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COMESA, SADC FREE TRADE AREAS :– Opportunities for Zimbabweans in The Diaspora
By Vonesai [email protected]
[email protected] www.trademarksa.orgwww.tradebarriers.org
PART I- ECONOMY
Short Term Economic Recovery Programme (STERP)
Overview on performance of the Economy
Sectoral Perfomamances- GAPS
PART II- ZIMBABWE’S TRADE PERFOMANCE
Major Regional Trading partners
Trade Potential in the region
PART III-REGIONAL INTEGRATION
COMESA & SADC Free Trade Areas- Facilitating Zimbabwe’s economic recovery &growth through trade, Infrastructure development
Opportunities in the FTAs
SUMMARY PRESENTATION
In February 2009, Government put in place phase 1 of the Short term Economic Recover Programme (STERP) to address the economic woes and challenges facing the economy and work towards revival of the economy. Key goals of the short term stabilisation programme which would run from February – December 2009 were:
To stabilise the macro and micro-economy, recover the levels of savings, investment and growth, and lay the basis of a more transformative mid term to long term economic
programme that will turn Zimbabwe into a progressive developmental State
Major Challenges facing the economy included : Unprecedented levels of hyper-inflation, massive devaluation of the currency, There had been an unsustainable period of negative growth Serious unemployment and loss of jobs, Massive de-industrialisation Low productive capacity and food shortages and Poor service delivery,
STERP
STERP unveiled Against the backdrop of the worst economic recession in the world economy. The recession which started as world financial crisis slowed down growth in most major economies, leading to a revision of world growth in 2009 in which it was expected to decline to its lowest levels in 60 years.
Therefore, in developing STERP, Government was cautious to put realistic and pragmatic targets as it anticipated low international support as well as the pace of the turnaround in relations to the magnitude of the challenges .
Overview
Stabilisation
i. Implementation of a growth oriented recovery programme
ii. Restoring the value of the local currency and guaranteeing its stability
iii. Increasing capacity utilisation in all sectors of the economy and, hence, creation of jobs
iv. Ensuring adequate availability of essential commodities such as food, fuel and electricity
v. Rehabilitation of collapsed social, health and education sectors
vi. Ensuring Adequate Water Supply
STERP Priority Areas- Economic Stabilisation
The Key Priority Areas outlined to stabilise the economy set out in STERP are:
i. Implementation of a growth oriented recovery programme
ii. Restoring the value of the local currency and guaranteeing its stability
iii. Increasing capacity utilisation in all sectors of the economy and, hence, creation of jobs
iv. Ensuring adequate availability of essential commodities such as food, fuel and electricity
v. Rehabilitation of collapsed social, health and education sectors
vi. Ensuring Adequate Water Supply
vii. STERP seeks to ensure household food security, targeting of women in their production and reproductive roles in order to eradicate poverty.
viii. STERP seeks to ensure the de-marginalisation of women in Zimbabwe through specific and concrete gender mainstreaming policies and programmes in every sector covered by STERP.
viii. These measures would be anchored on promoting production and increase capacity in key areas of the economy in particular agriculture, mining, manufacturing and tourism. In short STERP is a Capacity building Recovery programme that seeks to stabilise all the macro and micro-economic fundamentals.
ix. A follow up programme is being implemented towards achievement of the set goals
STERP DELIVERABLES
Objectives of Short Term Economic Recovery Plan (STERP II) are on course:
Macro Economic reforms creating economic stability Inflation dropped from hyper inflation levels to single digit
levels consistent with SADC and COMESA macro economic convergence targets .
Growth in real GDP increased from -14.8% in 2008 to 5.7% in 2009 and is estimated to increase to 8.1% in 2010
There is improved overall capacity utilisation thereby addressing supply of goods & services in the formal sector
The financial Sector has been resuscitatedThere has been some improvement in Public sector deliveryHowever, export performance continues to lag behind in
response to the low capacity utilisation. The country has recorded negative trade balances with its major regional partners (
Overview of Economic Performance 2008-2010
Measures being taken to improve production capacity
Government embarked on Fiscal consolidation through introduction of
Cash Budgets Multiple currencies Resource based Budgeting Public Finance management Acts and Tax reforms
Government strengthening Public Institutions through capacity building and enforcing accountability measures
Government also putting measures to strengthen social protection programmes
Measures for Sustaining Macro –Economic Stabilisation
PART TWO- ECONOMIC PERFOMANCE
Real GDP Growth (2008-2011)
Real GDP Growth by Sector (%) 2008
2009
2010 Est.
2011 Proj.
Real GDP -14.8 5.7 8.1 9.3
Agriculture, Hunting & Fishing -39.3 14.9 33.9 19.3
Mining and Quarrying -33.4 8.5 47 44
Manufacturing -17.1 10.2 2.7 5.7
Electricity and Water -13.6 1.9 1.5 2.5
Construction -8.5 2.1 1.5 1
Finance and Insurance -27.9 4.5 0.5 2
Real Estate -36.4 2 0.9 1
Distribution, Hotels & Restaurants 2.8 6.5 0.5 6
Transport & Communications 2.2 0.1 5.5
Source: CSO; MoF
Real GDP growth from -14.8 in 2008 to 5.7 in 2009
All sectors recorded positive growth in 2009
Sub sector Capacity utilisation increasing though at modest levels
Zimbabwe’s GDP growth at 4.7% in 2009 compares favourably with regional countries
Zimbabwe’s Trade balance remains in the negative in the last three years (2007-2009) as she loses her leverage in exports to regional markets.
Zimbabwe’s trade balances with once her major export destinations ( Malawi, Mozambique, Zambia etc. in the negative
INDICATORS
Industry % Contribution
Agriculture 15.5%
Transport & Communications 15.2
Manufacturing 14.7
Tourism 11.0
Mining 4.9
Construction 0.6
Real estate 2.0
Finance & Insurance 3.9
Other services 4.3
Domestic Services 1.8
Selected Sectors Contribution to GDP (2009)
Sector 2009 Actual
2010 est. 2011Proj.
Foodstuffs 39% 42 45
Drinks, Tobacco & Beverages 50 59 62
Textiles & Ginning 20 21 21
Clothing & Footwear 58 55 51
Wood & Furniture 82 83 85
Paper, Printing & Publishing 41 43 43
Chemical & Petroleum Products
31 31 32
Non Metallic Mineral products 21 21 23
Metals & Metal Products 11 10 9
Transport Equipment 16 14 14
Other manufactured goods 13 14 16
Overall Growth 10.2 2.7 5.7
Sub sector Capacity Utilisation
Country GDP (US$b) GDP Growth Inflation Rate
Zimbabwe 5.179 4.7 -1.1
Angola 70.53 -0.6 13.1
Botswana 10.94 -5.2 7.3
DRC 11.23 2.7 16.7
Lesotho 1.643 -2.0 8.5
Malawi 4.97 5.9 8.5
Mauritius 9.26 2.1 3.4%
Mozambique 9.7 4.3 3.5%
Namibia 9.1 0.7 8.8%
Swaziland 2.96 -0.4 8.5%
Tanzania 22.4 4.9 11.6%
Zambia 12.44 4.5 13.5
South Africa 280.6 -1.8 7.2%
Source: Zimbabwe Budget Statement 2010
Economic Indicators for selected SADC Countries (2009)
Year Total Exports
No. Of Exported products
Trade Balance
2005 1 393 464 1 131 -678 134
2006 6 427 251 1 374 3 851 522
2007 3 308 285 1 367 - 132 652
2008 1693801 -1 137 323
2009 2 268 873 1 076 -1 257 217
Zimbabwe's Exports 2005-2009
Country 2007 2008 2009
*Botswana -207961 -57821 -161689
Lesotho 4596 1175 25032
*Malawi -113845 48361 23258
Mauritius -6837 -3414 -41717
*Mozambique -105046 -73198 -124055
Namibia 11203 3889 239
South Africa -295135 -1047669 -940012
Swaziland 5254 2786 7177
Zambia 14633 8191 -8677
* Zimbabwe recorded surplus trade before 1995
Table Zimbabwe Exports to Region (Trade Balances- Major Trading partners)
1. Agriculture
Contract Farming to support Agro processing
Irrigation Rehabilitation
Livestock Development and farming ( Small-scale dairy farming; rearing small animal stock, including poultry and piggery)
2. Manufacturing
Targeted sectors for small – medium investment include: food processing, beverages, clothing and footwear, leather & Leather products , packaging, paper
printing and publishing, Tourism, construction , services sector and huge investments in textile and ginning, fertiliser, pharmaceuticals,
motor industries, chemical and petroleum products, non metallic mineral products, among others.
3. IT and Technology4. Micro Financing to provide working capital to micro and small business
ventures and manufacturing entities
Potential Areas for Investment - Zimbabwe
Government to Create concessionary and attractive opportunities for DIASPORA participation in the development of the economy.
Targeted engagement with Diaspora to maximise on potential and harness productive human and financial resources
Engage agency to draw up strategic engagement policy directing remittances to developmental areas ( Investment in productive sectors) instead of just remittance.
WAY FOWARD
PART THREE – REGIONAL INTEGRATION
Zimbabwe has entered into Bilateral Preferential Trading Arrangements with Botswana, Malawi, Namibia, South Africa
Under these agreements, Nationals can trade in goods meeting rules of origin free of customs duties.
Zimbabwe is a Member of the Southern African Development Community (SADC) and Common Market for Eastern and Southern African States (COMESA) Regional Economic Groupings
Southern African Development (SADC)- 15 Countries and Common Market for Eastern & Southern African States
(COMESA) has 19 Member statesZimbabwe is also a Member of the Proposed Tripartite
Free Trade Area of COMESA, EAC and SADC regional groupings
Regional Integration
A free Trade Area is established when countries wish to bring together their economies but do not wish to integrate them
Tariffs on originating goods are eliminated
Unnecessary non- tariff barriers to trade are removed and eliminated between Member States
Goods are admitted in each other’s territory upon compliance of agreed rules of origin
Each Country maintains its own external tariff
There is greater degree of movement of capital among FTA Member to take advantage of economies of scale as the FTA is one market and supplier of goods meting the rules of origin
There are 4 FTAs in the Southern & Eastern African Region (COMESA, EAC, SADC, SACU)
What is a Free Trade Area
1.Further liberalization of intra-regional trade in goods and services on the basis of fair, mutually equitable and beneficial trade arrangements, complemented by Protocols in other areas.
2. To ensure efficient production within the region reflecting the current and dynamic comparative advantages of its Members.
3. Contributing towards the improvement of the climate for domestic, cross-border and foreign investment.
4 Enhancement of economic development, diversification and industrialization of the Region.
Key Objectives of FTA
Four Regional Groupings have attained their FTAs/Customs Unions :
1.Common Market for Eastern & Southern Africa (COMESA) (19 Member states)
2.Southern African Development Community (SADC ) FTA has 12 countries, namely, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.
3.Southern African Customs- (SACU)- 5 countries Botswana, Lesotho Namibia South Africa, Swaziland
4.East African Community (EAC) – 5 countries : Burundi, Kenya, Rwanda, Uganda and Tanzania
5.Proposed Tripartite Free Trade Area encompassing COMESA, EAC and SADC regional groupings
Regional Groupings - FTAs
1.Further liberalization of intra-regional trade in goods and services on the basis of fair, mutually equitable and beneficial trade arrangements, complemented by Protocols in other areas.
2. To ensure efficient production within the region reflecting the current and dynamic comparative advantages of its Members.
3. Contributing towards the improvement of the climate for domestic, cross-border and foreign investment.
4 Enhancement of economic development, diversification and industrialization of the Region.
SADC FREE TRADE AREA
Twenty six Member States of COMESA, (19) SADC, (15) EAC, (5)and SACU (5) are cooperating under the framework of their FTAs, and Customs Unions with the aim of integrating their economies through development of infrastructure, liberalisation of trade in goods ands services to improve the welfare of their people particularly women and youth
Under the proposed Tripartite arrangement of COMESA, EAC and SADC, Member States undertake to achieve ‘ An Integrated prosperous, and peaceful Africa by its own citizens and representing a dynamic force in the global Arena’
REGIONAL INTEGRATION – Tripartite FTA
Proposed Tripartite FTA
The Tripartite FTA refers to three Regional Economic Communities – COMESA, EAC & SADCTripartite FTA Membership Structures
COMESA FTA has 14 Member States; 8 also in SADC; 1 in SACU, and 4 also in EAC
SADC FTA has 12 Member States; 8 also in COMESA, 5 in SACU , 1 in EAC
SACU has 5 Member States, which are also Members of SADC; and 1 also in COMESA
EAC has 5 Member States ; 4 are also members of COMESA
The Tripartite Free Trade Area
A recent growth trend in intra-REC trade has been witnessed
Sub-Saharan Africa has registered a considerably higher rate of growth in its intra-regional exports share over the period 1960 – 1962 (4.08%) and 2004 – 2006 (11.41%), representing growth of 179.94%
Expanded market of over
Potential for increasing intra-African trade in agricultural goods remains untapped , therefore, opportunities for investment in agro-industries
Opportunities from Tripartite FTA
SADC has 12 Participating FTA countries
1.Botswana 7.Seychelles
2.Lesotho 8.South Africa
3.Malawi 9. Swaziland
4.Mauritius 10. Tanzania
5.Mozambique11.Zambia
6.Namibia 12. Zimbabwe
COMESA has 14 FTA participating Countries
1.Burundi 8. Malawi
2Comoros 9.Mauritius
3. Djibouti, 10. Rwanda
4 Egypt,11.Seychelles
5. Kenya, 12 Sudan
6Libya, 13. Zambia
7.Madagascar14.Zimbabwe
,
Comesa and SADC FTA countries
PRODUCERS/EXPORTERS EXPORTERS/IMPORTERS
• Wider source of products for trading
• Expanded market for goods & Services
• Cross border activities increased from various trade facilitation instruments
• Non Tariff Barriers to trade eliminated
• Movement of persons facilitated
• Zero/reduced duties for inputs
• Identified NTBs removed
• Source cheaper raw materials qualifying under Rules of origin
• Source intermediate goods for further processing
• Reduced costs of production
• Wider market for qualifying goods and Services
• Trade Facilitation instruments
FTA benefits to Business
Non Tariff Barriers to trade being eliminated (Online NTBs Monitoring Mechanism being implemented at Tripartite level www.tradebarriers.org
Harmonisation & Simplification of Rules of Origin
Enlarged market and supply of production inputs
Bilateral Trading Arrangements within the FTA provides more preferences e.g.
Access duty free raw materials goods (intermediate, finished) for production
Opportunities From FTA
These are a set of agreed criteria used to establish degree of processing,
and origin of goods produced within SADC Member States and are therefore entitled to tariff preference
Common Rules applicable to COMESA and SADC FTAs
Wholly produced products made from materials obtained from within the region. •Cumulating rule – Goods produced using raw materials originating in the region are deemed originating from the Member State where final processing/Manufacturing took place•Sufficiently worked/processed-Must meet the following:-Regional value content test (import content or value addition criteriaChange of tariff heading (HS Tariff classification)Produced within the region and classifiable after processing.
What Are Rules of Origin (RoO)
Women and Trade in the FTA?
Gender inequality is still a challenge in SADC; (Inequalities transcend trade sector)
Inequality manifests in Lack and Loss of economic and Development Opportunities
Women generally un aware of initiatives towards Regional Integration and benefits thereof due to unfavourable education levels, widening technological and digital divide etc.
Policy and regulatory frameworks established in COMESA, SADC and EAC treaties, protocol provisions on gender mainstreaming and Trade.
Trade facilitation instruments developed to benefit women e.g. simplified trade documentations, awareness campaigns
Specific targets to improve standard of living by women and youths embedded in Trade development programmes
Regional Integration- Gender Mainstreaming
TRIPARTITE – 42OMILLION GDP=
COMESA
SADC
SACU
EAC
MARKET POTENTIAL
Goods must meet Rules of origin
Wholly Originating goods ( Agricultural products , minerals, wood, live animals, Fresh water fish, Matemba; cotton based products;
Semi processed- Leather & leather products, cotton based, ginned wool, clothing (Safari, children's
Change of Tariff Heading- Manufactured products
Qualifying Criteria for Preferential Treatment Tradable Goods under FTAs
Anchor in Zimbabwean economy Utilise existing capacity in manufacturing, services and
agricultural processing, farming Bring in capital into sectors with regional trading
potential ( Processed foods, drink and beverages; manufactured tobacco; leather & leather products, cotton based textiles & clothing; wood & furniture)
Trade in services ( Finance, real estate, construction; Commercial transport & logistics; tourism)
Micro financing to complement formal banking Joint Ventures ( refer to ZIA for potential sector:
www.zia.co.zw Regional base – Setup base in FTA countries and produce for local market manufacture for export into and outside region; trade in services e.g. consultancy; transport; tourism;
construction
ENTRY POINTS FOR DIASPORA
Government Commitment to
Support agriculture sector
Rehabilitation and maintenance of run down infrastructure for utilities ( Power, water, roads
Improving access to basic social services by the poor population including women and youths (education, health and social protection)
Favourable investment policies
Private /Public sector partnerships policy
Legal and regulatory framework at national level
Enabling Environment
Agricultural Mechanisation Finance New farming technologies Refurbish Agricultural equipment and supply regional
markets- (Zambia, Mozambique; South Africa ) Manufacture of agricultural implements for small farmers in
the region
Manufacturing and processing- (leather products, steel fabrication, furniture, cotton based textiles & clothing, food processing , engineering; irrigation equipment, motor vehicle spares,
Value addition- agricultural produce and commodities, mining ,
Agricultural products imported into region traded duty free include: tea, coffee, spices,cereals,fruit, seed, vegetables, tobacco
Invest in What?
TRIPARTITE FREE TRADE AREA
Websiteswww.comesa.int
www.eac.org
www.sadc.int
www.sacu
www.trademarksa.org
www.tradebarriers.org