Gerald Hamuyayi, Lusaka, Thursday, 24 March 2024 – Africa is a continent brimming with potential, yet challenged by inefficiencies that hinder its economic growth. The recent import-export Town Hall meeting, held on 14 March 2024 at the Mulungushi International Conference Centre, highlights the startling truth: the African Continental Free Trade Area and other trade agreements have not fully united the continent in optimising the value of international trade. For Zambia, these international trade structural hurdles are predominantly on its borders, where a labyrinth of constraints derails the optimisation of the value of international trade.
The Town Hall, spearheaded by the Minister of Finance and National Planning, focused on “unlocking Zambia’s economic potential through enhanced import-exports”. The value of international trade is a significant metric for Zambia, as it impacts critical economic indicators such as the exchange rate and inflation rate, which are crucial for investors, businesses, and individuals. A country’s openness can be gauged by the value of imports and exports as proportions of GDP. As shown in the “Zambia Exports and Imports as ratios of GDP chart since 1994,” exports have continued to fluctuate largely between 25 and 43 percent of GDP, while imports have ranged between 23 and 53 percent of GDP. Further examination of the variables highlights the widening gap between import and export growth, posing a major risk to the foreign exchange markets as more dollars are sent out than are brought in through international trade.
Exports account for the largest share of foreign exchange earnings in Zambia, with the mining sector contributing the lion’s share. Exchange rate stability remains a dream in an economy with slow growth, in addition to inefficiencies along the supply chain.
Despite Zambia’s strategic location in the heart of Southern Africa, the country has been locked in an import-export conundrum and has failed to maximise value from international trade. The one-stop border post efforts at Nokonde, Kasumeno, Nakonde, and Sakanya borders, to mention a few, remain largely underdeveloped and inefficient. As the government continues to consolidate fiscal policy, investments via Public-Private Partnerships will be key to unlocking value at the borders.
Zambia’s border challenges extend beyond impediments to truck movements and various other non-tax surcharges from neighbouring countries. Additionally, despite the pre-clearance of goods at Dar es Salaam, merchandise is often unduly held in Tanzania, resulting in a loss of turnaround time and revenue. This situation necessitates prompt negotiations between the revenue authorities of the two nations to establish sustainable mechanisms for enhancing border efficiencies at the Nakonde border.
The development of African treaties and agreements such as the African Continental Free Trade Area (AfCFTA), the Southern African Development Cooperation (SADC), and the Common Market for Eastern and Southern Africa (COMESA) has had minimal impact on facilitating seamless transactions across African borders. For instance, Zambia and Tanzania have been members of the World Trade Organisation since 1995 and have both ratified the AfCFTA agreement. The two countries, however, are yet to explore fully the potential value of these regional trade covenants. Some of the objectives of these agreements include trade liberalisation, rule enforcement in international trade, and resolution of conflicts.
The proliferation of multiple agents at the borders has also hindered international trade efficiency. Zambia is in the process of streamlining the number of agencies at the borders from over fifteen to six, aimed at enhancing flow and unlocking value at the borders. This consolidation of agencies includes the integration of information technology into the border infrastructure to ease the flow of transit goods.
Based on 2014 to 2019 data, the time taken for border compliance to import and export merchandise remained elevated at 120 hours in 2019, up from around 80 hours in 2014 as illustrated in the graph “Time taken to Import & Export”. The collaboration between Zambia and its neighbours in synchronising border activities in payments and agencies would maximise flow and value for both players and the government.
Furthermore, road development is among the internal structural issues that Zambia needs to address, and is essential for easy transportation of merchandise. Additionally, the checkpoints have also been identified as hurdles that increase the turnaround time of trucks. Mineral exports in Zambia hover around 800,000 metric tons annually, a quantity that would generate more than US$100 million in transport revenue. However, this source of export earnings is lost to foreign logistic companies as they are the buyers responsible for all logistics and clearing agents in the supply chain.
During the dialogue meeting, Zambia Association of Manufacturers President Mr. Ashu Sagar underscored how Zambia’s openness to every single importer of finished products has intensified competition, leading to lacklustre performance of the local manufacturing sector. He further highlighted how undervaluation of imports and smuggling undermine local manufacturing and recommended the government to improve international trade accountability via an import tracking mechanism similar to the export tracking system being developed by the Bank of Zambia. This calls for a strategic balance between protectionism and free trade to ensure the value optimisation of international trade.
The Stanbic Bank Zambia Purchasing Managers Index (PMI), an economic barometer measuring business conditions in the Zambian private sector averaged 49.8 in 2022 and 49.9 in 2023. The PMI readings have been in the contraction territory the first quarter of 2024, averaging 48.2 which is below the 50 no-change threshold. The PMI survey has consistently signalled the challenges being faced in the manufacturing sector, lingering in the contraction zone for the last 4 years. Alongside international trade rigidities, manufacturing has continued to grapple with other macro headwinds such as high input cost, a depreciating Kwacha and rising interest rates. This calls for swift policy interventions to incentivise and propel the manufacturing sector.
The road to realising Africa’s trade potential is paved with collaboration, innovation, and a commitment to overcoming the structural rigidities that have long hindered growth. Only then can Zambia, and indeed Africa as a whole, truly extract the full value from its international trade supply chain and emerge as a significant player in the global marketplace.