Protectionist sentiment appears to be gaining momentum in Zimbabwe and could potentially impact on dozens of South African export products entering the neighbouring country duty free and, in some cases, at preferential duty rates.
In its latest move, Zimbabwe expanded the list of products that require an import licence to enter Zimbabwe. The newly listed products range from various food products, such as canned fruit and vegetables, jams, peanut butter, baked beans and coffee creamers, to body lotions, flat-rolled steel products, used tyres, furniture, fertilisers and the popular women’s artificial hair commonly known as weave.
No prior notice was given, with the requirement for import licences on these and many other products being implemented on the day the statutory notice was published. Import licences will enable the authorities in Zimbabwe to control the inflow of the listed goods. For an import licence to be granted, the applicant has to motivate why there is need to import the product. If granted, the licence will be valid for a limited duration and will specify the quantities the licence holder can import. In all likelihood, if the Zimbabwe industry manufacturing any of the listed products has the capacity to meet demand, an import licence will not be granted.
South African producers of the listed products will likely be affected the most because the products generally originate from South Africa. A quick walk around Zimbabwe’s large retail supermarkets would show the extent to which South African food products, in parti- cular, have penetrated the Zimbabwe market. The licence system would likely be effective in limiting the types and volumes of the targeted products that end up in retail outlets throughout Zimbabwe.
South African exports to Zimbabwe have grown considerably – from R9.2-billion in 2010 to R15.2-billion in 2015 – achieving an average growth rate of R1.1-billion a year. The export basket into Zimbabwe is diversified, with the top products by value being oils, wheat, maize, sugar, food preparations, and mineral and chemical fertilisers, besides many others. In contrast, Zimbabwe’s exports into South Africa grew from R1.3-billion to R4.3-billion during the same period. The products mainly comprise nickel, tobacco and cotton.
The value of trade between the two countries is significantly skewed in favour of South Africa, in light of Zimbabwe’s continued economic impasse. The licence requirement will likely reverse the positive growth in South Africa’s exports as Zimbabwe continues to introduce new measures to reduce imports, particularly from South Africa, and rejuvenate its manu- facturing sector.
A while ago, Zimbabwe introduced surtaxes (an additional tax or the duty payable on the importation of selected goods) on South African products, such as cooking oil, margarine, soap, chicken, eggs, potatoes, stoves, fridges and freezers, besides many others. Surtaxes discourage imports, as they make imports more expensive. If a particular product already attracts a preferential duty of 10% under the Southern African Development Community (SADC) free trade area (FTA) and appears in the surtax list, it will attract surtax at 10% – so the duty is, in reality, 20%. However, goods with a duty rate of 40% under the SADC FTA that appear in the surtax tariff will attract a surtax of 25%, which is the maximum surtax chargeable on any goods. This will take the duty to 65%.
As the Zimbabwe government seeks ways of navigating the country out of its economic storm, reducing the import bill and curbing the outflow of the elusive US dollar, it is likely that more measures to restrict South African imports, in particular, will continue to emerge. At some point, South African manufacturers will pressure political leaders to take action against measures that nullify benefits under the SADC FTA.
Paradza is a consultant at XA International Trade Advisors