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Friday, May 27, 2022

How can we promote trade when Zambia’s exports to South Africa are nearing zero?

Columns How can we promote trade when Zambia’s exports to South Africa are...

By Edward Chisanga

Zambia is exporting almost nothing to South Africa

When the late President Kaunda sacrificed Zambia and Zambians to help black South Africa gain its political freedom and rule largest economy in Africa, the expectation of Zambians was that payment would come at least in form of vibrant trade and foreign direct investment (FDI). South Africa is the only country in the continent with potential FDI and capital and intermediate goods needed for Zambia’s industrialization. But about twenty-five years since black South Africans took over the governance of the country, Zambia has failed to maximize and take advantage of the warm relationship. It is unclear how much capital and intermediate goods the Zambian private sector imports from South Africa and how much FDI they have captured. What is clear though is the presence of many retail shopping malls erected by South Africans in Zambia from which we buy retail and already processed South African goods.

Trade is perhaps the only thing under Zambia’s control which our private sector can take advantage of from South Africans. Since black rule began, many Zambian business men and women as well as government officials have been travelling to South Africa telling us they go there to seek trade. The Zambian Embassy in South Africa was opened with the main objective to promote the country’s trade. Hence, one would expect that in the past years, Zambians would be seeing expanded trade, at least exports to that country.

When then President Lungu and President Zuma, of South Africa met, our President told his counterpart, “Although trade between Zambia and South Africa remains buoyant, it is heavily and unfortunately skewed in favor of South Africa.” When I checked the definition of the word, ‘buoyant,’ the answer was, “(Of an economy, business or market) involving or engaged in much successful trade or activity.” It was in 2016 when then President Lungu made this statement. So, I compiled statistics to show Zambia’s exports to South Africa from 2001-2020 shown in Figure 1 below. What I found was that President Lungu’s statement was misleading. In 2016, Zambia’s trade with South Africa was not buoyant. In fact, it was torpid or gloomy. You can see the continuous downturn that it experienced from its highest peak of about $ 900 million in 2013 to less than $200 million in 2020. The peak was achieved by President Banda and Mwanawasa’s rule while the slump is attributed to President Lungu’s period.

Meanwhile, I also constructed statistics to show more details of Zambia’s trade with South Africa depicting exports and imports. My finding is that Zambia exports less to South Africa than it imports from that country leading to a growing trade deficit which both Presidents Mwanawasa and Banda, on the one hand, as well as Lungu on the other, failed to reverse as Figure 2 below shows. President Lungu tried but did not succeed. Continuous trade deficits mean Zambia is not leveraging external revenue from trade with South Africa and this constitutes one of Mr. Lungu’s complaints to Mr. Zuma.

I checked data to see whether Zambia was importing capital and intermediate goods from South Africa enough for industrialization. In 2020 for example, Zambia’s imports of capital and intermediate goods put together reached less than $1 billion for each. That is not enough money to import such important tools for industrialization and economic development. Zambia’s own reported data shows that the country imported consumer goods from South Africa which amounted to $807.8 million the same year. That is quite a lot relative to Zambia’s exports of less than $200 million goods to that country.

Zambia has lost its ranking in top Sub-Sahara African countries exporting to South Africa

I was equally interested to find out how competitive Zambia is in the midst of other Sub-Sahara African countries excluding South in exports of all products to South Africa. What I found stunned me and am sure will other Zambians. In 2001, Zambia’s ranking was number five but this went down to number fifteen in 2020 as Table 1 below shows. It implies that Zambia lost competitiveness to other African countries exporting to South Africa. It traumatizes me and, I’m sure other Zambians that our private sector is failing to utilize free market access through our membership to SADC to export to South Africa. How can our private sector and government be exporting less than $200 million?

Table 1: Sub-Sahara African countries’ exports of all products to South Africa in $millions:

2020

Nigeria

1,806

Ghana

1,336

Eswatini

1,238

Zimbabwe

1,195

Tanzania,

1,054

Namibia

923

Angola

687

Mozambique

570

Botswana

495

Mali

390

Côte d’Ivoire

381

DRC

352

Lesotho

321

Mauritius

183

Zambia ranks number 15

181

Source: Unctadstat

Conclusion

It is not because of Covid19 that trade between Zambia and South Africa has slumped so much. The slump began many years before its ugly arrival. The many public statements coming from both the private and public sectors that we must promote trade as an engine of growth, job creation and poverty reduction is not matching with what is happening on the ground. What really is the role of Zambia’s private sector when it has not expanded trade since independence. Of course, numbers have been rising in some cases in absolute values, but we don’t really see expanded trade in the manner we see it in Asian countries like Viet Nam. What is really wrong?

One certain wrong thing is that the private sector continues to export primary commodity products instead of manufactured goods. One time I asked a former South African Director of Trade friend of mine, “How can the Zambian private sector increase and improve its trade partnership, in particular to export processed goods to that country?” His answer was that Zambia’s private sector must negotiate export value chain agreements. They must sit down with their counterparts in South Africa and adopt ways in which they can learn production processes.

Finally, Embassy staff must begin to become result-oriented and accountable to Zambians. They must begin learning how trade is done. One way to do this is to understand what trade itself is. We can help them to understand some basics about trade. They need to know what concepts like exports, imports, trade balance, competition and other relevant terms mean. Often those asked to go and promote trade in Embassies don’t even know the size of Zambia’s exports to the host countries they are in. They need to know as a basis for promoting trade. Organizations like the United Nations that I worked for can help in building capacity for Embassy staff. That is what we used to do.

When President Hichilema tells Zambians that his team, including those promoting trade will be driven by merit and professionalism, that is exactly what I’m talking about. Let those promoting trade first know what trade is. And there are many Zambians who know this but find it difficult to penetrate into the system that makes appointments. Some Zambians from poor families with the right qualifications and knowledge in trade are simply languishing without jobs because they have no one to connect their CVs into the system. Let things change. We can promote trade in South Africa if we have the right people. But we must have the right products too because how can they promote trade which is not there?

27 COMMENTS

  1. What will save this country is quick deployment of state farms. This must swallow 10,000 youths from each province, you will instantly have a 100,000 youths country wide doing some thing if this happens, this will help solve the biggest problem has as well as guarantee food security and rake in the much needed foreign exchange. Industries wont mush room over night, but state farms can ,The damage done by the PF is so huge that we need robust actions deployed quickly

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  2. @Deja, Maybe, but it wouldn’t be such an issue if there was more export, ideally the sum between exports and imports near zero. If trucks filled with goods are driving up from SA then they should be driving down filled with goods also. But not enough goods are made.

  3. The answer is simple. We almost don’t manufacture anything, except raw copper. So what is there to export?
    In terms of agriculture, South Africa is way ahead of us in terms of both output,finance, and mechanisation.
    We need to seriously sit down as a country, do a situational analysis and embark on a comprehensive programme to reverse our fortunes.
    The million dollar question is, do we have the leadership with the patriotism and zeal to move this country forward for the benefit of zambians and not individuals?
    Your guess is as good as mine.

  4. The answer is simple. We almost don’t manufacture anything, except raw copper. So what is there to export?
    In terms of agriculture, South Africa is way ahead of us in terms of output,finance, and mechanisation.
    We need to seriously sit down as a country, do a situational analysis and embark on a comprehensive programme to reverse our fortunes.
    The million dollar question is, do we have the leadership with the patriotism and zeal to move this country forward for the benefit of zambians and not individuals?
    Your guess is as good as mine.

  5. Well if the exports where very high, would it have made sense for us to start promoting that trade? Ofcourse we need to promote cause the exports are nearing zero. That’s the reason why we need urgently do it.

  6. Perhaps the biggest has changer is in National productivity and sound economic stratergies on how to effect positive changes on the terms of trade the Financial and Capital Account or BOT You will need a sttatergy to rebalance and achieve favourable balance of trade By now the incentive s and measures announced in the Budget 2022 must have directed the capital and flows to position favourably What will differentiate most is National productivity that is seen in per capital income Nigeria is an example of how to achieve that Infrastructure and soft areas have already been fairly put in place may be only Investments promotions

  7. Spot on @Edward. The new govt needs to pay attention to this. You can’t want forex without exporting. The SA trade issue was one of the first things former Veep Guy Scott tried to deal with in his short stay as acting Head of State. Zambia needs to harness its good relationship with SA to work towards trade balance. To be systematic, you need a strategic framework to identify the gaps and opportunities for the export trade for Zambia. There is a 60 million people market in SA. Opening up trade routes into Angola is one commendable move by govt. One important issue that has to be dealt with is the strengthening of quality assurance mechanisms in Zambia. Zambia Bureau of Standard needs to be strengthened and have operational bases beyond Lusaka.

  8. 1. Zambians must not think, just because KK did a lot for South Africans, pre-its independence, then they will be given an upper advantage. We must compete to gain its market share. We live in a competitive world where the buyer or consumer wants to get a better value and better products. When it comes to finding markets into foreign nations, especially in South Africa, there has been a lacklustre & jaded attitude.

  9. 2. As a person who does business in South Africa, I know that we often don’t do our homework which requires:

    a) Market Research
    b) Gain Knowledge Base & Demographics
    c) Understand Your Competitors
    d) Risk Calculation
    e) Finding Partners
    f) Effective Communication
    g) Being Creative

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  10. 3. I tried, and I failed the first time. Then I changed the gears and went for a system called Piggybacking – in International Business.

    I succeeded in the end. And we have grown year after year. Just well it gave me an opportunity to understand the South African – Market, Culture, Laws, Consumer Attitudes. Piggybacking is when two non-competing companies agree to work together to cross-sell the other’s products or services in their home country. It requires total trust in partnership. Its low-risk and requires not much capital to start with.

  11. You can’t look at exporting before you exploit your own internal market……..

    GRZ needs to double up on buy Zambian campains , cutting red tape and quality assurance and training …………

  12. 4. Lastly and not least. There has been too many political appointees from the past been ascended as Secretary of Trade & Economics, in diplomatic missions who should be the eyes of the country in foreign nations. If we need to win the market share, we must appoint people on merit in diplomatic missions, even it means appointing someone who does not salute allegiances to the party in power. We need diplomats who can go out in the field to network with business forums and find markets for Zambia. The UK Zambian High Commissions has been another disappointment. If you consider that London is the hub of Business in EU and the Commonwealth Secretariat HQ is London.

  13. The plain truth is that Zambians in geeral think that you only get rich when you are in Govt. We don’t have the knowledge outside these parameters. We often have only conmen conning resources from the state. We only have hand to mouth business men and women travelling on buses to buy things from South Africa for resell in Zambia. The situation described above will never translate into a healthy trade balance for our country. What we need is to earnestly try and empower our citizens into processing and manufacturing of goods within our country.

  14. what does Zambia have to trade besides copper and gemstones?

    we do get South African tourists, but apart from Victoria Falls, we do not have anything unique to offer them in that regard.

  15. SPAKA

    Yes, in a way you are correct. However, in the business world they are things that are ” very hard” sell to the local market. And the market is always in foreign lands. For example to most Very Rich Zambians buying precious gemstones as collectables for the family is unthinkable, such as Red Ruby, Green Emerald, Pink Sapphire, Tanzanite, Opal, Topaz. Whereas, if you export them to Western Nations, the very rich people buy and keep them as collectables to be passed to the next generations in the family, as part of wealth creation & accumulation. Most of the Gold bought in the world is just kept in Bank Vaults by rich people and is not even sold to be used as finished products. But just kept as a commodity to sell at the right time or…

  16. I don’t understand the clamour for exports to SA when we cannot even meet the demand for maize meal and other foodstuffs to DRC. Meet existing demand first then you can start to look further afield

  17. Just want to appreciate you for raising the quality of the debate, Sir. It is up to Zambians and the government to leverage the thinking of Zambians like you so that such thinking translates into action. We spend too much time and energy entertaining empty-headed comments in the name of respect when we should be ruthless in weeding out silly ideas and relentless in exploring and promoting data-backed proposals like yours.

  18. Is NESTLE owned by SA?? I own a wholesale and retail shop and think our products are no match to SA products.. but we can still trade kawambwa tea revamp the battery industry so that it can compete with energizer battries.

  19. Zambia is a land linked country so there are export opportunities surrounding the entire country. Stop being one eyed and looking only at South Africa. Just take a look at the trade amongst the ASEAN tigers. Their trade and investment strategues were not focussed on Japan but on the entire region

  20. “the expectation of Zambians was that payment would come at least in form of vibrant trade and foreign direct investment ” Really? You are only speculating in retrospect.
    In all honesty, we were just angry with the white man for enslaving us and we didnt want it to continue in neighboring countries because it reminded us ofwhat could re-happen to us. Besides once the boers entrenched themselves in South Africa, Namibia and even Zimbabwe what was going to stop them from invading Zambia? We had the choice of fighting them or capitulation to the capture of Africa the way Australia and America was conquered

  21. What you see from most contributions above is that there are some serious Zambians with the country at heart. They have vast experience and wonderful free advice which govt can use to grow the economy. The relevant Min can establish a professional diaspora network to tap into their vast knowledge and skills.

  22. Almost nothing is a big exaggeration. Zambia exports to South Africa, agriculture produce, electricity, and copper to mention a few

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