Market News

The Reserve Bank of Zimbabwe (RBZ) introduced the export incentive policy in September 2016 at 5% of gross export receipts in order to improve production of minerals and tobacco. The policy was widened to cover diaspora remittances, manufacturing sector and all other export sectors in the economy. Despite the unpopularity associated with the introduction of bond notes in November 2016, the export incentive scheme has demonstrated that supply side incentives are the best remedy to Zimbabwe's perennial trade deficit and foreign currency woes. It is worth pointing out that the export incentive scheme had its negative implications -- especially increasing broad money supply, which fuels inflationary pressures in the economy, but overall the scheme has many positives for key sectors in the economy such as agriculture, mining and manufacturing. After the introduction of the export incentive scheme in 2016, gold deliveries to Fidelity Printers and Refiners increased by 16% to 24,8 tonnes in 2017 and notched an all-time high of 33,2 tonnes in 2018. In terms of export earnings, gold is now the single largest contributor of foreign currency with export contributions in excess of $1,1 billion per annum. The same effect was also felt in tobacco farming where farmers produced 189 million kgs of the golden leaf in 2017 and a record of 253 million kgs in 2018. It is worth noting that small-scale producers now account for the bulk of gold and tobacco deliveries in Zimbabwe, showing the effect of the policy in channeling these commodities to the authorized buyers instead of the parallel market. In the manufacturing sector, export incentives also managed to improve the manufacturing capacity utilization (MCU) from 34% recorded in 2015 to an average of 45% from 2016-2018. It is not surprising that the MCU increased to 45% considering the fact that the manufacturing sector in Zimbabwe has direct linkages with agriculture and mining. Merchandise exports increased from $144,5 million in 2017 to $222,6 million in 2018. Horticultural exports also recorded significant growth in 2018 after more than $112 million worth of produce was exported, up from $51 million exported in 2017. Zimbabwe earns more than 85% of its foreign currency through exports of gold, nickel, tobacco, chrome and ferro-chrome, diamonds and platinum. In terms of imports, petroleum, electricity, grain, medicine, chemicals and motor vehicles account for over 50% of the country's import bill. Zimbabwe's export list is mainly dominated by raw minerals and tobacco which fetch very low prices on the world market. Implementation of policies to compel value addition locally will see a massive jump in export values and a significant improvement to the country's balance of trade (BOT). Merchandise exports are hugely affected by the cost of doing business on the local market and acute shortages of foreign currency to import critical raw materials. The high cost of doing business takes into account the cost of electricity, water and locally produced inputs which are largely indexed in US dollar prices or pegged on black market rates. Other constraints to optimal production in manufacturing include lack of capital to retool, high costs of compliance and taxation, obsolete machinery and stiff competition from competitively priced merchandise imports from South Africa, China and Singapore. The export incentive scheme had managed to improve the country's balance of trade position in the last three years despite its negative impact on broad money supply. The growth of exports to $4,23 billion in 2018 demonstrates that Zimbabwe has got the capacity to produce for the local and export market if the policies are well aligned. Some would argue that producers were starving the local market in search of foreign currency and export incentives. However, that can only apply to merchandise exports which account for less than 5% of exports in 2018. Bulk of Zimbabwe's exports are raw in nature hence they are largely produced for the export market. Export incentives had managed to bring life to the local economy while creating millions of jobs for small-scale producers who ordinarily have less inclination towards supplying their produce to the formal market or authorized buyers. Even though the export incentive scheme has been scrapped off, the government needs to draw from the lessons learnt from it. One major take-away is that producers at all levels can improve production and channel produce to the formal market, provided there are economic incentives to do so. Lack of incentives provides fertile ground for the channeling of produce to the black market or smuggling of precious minerals out of the country. It has been widely reported that gold deliveries to Fidelity Printers fell sharply after the February 20 monetary policy announcement. Small-scale miners have parallel market channels to sell their produce and evade taxes if the incentives do not match their economic expectations. It is therefore imperative to remodel the export incentive policy and target reducing the cost of production for same exporters. Following the increase in fuel prices on the January 12 2019, the government introduced a fuel duty refund to key sectors such as agriculture, manufacturing, transport and mining. The impact of the policy is yet to be felt on production; however, the policy points to the direction the government should take to stimulate production in the economy. One way of subsidizing key exporters in mining and agriculture is to rejig the local compliance and tax regime. Low hanging fruits can be downward reviews of license renewal fees, mining royalties, income tax and the Intermediated Money Transfer Tax (IMTT). The government recently suspended the 2% IMT Tax on tobacco purchases for local merchants as a way to reduce the costs involved in paying tobacco farmers. Considering the value realized through exports of tobacco and minerals, producers are justified in their calls for tax breaks. The export incentive scheme could have been scrapped by RBZ, but its impact on the trade and export earnings was immense. The policy should be remodeled and be continued in a way that brings sustainability to government expenditure management and the country's balance of trade position. Constant review of export incentives has become mandatory, considering the rate of inflation, change in commodity prices on the world market and the need to fight smuggling of precious minerals out of the country. The central bank made a good call on production in the economy with introducing export incentives and the gains realized through the policy should be maintained so as to keep the country's export receipts north of $4,23 billion in the mid-term while the government crafts a long-term policy on import substitution. Source: Allafrica.com

Despite having a ready export market, Malawi is failing to meet global demand for chilies due to low production, a development that is hampering the country’s potential to enhance its revenue generation.
Deputy Director of crop development responsible for horticulture in the Ministry of Agriculture, Irrigation and Water Development, Evenness Nyalugwe, said this on Tuesday during a clinic for chilies production that targeted representatives of farmer cooperatives drawn from districts of the country.
The Malawi Investment and Trade Centre (MITC) is organizing such clinics to empower growers to value add and produce more chilies to suffice the existing export demand.
The initiative is part of the Economic Integrated Framework (EIF) that has strategic support in the agricultural sector to enhance value chain addition and increased productivity to create competitiveness of products on external markets.
Said Nyalugwe: “Despite Malawi’s potential to enhance its revenues through the chilies sector, the reality is that the current levels of production are not progressive and cannot sustain the global demand.
“As of 2017, Malawi’s chilies and paprika production were at 141 216 and 471 317 metric tonnes against the global demand of 3 million metric tonnes. What is critical at this stage is for Malawi to boost its production levels and match quality standards to the international preferences.”
MITC Chief Executive Officer Clement Kumbemba expressed worry over the development, saying more investments are needed into chilies production to suffice demand and maximize revenue from the crop.
“MITC believes that the chilies sector has competencies for Malawi. Malawi is known for producing unique chilies. We should revisit our strategies and take advantage of available value chains. Let’s face it, we have not been aggressive enough. This is why we are engaging the farmers to produce and meet the demand”, he said.
A recent study commissioned by Total Land Care shows that Paprika and Bird’s Eye Chilies have comparative advantage in the readily available markets in Africa and Europe such as South Africa, United States of America, Spain and other European countries.
Source: Nation Newspaper

The Malawi Investment and Trade Centre (MITC) says it has identified export markets for Malawian Products worth &547 million (about K397 billion). In a statement made available to Business News, MITC Public Relations Manager Deliby Chimbalu said the markets are mostly for agroculturral products such as soya beans, groundnuts, rice, beans sunflower and poultry.

The Markets include China ($141.7 milllion), Zambia ($11 million), Zimbabwe ($76.7 million), Tanzania ($510.6 million), South Africa ($100 million), Mozambique ($1 million), and Egypt ($200 million) while the Malawi Investment Forum (MIF) 2018 fetched $16 million in investment pledges. She said there is still demand for some manufcactured products like soya pieces, sunflower cake, plastic products, peanut butter, tea, coffee, cotton cake and beverages.

Said Chimbalu "Last year we rolled out an export pomotion campaign where we organized several trade missions to different countries with an aim of identifying markets for our products." 

"Some of the countries visited include Mozambique, Zambia, Tanzania, Zimbabwe, South Africa, Egypt, and China. We are happy that these missions have exposed our Malawian producers and manufacturers to market oportunities beyond the borders of Malawi".

Meanwhile, MITC is calling on all export ready companies to take advantage of the explored market opportunities.

Source: The Nation Newspaper

A delegation of businessmen from Mozambique was in the country to seal trade deals with potential producers of poultry products in Malawi.

President of the Mozambican Confederation Economical Association, Chaual Naparia, said currently there is low supply of eggs and chickens in Quelimane against the rising demand hence their decision to import some from Malawi.

‘We have a huge demand of eggs and chickens and besides there are a lot of trade opportunities from Zambezia which we think Malawi should take advantage of because of its closeness to Mozambique. It does not make sense that we should be importing from South Africa or Brazil yet our closest Neighbor Malawi can equally supply us these products.’ Explained Naparia.

The Malawi Investment and Trade Centre (MITC) recently organized a trade mission to Quelimane, to identify market opportunities for Malawian products. It was during this mission that the Mozambican Government including entrepreneurs from Quelimane and Mocuba (Zambezia) expressed interest to import chickens and eggs from Malawi to Mozambique, more especially due to the festive season.

The trade mission is part of the activities under the EIF project which aims to promote sales of Malawian value-added products by local non-traditional exporters and their respective production networks of local producers to the Nacala corridor and also regional and international markets.

Source: MITC