zhejiang Huayou Cobalt cemented its commitment to Zimbabwe with the July 5, 2023 launch of a US$300 million processing plant.

This marked a significant step in the African nation’s journey to become a major player in the burgeoning EV industry.

With the new processing plant operational, PLZ boasts an impressive capacity to process 4,5 million tonnes of lithium ore annually, yielding 450 000 tonnes of concentrate.

Zhejiang Huayou Cobalt’s US$300 million processing plant was not alone in 2023 — other lithium facilities were launched, propelling Zimbabwe’s push towards becoming a prominent lithium player.