Weaker rand to hurt Zim's trade competitiveness

The continued weakening of the South African rand should further erode Zimbabwe's export competitiveness as South Africa is Zimbabwe's major trading partner in the region, and only falls behind China across all its trading partners.

Trade data released earlier this week by the South African Revenue Service (SARS showed that the country's trade balance switched from a R16.9bn deficit in December to a R1.7bn surplus in February And observers believe that the bump in South Africa's trade improvement was largely due to the rand which has been on a weak trend since late last year.

Economic analyst Ronald Chizenga said Zimbabwe will suffer from South Africa's import decline that will result from a sustained weaker rand.

"The weaker rand is boosting that country's export earnings while at the same time making it expensive for it to import. This means that South Africa has had constrained import growth, which means a shrinkage in what we can sell to them."

The US$, which is the major currency in Zimbabwe's multi-currency basket, has largely strengthened against the rand which is also threatening the viability of the local manufacturers as South African products are now cheaper than locally produced ones.

Most local retailers are therefore compelled to sell South African exports, which means Zimbabwean products have also lost their competitiveness in the local market.

Last week, the Government moved in to ban the imports of fresh fruits and vegetables as exports of the same products, largely from South Africa, were flooding the market.

However, there have been minor indications that the rand may not sustain the weakening trend for long. For instance, on Monday, the data from SARS led to a slight firming in the rand on Monday to R10.52/$ - its best level in over three weeks. Zimbabwe can also take advantage of the ongoing platinum strikes in South Africa to ramp up its mineral exports, which account for a significant portion of the country's exports.

Meanwhile, Zimbabwe's trade development and promotion organisation, Zimtrade, will tommorow release results of a Local Export Manufacturing Capacity Survey, which it carried out in November last year in collaboration with the Confederation of Zimbabwe Industries.

According to Zimtrade, the survey is a baseline study to establish the local manufacturing export capacity to enhance industry policy lobby initiatives.