Zimbabwe’s Foreign Trade Performance During the Decade of Economic Turmoil
Will Exports Recover?
Bartlomiej Kaminski and Francis Ng
2/2/2011
Key words: Zimbabwe’s economy, macroeconomic stability and policy, economic governance, foreign trade performance, export competitiveness, natural resources, factor intensity, revealed comparative advantage, export specialization
JEL classification: F10, F13, F14, O11, O13, O24
A revised version of a background paper prepared for Zimbabwe’s Diagnostic Trade Integration Study in Africa Region (AFTP1). Without in any way asking them to share responsibility for opinions and interpretations expressed in this paper or for errors that might remain, the authors are grateful to Angelica Katuruza, Praveen Kumar, Sydney Mabika, Gift Mugano, Simon Nyarota, for their useful comments and suggestions on the draft of this report. In particular, we would like to thank Ian Gillson for numerous discussions and involvement in all stages of our work on this project. E‐mails of correspondence: "Bart Kaminski"<[email protected]>; “Francis Ng”<[email protected]>
Political instability and economic mismanagement have extracted a heavy toll on Zimbabwe’s economy. Over the last decade or so, traditional surpluses in agricultural products and industrial raw materials have either diminished or disappeared turning Zimbabwe into a net importer of agricultural products. The volume of exports has been in decline each year since 1998 while both contracting exports and imports have shifted away from the EU to the South African market. Yet, considering the extremely poor quality of Zimbabwe’s economic governance and the anti‐foreign trade bias of its institutions and economic policies, it is rather surprising that all exports—except for food products—have not contracted more. Following the restoration of macroeconomic stability in 2009 after more than a decade of inflation and hyperinflation, the major barrier to economic activity has been removed. Yet, macroeconomic stability alone will not put the economy on the path of sustained growth unless weaknesses in the country’s investment climate are addressed. The damage inflicted by a decade of ill‐conceived economic policies has been huge but it can be reversed once policies conducive to the revival of specializations in line with Zimbabwe’s endowments in natural resources, relatively high quality of human capital and attractive natural environment are in place.
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Contents Executive summary ................................................................................................................................... 4
Introduction .............................................................................................................................................. 8
A. Determinants of foreign trade performance: governance and macro‐instability ............................ 8
B. Observations derived from empirical analysis of Zimbabwe’s foreign trade ................................. 10
C. Structure of the report .................................................................................................................... 12
1. Zimbabwe’s lost decade: economic governance, macroeconomic disequilibria and other self‐
inflicted wounds ...................................................................................................................................... 14
1.1. Quality of economic governance in 1996‐2009 in a comparative perspective ........................... 14
1.2. Economy in a frenzied free fall in 1999‐2008: implications for foreign trade ............................. 18
1.3. Zimbabwe’s foreign trade performance in a regional perspective.............................................. 25
1.4. Concluding observation ............................................................................................................... 27
2. Highlights of Zimbabwe’s trade performance: openness, dynamics, and direction of trade ......... 29
2.1. Deceptive increase in openness ................................................................................................... 29
2.2. Trade in services: transportation and tourism ............................................................................ 31
2.3. Dynamics of foreign trade in goods in 1997‐2008 ....................................................................... 34
2.4. Zimbabwe’s export rebound in 2003‐07: was it price‐led or quantity‐driven? ........................... 36
2.5. Changes in Zimbabwe’s direction of trade: a shift in exports from the EU towards Southern
African markets ................................................................................................................................... 41
2.6. Zimbabwe’s export performance in regional markets................................................................. 44
2.7. Concluding comment ................................................................................................................... 45
3. Drivers of Zimbabwe’s trade performance: evolving patterns of specialization ............................ 47
3.1. Diversity in exports has declined ................................................................................................. 47
3.2. The degree of processing embodied in exports and imports ...................................................... 49
3.3. Agriculture and agro‐processing: contraction of net exports ...................................................... 53
3.4. Factor and technology content of foreign trade and revealed comparative advantage ............. 55
3.5. Victims and survivors: new and vanishing specializations ........................................................... 59
3.6. Revealed comparative advantage: predictable shifts from agriculture to extractive sectors ..... 62
3.7. Conclusion .................................................................................................................................... 69
4. Moving forward: how to revive exports? ....................................................................................... 71
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4.1. Restoration of macroeconomic stability: its initial impact and the challenge ahead .................. 73
4.2. A new setting for foreign trade policy: implications of the multi‐currency regime .................... 75
4.3. Expanding the export base calls for new investments but barriers persist ................................. 79
4.3. Conclusion .................................................................................................................................... 82
References .............................................................................................................................................. 84
Appendix 1: Note on foreign trade reporting in Zimbabwe ................................................................... 87
Appendix 2: Note on geography‐ and policy‐induced costs of trading across borders .......................... 99
Appendix 3: Taxation as the most binding formal constraint to do business in Zimbabwe ................. 103
Statistical Annex .................................................................................................................................... 106
Tables
Table 1: The values of aggregate quality of governance (SAG) indices for Zimbabwe and selected SADC countries in
1996, 1998, and 2002‐09 ............................................................................................................................................. 15
Table 2: Dimensions of economic governance quality in Zimbabwe in1996, 1998, 2000, 2002‐09 ........................... 16
Table 3: Exports of selected minerals in terms of volume and value in percent of their peak performance and share
in total exports in 2010 (in percent) ............................................................................................................................ 20
Table 4: Imports of capital equipment and FDI flows to Zimbabwe and Zambia in 1995‐2008 (in millions of US
dollars) ......................................................................................................................................................................... 23
Table 5: Foreign trade growth performance of selected Sub‐Saharan African countries in 2001‐08 (in millions of US
dollars, dollars and percent) ........................................................................................................................................ 26
Table 6: GDP and its growth in real and value terms according to different sources over 1998‐2008 (in millions of
US dollars and percent) ............................................................................................................................................... 30
Table 7: Zimbabwe’s trade in services in 2000 and 2008‐2010 (in millions of US dollars) .......................................... 31
Table 8: Receipt from international tourism according to Zimbabwe’s balance of payments statistics and the World
Bank’ world development indicators database in 2000‐08 ......................................................................................... 33
Table 9: Exports and imports of goods in terms of value and exports in percent of imports in 1997‐2008 (in millions
of US dollars) ............................................................................................................................................................... 35
Table 10: Three phases of export growth in 1990‐2008 (in percent) .......................................................................... 36
Table 11: Exports of selected commodities and total exports as reported by Zimbabwe’s authorities and importers
of Zimbabwe’s products in 2000‐08 (in current prices)............................................................................................... 36
Table 12: Major Zimbabwe’s exports in terms of natural units in 2000‐08 ................................................................ 37
Table 13: Prices of major Zimbabwe’s exports in 2000‐08 (in US dollars per unit) ..................................................... 38
Table 14: Cumulative annual change in prices and quantities exported in 2001‐08 and 2003‐07 (in percent) .......... 39
Table 15: Total values of exports of selected commodities expressed in constant quantities and prices in 2000‐08
(in millions of US dollars) ............................................................................................................................................. 40
Table 16: Direction of trade in 2000‐08 (in millions of US dollars and percent) ......................................................... 42
Table 17: Exports to neighboring countries, EU‐27 and ROW in 1997‐2008 (in millions of current US dollars and
percent) ....................................................................................................................................................................... 44
Table 18: Zimbabwe’s export performance in neighboring countries in 2000‐08 (in percent) ................................... 45
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Table 19: Various indicators of concentration in 1994, 1997, 2002, 2007 and 2008 (in percent and numbers) ........ 48
Table 20: Shares of top ten in total exports and values of Herfindahl‐Hirschman index of total exports and of
exports to South Africa and European Union: four‐digit SITC items ........................................................................... 49
Table 21: Developments in Zimbabwe’s exports in terms of end‐use product categories ......................................... 50
Table 22: Developments in Zimbabwe’s trade by end‐use product categories in selected years over 1997‐2008 (in
millions of US dollars and percent) .............................................................................................................................. 51
Table 23: Direction of Zimbabwe’s exports by end‐use to South Africa, European Union and rest of the world in
1997 and 2008 (in percent) ......................................................................................................................................... 52
Table 24: Net exports of raw food and agricultural products in 1997‐2008 (in current millions of US dollars) ......... 54
Table 25: Change in factor content of Zimbabwe’s trade in goods in 1994‐97, 1997‐2003 and 2002‐07 .................. 56
Table 26: Exports in terms of technology intensities in 1997 and 2002‐08 (in millions of US dollars and percent) ... 58
Table 27: Dynamics of Zimbabwe’s trade in terms of technology and factor intensities in 1994‐97, 1998‐2002,
2003‐07, and 2008 (in percent and millions of dollars) ............................................................................................... 59
Table 28: Victims and survivors in 2008 against the average in 1994‐97, 1998‐2002 and 2003‐07 (in millions of US
dollars and four‐digit SITC product lines) .................................................................................................................... 61
Table 29: Low technology labor intensive products with the values of RCA exceeding unity in 1997 and 2008 ........ 62
Table 30: Resource intensive products with values of RCA exceeding unity in 1997 and 2008 ................................. 63
Table 31: Export specialization in South African and EU markets in 1997, 2002 and 2007‐08: number of SITC three‐
digit products with values exceeding unity in terms of technology, natural resource and labor content .................. 64
Table 32: Agricultural ‘losers:’ values of RCA and exports in 1997, 2002‐2008 (in millions of US dollars) ................. 65
Table 33: Exports and values of RCA of three‐digit SITC manufactured products that lost comparative advantage in
world markets in 1997‐08 and their technology and factor content .......................................................................... 66
Table 34: Exports of three‐digit SITC sectors that acquired revealed comparative advantage in 2007‐08 (in millions
of US dollars in 1997 and 2002‐08) ............................................................................................................................. 68
Table 35: Projected exports of selected agricultural and non‐agricultural commodities in current prices and
volumes in 2010 (in percent) ....................................................................................................................................... 74
Table 36: Zimbabwe’s exports and imports of sensitive agricultural and non‐agricultural products in 2002‐09 (in
percent) ....................................................................................................................................................................... 77
Figures
Figure 1: Moving in different directions: Zimbabwe’ quality of economic governance against that of Mozambique
and Rwanda in 1996,1998, 2000, 2002‐09 .................................................................................................................. 16
Figure 2: FDI in Zimbabwe and Zambia in 1994‐2009 (in millions of US dollars) ........................................................ 22
Figure 3: Two different tales: Imports of machinery and equipment (index 1996=100) and FDI into Zimbabwe and
Zambia in 1994‐2008 (index 1997=100) ...................................................................................................................... 23
Figure 4: GDP and foreign trade in US dollars per capita and percent in 1997‐2000 and 2003‐08 ............................ 30
Figure 5: Zimbabwe’s exports and imports of goods in 1997‐2008 (in millions of current US dollars) ....................... 34
Figure 6: Exports to neighboring countries, EU‐27 and ROW in 1997‐2008 (in millions of current US dollars) .......... 43
Figure 7: Developments in trade balances of traditional inputs and Zimbabwe’s total trade balance in 1994‐08 (n
millions of US dollars) .................................................................................................................................................. 51
Figure 8: Exports of low‐technology labor intensive products, resource intensive and medium to high‐tech products
in 1994‐2008 (in millions of US dollars) ....................................................................................................................... 58
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Executive summary
The objective of this report is to provide preliminary answers to three intertwined questions that are
essential to the development of a strategy that would boost Zimbabwe’s foreign trade performance:
How a decade of economic chaos has affected Zimbabwe’s export base? Whether lost export capacity
can be restored? And what policy actions are now necessary to set Zimbabwe on a path of sustained,
export‐led growth?
The short answer to these questions can be summarized as follows:
As a result of economic policies pursued in 2000‐09, exports of goods in terms of quantities are well
below the levels achieved in the 1990s, albeit with some notable exceptions discussed below, and
the balance of trade has been in deficit since 2006. For services, revenue from tourism has increased
steeply over 2009‐10 to reach the levels previously recorded in the 1990s, which has helped
somewhat in offsetting significant expenditures associated with the costs of transporting goods into
Zimbabwe. But it also suggests that the potential for double‐digit growth in this sector, at least in
the short‐term, has probably already been exhausted;
Despite significant contractions in the real output of exporting sectors, not all capacities have been
lost and some can be restored relatively quickly. The most affected sectors were labor intensive
agriculture and miscellaneous industrial sectors. Less affected were capital intensive extractive
industries. Output of tobacco can be probably increased in a relatively short period, as can agro‐
processing.
Restoration and the development of new export capacities requires an overhaul of existing
economic policy. In particular, without the removal of policy barriers to domestic and foreign
investments, the development of a diversified exports base will not be realised.
However given the extent of current bottlenecks, their removal may (a) be relatively straightforward
assuming political commitment; and (b) release powerful forces stimulating economic activitity.
Put differently, the payoff from economic reforms can be quick and significantthanks to an existing
dissonance between the country’s endowments and its subpar performance.
These observations derive from an empirical analysis. The diagnostics underlying them may be usefully
divided into two groups: foreign trade performance and economic governance.
Foreign trade performance While there is a commonly shared view in Zimbabwe that the main problem facing the economy is
underutilized production capacity in most sectors, an examination of Zimbabwe’s export performance
does not provide empirical support to this view. The exports base has shrunk, although probably less
than data on the contraction of GDP might suggest. Exports and imports have undergone a huge
transformation during the period of economic turmoil in 2000‐08. These changes can be summarized as
follows:
The contraction in exports and imports was quite substantial although not as large as the fall in real
GDP per capita:
o Had Zimbabwe exported the same quantities in 2008 as it did in 2000, the value of its
exports would have been around 50 percent higher than they were in 2008. In real terms,
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exports in 2008 were significantly lower than a decade earlier. In 2000 prices they were at
least 30 percent lower in 2008 than in 2000;
o Had Zimbabwe’s exports grown at the region’s average, their value in 2008 would have been
2.3 times higher than they actually were. Zimbabwe’s share in the region’s exports fell from
5 percent in 2000‐02 to 3 percent in 2005 and, further, to 2.2 percent in 2008. In order to
retain its export share in 2002, the value of exports in 2008 would have had to be US$5
billion or around 2.3 times higher than it actually was that year;
o Had imports grown in line with the region’s average, the value of imports would be 1.8 times
higher or US$4.7 billion rather than US$2.7 billion in 2008. The contraction of imports has
been less pronounced than that for exports. Relative to other countries in the region, the
share of Zimbabwe in the region’s imports fell from 3.8 percent in 2000 to 2.2 percent.
o Consequently:
Zimbabwe’s trade openness as traditionally defined has paradoxically increased. The
fall in GDP per capita there was accompanied by an increase in foreign trade as a
percent of GDP solely because both exports and imports per capita did not fall as
steeply as GDP.
Deficits in goods trade replaced earlier surpluses. Zimbabwe ran a significant trade
surplus in 1999‐2005 followed by growing deficits in goods trade. Export coverage of
imports fell from 130 percent in 2000 to 83 percent in 2008 and 51 percent in 2009.
The structure of Zimbabwe’s exports has changed rather substantially mainly as a result of
differences in the pace of contraction of different product groups as well as both exit and entry of
exporters;
o The contraction in agricultural exports was much more pronounced than in exports of
minerals. Industrial raw materials replaced agricultural foods and feeds as major exports in
2005: the value of exports of agricultural foods and feeds fell from around US$1 billion in
1997‐2001 to US$400 million in 2005 while that of industrial raw materials rose from around
US$150 million to US$400 million in 2005 and US$800 million in 2008;
o The contraction in exports has been accompanied by a shift from low‐technology unskilled
labor‐intensive to non‐processed natural resource‐intensive products with the share of
medium to high technology exports remaining unchanged;
o The degree of processing embodied in Zimbabwean exports has remained unchanged as one
set of products (industrial raw materials) has replaced another (food and feeds), both being
low value added traditional inputs;
o … while the concentration of Zimbabwe’s exports has increased dramatically especially to
Zimbabwe’s two major markets (South Africa and the European Union) e.g.
The number of SITC four‐digit exports exceeding the value of US$1 million has
steadily fallen from 140 in 1994‐97 to 133 in 2003‐07 and 114 in 2008;
The values of the Herfindahl‐Hirschman Index of export concentration for:
South Africa‐destined exports surged from an average of 0.018 in 1994‐97
to 0.19 in 2003‐07 and 0.22 in 2008;
EU‐destined exports increased from 0.11 in 2003‐07 to 0.14 in 2008.
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Zimbabwe’s foreign trade has also undergone a fundamental change in terms of its geographic
composition triggered by a redirection of trade to its neighbors, mainly South Africa, at the expense
of falling exports to the EU and the rest of the world. Zimbabwe is the second most trade dependant
economy in Southern Africa. The turning point was in 2003, when the value exports to its neighbors
increased 53 percent in that year alone overtaking exports to the EU, which contracted 9 percent:
o The shift in the geographical pattern of Zimbabwe’s trade was therefore not triggered by
expanding exports. Redirection of Zimbabwe’s exports has been due to a redirection of
exports from the EU to South Africa. The change in the geographical pattern of Zimbabwe’s
imports has been less pronounced, yet displays striking similarities with those for exports.
The share of South Africa in Zimbabwe’s total imports was 63 percent in 2008 and much
higher than its exports (34 percent).
Quality of economic governance Zimbabwe’s economy was in the state of a free fall in 1999‐2008: its GDP was falling every year while
inflation was increasing to reach an astronomical 500 billion percent in 2008. The introduction of the
multi‐currency regime in April 2009 marked a turning point not only in restoring macroeconomic stability
but also because it ended trade suppressing foreign currency regulations and other confiscatory
measures.
The major findings concerning the evolution of the quality of economic governance over the last decade
can be summarized as follows:
The quality of economic governance as measured by regulatory quality, political stability, and
government effectiveness dramatically deteriorated. Zimbabwe moved from an average performer
in the regional context in the 1990s to a poor one already in 2000. Subsequently, the quality of
economic governance continued falling, elevating Zimbabwe to one of the worst run and least
competitive economies in the world.
Despite the restoration of macroeconomic stability in 2009, the quality of economic governance has
not significantly improved according to various international rankings. Reasons include poor quality
of economic regulations and disregard of the government for private property rights as exemplified
by its indigenization program prompting capital flight and erecting new barriers to foreign direct
investment.
While other countries in the region have introduced economic reforms and seen significant
improvements in the quality of their business environments, Zimbabwe was moved in the opposite
direction. Ease of doing business has deteriorated in all dimensions and lags behind most other
countries.
Not surprisingly, the incidence of corruption, as captured by Transparency International’s corruption
perception indices, has moved in step with the deterioration in the quality of economic governance.
Despite notable improvement in 2009, Zimbabwe remains perceived as the most corrupt country in
the region.
Macroeconomic stability alone will not revive exports: policy reforms and new investments will Most constraints in Zimbabwe are policy‐induced weaknesses whose removal does not require
significant amounts of time or resources, and so could be relatively quickly addressed provided there is
political commitment to liberal economic reform which is indispensable to revive growth and reduce
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unemployment. Complementing macroeconomic stability with measures friendly to private sector
development would go a long way to boosting economic growth in the country.
This calls for the development of a comprehensive program of economic reforms that would address all
aspects of Zimbabwe’s economic regime. Without significantly reducing regulatory hassle and the fiscal
burden of conducting business in Zimbabwe, the revival of labor‐intensive exports will be impossible.
Reform is not only necessary for job creation but also to alleviate the very real risk that the country will
become even more dependent on foreign aid and continue under‐performing relative to its significant
potential.
However, the reversal in economic fortunes in any significant way is not likely to be achieved without
inflows of FDI (foreign direct investment). FDI has stayed away from Zimbabwe for the last ten years
going to its neighbors instead. Without a dramatic increase in FDI inflows, modernization of Zimbabwe’s
extractive and manufacturing sectors will simply not occur.
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Introduction The Global Political Agreement (GPA), signed on September 15, 2008, and the introduction of a multi‐
currency regime in April 2009 have provided a modicum of political certainty and restored
macroeconomic stability. The latter put an end to hyperinflation and removed some of the most
damaging measures introduced during the economic chaos in 2000‐09. A key question is whether these
measures will suffice to restore economic growth and boost exports?
A. Determinants of foreign trade performance: governance and macroinstability This study provides an indirect answer to this question through examining both economic governance
and foreign trade performance. At the most general level, the answer is that macroeconomic
instabilities were not the sole cause of Zimbabwe’s disastrous economic performance. Instead, it was
also the product of low quality of economic governance and the government’s disregard for private
property rights. Government policies have failed to strike a balance between redistributive functions
and growth generation. Rent‐seeking behavior, aimed at transferring or keeping wealth thanks to
political connections, was encouraged while activity that increases the economic pie was suppressed.
Restoration of macroeconomic stability without setting institutions that “reward socially useful
entrepreneurial activity once started (…) as otherwise individuals cannot be expected to take the risks of
losing their money and their time in ill‐fated ventures” (Baumol et al. 2007, p. 7) will fail to produce
sustainable economic growth.
At a more pedestrian level, another cause of the country’s poor growth record is that Zimbabwe has not
had institutions and structures supporting protection of property and contract rights combined with a
low cost of doing business, i.e., easiness to enter and exit business activities, low taxation and regulatory
compliance cost, high flexibility of labor markets, and a reasonably well‐functioning financial system.
Only under these conditions, could firms have had incentives to expand and cut costs in order to stay
competitive.
Indeed, all success stories of economic development over the last two decades have been based on
export‐oriented policies combined with business‐friendly environment, political and macroeconomic
stability, and low or declining barriers to imports of goods and services, and openness to FDI inflows.
Successful countries have also developed infrastructure commensurate with growth in internal demand
for inputs and for expanding transportation of goods, storage facilities and ports. Zimbabwe appears to
score satisfactorily in terms of physical access to external markets. Its major urban and industrial centers
are linked with paved roads and railroads both tied into an extensive central African transportation
network with all its neighbors.
But the government has so far failed to follow up on opportunities stemming from restoring macro‐
economic stability. It has been acting as though macroeconomic stability by default would end under‐
utilization of capacities and restore employment. The problem is that some human capital might have
been lost as a result of long‐term unemployment. More importantly, as our analysis of Zimbabwe’s
exports performance suggests, these production capacities may no longer exist. The scope of firms
engaged in export activities significantly declined in the 2000s. Some survived by selling in domestic
markets, but even those that did did nowbadly need new capital investment to stay competitive. High
real interest rates combined with an unfriendly investment environment do not make these investments
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possible. Except for the removal of some restraints on current business activities (e.g., the foreign
currency surrender requirement, foreign exchange controls), there has been no improvement in the
investment climate. Put differently, the quality of Zimbabwe’s business environment has improved but
only marginally as other barriers that put Zimbabwe at the bottom of several international rankings have
remained in place.
The size of Zimbabwe’s economic reversal was unprecedented during peacetime, so the pace of
rebound should be without precedent had the issue been of only activating existing capacities. GDP per
capita contracted by around half and so did Zimbabwean exports and imports. Agricultural exports
collapsed. Minerals and low processed industrial raw materials have replaced them as Zimbabwe’s
largest exports, despite the contraction in terms of volumes exported. Exports of manufactured goods
stagnated in terms of value and fell in terms of quantities. And the unemployment rate hovered at
around 70‐80 percent. Under these circumstances, one would expect strong economic growth had the
only barrier been the absence of macroeconomic stability. But this is yet to take place. Zimbabwe’s GDP
growth of 5 percent in 2009—albeit the first recorded expansion since 1998—and the projected GDP
growth of 5.4 percent in 2010 strikes one as rather modest considering the unprecedented size of the
country’s economic contraction.
It is tempting to compare Zimbabwe with the economies that transitioned from central planning
following the collapse of the Soviet bloc in 1989‐2001. There are some things common to them, but
there are many other features that put them aside from Zimbabwe. The most common theme is that
both crises were human‐made, i.e., they were the result of wrong institutions and bad economic
policies. By the same token, nothing short of a complete overhaul of the economic regime could revive
the economy. But the similarities end there as reformers in the Soviet bloc recognized that the whole
framework of economic policy making had to be overhauled while Zimbabwean policy makers appear to
be unable to recognize the contribution of their economic policies and institutions to the collapse of
national economy. While radical reformers in Central Europe quickly overhauled excessive regulations
and liberalized foreign trade and foreign investment regimes, Zimbabwe is yet to recognize that
economic revival calls for similarly deep and bold measures.
Policies, rather than external and infrastructural constraints, remain responsible for Zimbabwe’s
performance which remains well below its potential. Like Central European transition economies,
Zimbabwe borders a much higher developed economy, South Africa. Although land‐locked, Zimbabwe
does not suffer from—to use Paul Collier’s phrase (2007, p. 5)—the “trap of being landlocked with bad
neighbors.” Both Botswana and South Africa have superb quality of economic governance by world
standards and rate highly in trade logistics. While Mozambique and Zambia rank lower than them,
neither of these countries has a dysfunctional government.1 Not unlike Central European transition
economies, Zimbabwe also has high quality human capital relative to other countries in the region. Its
1 According to the World Bank’s survey of the cost of doing business in 2010, Zimbabwe ranked third in the world in terms of the highest cost of importing and exporting after Chad and Central African Republic. But traders from Zambia, Zimbabwe’s north‐eastern neighbor, paid 35 percent less for imports and 19 percent less for exports per container. This clearly cannot be explained by geography alone.
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workers are praised in neighboring countries for their work ethics and the country does not seem to
suffer from a shortage of entrepreneurial talent.
Thus, broadly conceived quality of economic governance remains Zimbabwe’s biggest problem choking
off foreign trade and economic growth. It rather dramatically deteriorated in 1997‐2008 and the
incidence of corruption has been on the rise since 1997‐98. Zimbabwe’s fall to the bottom of various
international rankings In the 2000s points to a very unfriendly business and investment climate. Indeed,
in nominal terms, FDI inflows peaked in 1996 at US$52 million, fell to US$28 million in 1997 and
subsequently never exceeded US$10 million averaging barely 0.06 percent of the GDP.2 Domestic
investments were also very low. Zimbabwe suffers from the trap of bad governance. While in the
presence of geographical barriers, poor infrastructure and a shortage of entrepreneurial skills,
improvements in institutions and policies can do little to put a country on a path of sustainable
economic growth. But these barriers are not particularly binding for Zimbabwe. With literacy rates at
over 90 percent Zimbabwe has a population better educated than the average in Africa. Moreover,
climate, fertile soil and ample endowments in natural resources, all create huge opportunities for export
activity.
Yet, despite its many assets, Zimbabwe has failed in generating economic growth throughout most of
the period covered by this study, i.e., 1994‐2008.3 The last decade or so was largely a lost decade in
terms of economic development. Zimbabwe got stuck in a low‐income trap suffering from pervasive
corruption, gross economic mismanagement and political instabilities. Financing the budget deficits
through printing money led to hyperinflation that would reach 231,000,000 percent in July 2008 until
the local currency was abandoned as “…the printing press was not able keep pace with the expansion of
local currency” (IMF 2009: p. 7). Cash shortages and a significant divergence between the parallel cash
and electronic transaction exchange rates led to the official adoption of hard currencies for transactions
in early 2009. Faced with shortages of foreign currency triggered by poorly designed economic policies
(e.g., allocation of foreign exchange at subsidized exchange rates to parastatals and poor farmers), the
authorities introduced measures (surrender requirements on exports proceeds, the retention of foreign
exchange earnings above mandatory surrender levels, and the confiscation of foreign currency deposits)
further suppressing foreign trade activities. Furthermore, the government’s program of seizure of white‐
owned farms by squatters and forced land‐acquisition program expelling around 3,000 white farmers in
2000‐02 dealt a blow to the agricultural sector, traditionally, a backbone of the Zimbabwean economy.4
B. Observations derived from empirical analysis of Zimbabwe’s foreign trade Zimbabwe provides a textbook illustration of the negative impact of economic mismanagement and
political instabilities on foreign trade performance. An empirical investigation of developments in
Zimbabwe’s foreign trade performance leads to the following major observations. First, paradoxically
foreign trade has turned out to be more resilient to the folly of economic policies than overall economic
2 Derived from data in UNCTAD ‘s FDI database. 3 The availability of foreign trade data from external sources has determined the time coverage of this analysis, as the reliability of Zimbabwe’s statistics leaves much to be desired. 4 For a detailed timeline of critical events in the history of Zimbabwe, see British Broadcasting Corporation’s website at http://news.bbc.co.uk/2/hi/africa/country_profiles/1831470.stm (accessed on May 31, 2010).
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activities as captured by the GDP. The openness of Zimbabwe’s economy significantly increased in 1998‐
2008 as GDP per capita was falling faster than foreign trade. Both exports and imports per capita in
current prices recorded a modest positive growth during this period. These developments produced an
intersection of two linear trends of falling GDP and rising share of foreign trade in the GDP crossing at
around 2004‐05. In all, Zimbabwe’s export performance over the last decade has been lackluster, albeit
quite impressive when cast against its dismal economic growth performance.
Second, viewed in a longer perspective of the last two decades, one may distinguish three phases in
Zimbabwe’s export performance: phase of growth in 1990‐97; phase of contraction in 1998‐2002; and
the phase of moderate recovery in 2003‐07, although only in terms of the value of exports, which came
to a halt in 2008 when exports fell 8 percent. External factors were decisive: 2002‐03 marked the
beginning of the five‐year commodity boom notable for its exceptional duration, the number of
commodities involved, and the heights that prices reached reflected the resilience of developing country
growth during this period (WB 2009). Zimbabwe has failed to take advantage of opportunities offered by
the boom. Its exports in 2008 would have been around 30 percent higher had it exported the same
amounts as in 2000. It also underperformed vis‐à‐vis its neighbors, as its share in total exports of
neighboring SADC countries fell from 5 percent in 2000‐02 to 3 percent in 2005 and further to 2.2
percent in 2008.
Third, the differences in exports growth performance between the 1990‐97 and 2003‐07 phases raise
concerns over the depletion of levers of growth in the future. Zimbabwe’s exports have become less
diversified and increasingly concentrated on products with low level of processing and high natural
resource content. This does not augur well for the future export growth performance unless some
measures encouraging the development of the internationally competitive private sector are taken.
Fourth, there are strong indications that the industrial base supporting exports has significantly shrunk.
Consider the following: the share of capital equipment in total imports fell from around one third in
1990‐98 to around one‐fifth in the 2000s; the degree of processing embodied in Zimbabwe’s exports fell
in the 2000s as exports shifted towards industrial raw materials and resource intensive products; so did
the technological content marked by a dramatic shift from low technology labor intensive products to
natural resource‐based products; export offer has become less diversified with the fall of the number of
products with exports exceeding US$500 thousand; and net exports, as measured by the difference
between exports of a product and its imports, have been rapidly falling.
Fifth, Zimbabwe’s surplus in trade in natural resource intensive products has fallen rather dramatically
mainly due to the combination of falling exports of foods and feeds and their rising imports. While
exports coverage of imports was on average 510 percent in 1994‐97, it fell to 224 percent in 2002‐07
and 164 percent in 2008. Put differently, Zimbabwe exported around five times more natural resource
intensive products in 1994‐97 and more than twice as it imported in 2008. Surplus in trade of
agricultural foods and feeds fell from US$1.1 billion in 1997 to US$ 99 million in 2008. Excluding feeds,
Zimbabwe has moved from a net exporter to net importer of food. But its agro‐processing business
appears to have survived the economic chaos decade, although its base has been diminished.
Sixth, the rise to prominence of natural resources in Zimbabwe’s exports has not been the result of
different rates of expansion of products with different endowments in factors of production. Except for
12 | P a g e
natural resource intensive products, exports of human capital intensive products have been stagnant
and those of unskilled‐labor intensive products have been falling. Both developments are particularly
worrisome considering that Zimbabwe has a large pool of cheap skilled and unskilled labor.
Paradoxically, exports of unskilled labor intensive products experienced the second largest decline: its
negative LSG (least square growth) rate of 4.3 percent was larger than the pace of decline of capital
intensive exports of 4.0 percent but lower than that of skilled labor intensive products. However,
exports of skilled labor intensive recorded the largest decline in 2008. Their share in total exports fell
from an average of 6.4 percent in 2002‐07 to 3.2 percent in 2008.
Seventh, a great shift in geography of Zimbabwe’s exports from the EU to South Africa has taken place
since the beginning of this century. The shift in geographical patterns of Zimbabwe was not triggered by
expanding exports to its major external markets. Neither was it triggered by the surge in exports to all of
its neighbors as exports increased only to South Africa. The EU was taking almost half of Zimbabwe’s
total exports in 1994‐2000 and accounted on average for 24 percent of Zimbabwe’s imports during this
period. By 2008, these shares fell to 21 percent for exports and 7 percent for imports.
Hence, the change in direction amounted to redirection of exports from the EU to other countries,
mainly to neighboring South Africa. This was not the result of the emergence of new export capacity, as
exports in real terms were stagnant, if not falling, but a simple redirection as the presence of
Zimbabwean exporters in EU markets fell rather precipitously. So did it in other than South Africa
regional markets, albeit to a smaller extent.
Last but not least, contrary to what one might expect considering proximity of South African markets,
Zimbabwe’s South African‐oriented export basket has converged towards that of the EU‐oriented one.
In consequence, Zimbabwean total exports have become less diversified and increasingly concentrated
on a few minerals. While the traditional measures of concentration do not necessarily reveal it, as
Zimbabwean exports have always been dominated by a few large items—tobacco, nickel, the difference
is that the number of exported items above US$500,000 has significantly declined indicating the
disappearance of small and medium enterprises in the export sector.
C. Structure of the report The remainder of this report is organized as follows. The first chapter asks about links between the
quality of economic governance, overall economic performance and foreign trade performance in a
regional perspective. Chapter 2 provides a bird’s‐eye‐view of Zimbabwe’s foreign trade performance: it
ponders over the paradox of expanding economic openness, as traditionally defined by the percentage
of foreign trade in GDP, in spite of a disintegrating economy; it discusses developments in trade in
services; identifies three phases in Zimbabwe’s export development between 1994‐2008; and, assesses
the extent to which the last phase of moderate growth was driven by price‐increases; it compares
Zimbabwe’s trade performance with that of its neighbors; and, last but not least, it seeks to identify
changes in Zimbabwean geographical patterns of trade. Chapter 3 turns to an examination of change in
Zimbabwe’s exports in terms of patterns of specialization, factor intensities, degree of processing and
technology content. It also identifies losers and survivors of hyperinflation in 2002‐08 and seeks to
assess changes in revealed comparative advantage of Zimbabwean exports. The last chapter tries to
sketch prospects for a revival in exports: it argues that some traditional exports are still viable and those
13 | P a g e
that did survive the vagaries of economic policies in the 2000s could be expanded. But this will not come
by default, as serious policy‐induced barriers to reviving exports are still in place. These barriers go well
beyond trade policy: they stem from bad policies and a weak institutional framework. Without
addressing these key issues, prospects for export‐led growth are slim.
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1. Zimbabwe’s lost decade: economic governance, macroeconomic disequilibria and other selfinflicted wounds
Neither geography nor shortages of entrepreneurial talent and, more generally, high quality human
capital put up insurmountable barriers to Zimbabwean economic growth based on integration into
regional and global markets. Zimbabwe is amply endowed in natural resources and skilled labor, its
moderate climate is friendly towards agriculture, and, although it is landlocked, it has easy access to
seaports and cheap maritime transport. The question addressed in this section therefore concerns the
quality of economic governance. Leaving aside macroeconomic stability as a necessary condition for
staying on a path of economic growth, the quality of economic governance defined here broadly as a set
of institutions, regulations and policies assuring political stability, protection of property rights and
accountability of those in power. Good governance is critical to employment and economic expansion
because it is private enterprise that creates wealth and funds government, not the other way around.
1.1. Quality of economic governance in 19962009 in a comparative perspective In order to assess Zimbabwe’s quality of governance, an equivalent of government directive capacity, we
use the results of the World Bank’s “Governance” surveys systematically conducted since 1996, albeit
not on an annual basis.5 The international survey covering more than two hundred countries across the
world gives numerical estimates ranging between (‐) 2.5 (worst case) and (+) 2.5 (best case) together
with ranking in percentile6 for the following six dimensions of governance: voice and accountability,
political stability, government effectiveness, regulatory quality, rule of law and control of corruption. We
use the average of estimates of political stability, government effectiveness and regulatory quality as an
approximation of the quality of economic governance—hereafter referred to as a single aggregate index
of economic governance (SAG)—for two reasons. First, these indicators are critical dimensions of
business climate. Political stability impacts investment decisions and in extreme situations of its
absence, i.e., violence, it may completely disrupt economic activities. The inclusion of political stability
as a component of economic governance can be justified on the grounds of its influence on investment
decisions: political instabilities suppress private investment activities even more than macroeconomic
instabilities. More generally, democratization can be viewed as an investment in social capital improving
governance and economic growth performance. The quality of regulation is of little relevance unless
supported by a government having the capacity to enforce regulations, i.e., government effectiveness.
Second, three other indicators pertinent to such dimensions of governance as the rule of law, control of
corruption, and voice and accountability are not taken into account as they do not yield extra
information. They are strongly correlated with the selected three indicators, with the values of
correlation coefficients equal or above 0.97.
Table 1 presents values of the SAG index for selected SADC countries normalized for each dimension of
governance so that the best performer is 100 and the worst performer is zero. Thus, the scores for other
countries will show the distance separating them from the best and the worst performer in terms of the
quality of governance. In general, three groups of countries can be identified: decent performers with
5 For an explanation of methodology, see Kaufmann D., A. Kraay, and M. Mastruzzi (2007). 6 Percentile rank gives the percentage of countries worldwide (above 200 but their number has varied) that rate below the selected country (subject to margin of error) with higher values indicating better governance ratings.
15 | P a g e
the value of SAG above 60 percent; average performers with the values of SAG between 40 percent and
60 percent; and dismal performers with the value of SAG below 40 percent. South Africa (since 2000),
Botswana, Mauritius, and Namibia (since 2004), have decent levels of economic governance. The
remaining countries were within world median except for Zimbabwe, which slipped from this group
beginning in 2000. Zimbabwe’s quality of governance was already below the region’s average in 1996,
but it did not stand out as a pariah.7 Subsequently, there was a strikingly deep regress with Zimbabwe
replacing Rwanda as the worst performer among comparator countries (Table 1). The good news for
Zimbabwe is that its immediate neighbors—listed in Table 1, above the row with the data for
Zimbabwe—have rather good quality economic regimes: put differently, Zimbabwe—in contrast to a
number of other African landlocked countries—is fortunate in not being surrounded by ‘bad neighbors.’
Table 1: The values of aggregate quality of governance (SAG) indices for Zimbabwe and selected SADC countries in 1996, 1998, and 2002‐09
1996 1998 2000 2002 2003 2004 2005 2006 2007 2008 2009
Botswana 71.0 73.4 73.7 71.4 72.8 70.8 71.8 69.0 69.5 70.4 70.2
Mozambique 45.3 54.1 53.4 50.0 47.6 45.8 47.4 50.8 50.3 51.2 53.1
South Africa 49.9 57.8 62.0 61.8 62.7 64.6 64.8 65.5 65.1 64.3 61.5
Zambia 50.7 49.3 46.3 41.5 43.3 44.8 42.5 46.9 48.2 49.7 49.9
Zimbabwe 44.5 42.2 29.0 19.7 20.0 20.4 15.1 21.5 18.3 15.7 14.4
Malawi 46.8 53.2 49.2 45.4 46.1 46.0 45.8 43.9 47.5 45.7 46.2
Mauritius 65.7 71.1 70.4 68.9 71.3 69.4 69.2 69.7 71.0 73.7 70.6
Namibia 66.4 64.7 58.6 59.7 59.9 60.4 59.6 62.1 62.8 66.1 62.4
Tanzania 50.5 49.8 48.7 46.4 44.2 45.1 45.5 47.9 48.4 48.2 49.2
Memorandum:
Rwanda 12.0 24.6 30.3 28.6 34.5 38.0 34.5 43.0 45.7 47.9 48.2
Source: derived from data discussed in D. Kaufmann, A. Kraay, and M. Mastruzzi, 2009. Governance Matters VIII: Governance Indicators for 1996-2008 and available at www.worldbank.org/wbi/governance
The ground lost against other comparator countries has been outstanding. While Rwanda moved from
the value of SAG of seven percent in 1996 to a very respectable 48 percent in 2008‐09, Zimbabwe
moved in the opposite direction with the value of SAG falling from 45 percent to 14 percent over the
same time span. In order to appreciate how low this score is for Zimbabwe, bear in mind that Rwanda
was in 1996 only two years after the civil war ended and three years before its first local elections.8 In
order to appreciate the distance lost, compare Zimbabwe with Its Eastern neighbor, Mozambique, which
scored on a par with Zimbabwe in 1996 and stayed in an average group in the 2000s. As it can be seen in
Figure 1, it stayed the course making significant strides in building policy and institutional foundations of
competitive markets.
7 Zimbabwe scored also well below the countries listed in Table in annual rankings compiled under the “Index of African Governance” (earlier, in 2007‐08 named the Ibrahim Index of African Governance). For 2009 ranking based on data for 2008, consult the website http://www.worldpeacefoundation.org/africangovernance.html. For methodology and theory, see Rotberg and Gisselquist (2009). 8 The Tutsi rebels defeated the Hutu regime and ended the killing in July 1994. Domestic political stability has been solid, although under threat of several thousand Hutu insurgents operating out of the neighboring Democratic Republic of the Congo. Rwanda held its first local elections in 1999 and its first post‐genocide presidential and legislative elections in 2003.
16 | P a g e
Figure 1: Moving in different directions: Zimbabwe’ quality of economic governance against that of Mozambique and Rwanda in 1996, 1998, 2000, 2002‐09
Source: As in Table 1.
A closer look at the constituent dimensions of the SAG for Zimbabwe indicates that regulatory quality
has consistently negatively contributed to the value of the SAG as it has been lagging behind other
dimensions of governance—political stability and government effectiveness (Table 2). By 2006, the
government has become dysfunctional: its ability to implement measures has all but disappeared while
the quality of regulation has even further deteriorated. The latter, however, no longer mattered as the
government lacked the capacity to implement regulations. Excluding the value of regulatory quality
dimension, the average for other two dimensions would be 8 percent in 2008. Hence, although political
stability was maintained, the state became largely dysfunctional. And so did the economy with
hyperinflation and steeply falling aggregate output (see section 1.2).
Table 2: Dimensions of economic governance quality in Zimbabwe in1996, 1998, 2000, 2002‐09
1996 1998 2000 2002 2003 2004 2005 2006 2007 2008 2009
Political Stability 47.5 43.3 29.9 23.0 28.2 27.4 25.4 38.4 32.6 30.5 29.3
Government Effectiveness 43.8 40.3 31.5 31.1 29.5 30.7 22.0 22.7 22.5 14.8 13.9
Regulatory Quality 42.1 42.9 25.5 5.1 2.2 3.3 2.0 3.3 1.9 1.8 2.0
Source: As in Table 1.
Deterioration in governance quality has moved in tandem with creating new opportunities for rent
seeking. The incidence of corruption, as measured by Transparency International’s CPI (corruption
perception index) has also increased.9 By 2007 Zimbabwe became the most corrupt country amongst
comparators with the value of CPI falling from quite a respectable score of 4.2 in 1998 to 1.8 in 2008 as
compared with the average of four for the region (Annex Table 1). As the IMF (2009) report noted: “A
further deterioration in the business climate exacerbated the economic decline in 2008. A tightening of
price controls and exchange restrictions, a pickup in land invasions, the confiscation of foreign currency
deposits, and frequent changes in business regulations made it more difficult to conduct business in
Zimbabwe.” While other countries made progress in making conditions of doing business more
9 The corruption perception index (CPI) assumes values from one (maximum incidence of corruption) to ten (no corruption)
0
10
20
30
40
50
60
1996 1998 2000 2002 2003 2004 2005 2006 2007 2008 2009
Zimbabwe
Mozambique
Rwanda
17 | P a g e
transparent and kept the incidence of corruption at unchanged levels, Zimbabwe moved in the opposite
direction. But in 2009, the value of CPI moved up to a still very low score of 2.2: yet, this is the first time
that an improvement was noted and Zimbabwe’s score in terms of the average for comparator countries
raised from 45 percent in 2008 to 59 percent.
A weakened state and collapsing regulatory quality, also captured in the World Bank’s Doing Business
annual surveys,10 have raised transaction costs of conducting business activity and undercut the
competitiveness of Zimbabwe’s economy in global markets. According to the 2009 Africa
Competitiveness Report (ADB 2009) and Global Competitiveness reports (WEFA 2009), Zimbabwe was
ranked as one of the countries with the least competitive economy: it ranked 133rd on the overall Global
Competitiveness Index out of the 134 countries’ surveyed, scoring 2.9 points out of a possible 10. It was
ranked higher than only one country worldwide, Chad, also in earlier surveys 2007‐09 (WEF 2009). The
major reason was that since around 2000, the growing gap between government expenditures and
revenue was covered increasingly by printing money and implementing other business‐unfriendly
measures including expropriation of hard currency profits and administrative rationing of access to
foreign currencies.
Although Zimbabwe has a very long way to go in order to establish policies and institutions capable of
reversing the trend of economic decline, political and economic changes that took place in 2008‐09 have
already improved the quality of economic governance, which is yet to be captured in most international
assessments. Except for the Transparency International ranking, which duly registered improvement in
its measure of Corruption Perception Index, the verdict of other organizations on Zimbabwe has
remained unchanged.
Thus, it is rather surprising to note that two major events, i.e., signing on September 15, 2008 of the so‐
called Global Political Agreement (GPA), between the Zimbabwe African National Union‐Patriotic Front
(ZANU‐PF) and the two formations of the Movement for Democratic Change (MDC), on resolving the
challenges facing Zimbabwe, and an agreement adopted in April 2009, to abandon printing of the
Zimbabwean dollar, and replace it with the US dollar and the South African Rand did not have any
perceptible, positive impact on Zimbabwe’s rankings in 2009,11 although they, taken together, have
significantly altered the political and economic landscape in Zimbabwe. While the GPA has not lived up
to the task and despite complaints about a political stalemate, the current arrangement negotiated
under the GPA is clearly superior to the one existing prior to it. It is also not clear why dumping of the
Zimbabwean dollar was not enough to boost international assessments of the quality of economic
governance. After all, this has ended hyperinflation and has helped remove some restrictive regulations
directly linked with administrative attempts to contain hyperinflation (e.g., price controls, surrender
requirements). But, without some degree of macroeconomic and financial stability, the economy cannot
grow: it usually contracts. Hence, the introduction of a stable currency has been a huge improvement.
Both events have clearly improved Zimbabwe’s economic regime and contributed to political stability.
Yet, there are still reasons for concern. In particular, except for the removal of measures that became
redundant once local de‐based currency was dropped, not a single measure has been taken to address
10 For information, see the World Bank’s site at http://www.doingbusiness.org/. 11 To the contrary, the value of SAG declined in 2009.
18 | P a g e
other weaknesses of Zimbabwe’s investment and business climate. Macroeconomic and financial
stability are a necessary condition but not a sufficient one to ensure that current and potential investors
can retain not only the returns to their investments but also investments themselves, as the rule of law
remains capricious. Together with incentives, these are critical conditions to attract investments, both
domestic and foreign, that remain unmet so high levels of static and dynamic inefficiency in the
allocation of resources persist in the economy.
1.2. Economy in a frenzied free fall in 19992008: implications for foreign trade Zimbabwe’s economy, which was in a tail spin for almost a decade, has two dubious world records of
the early 21st century: highest inflation, or hyperinflation, and deepest contraction in aggregate output
experienced during peacetime. Some observers note, however, that the income loss in 1994‐2004 alone
exceeded even the income losses incurred by Côte d’Ivoire, Democratic Republic of Congo, and Sierra
Leone during their respective conflicts (Clemens and Moss, 2005). In 1996‐98, Zimbabwe was the fastest
growing economy in Africa; in 1999‐2008, it became the fastest shrinking economy in the world with an
average contraction of the real GDP of 6 percent per year. The trough appears to have been reached in
2008 with 15 percent fall in real GDP as compared to 2007, on top of 48 percent cumulative decline in
1999‐2007. The GDP in constant 2000 prices fell from US$8.3 billion in 1998 to US$4.3 billion in 2008. In
2009, real GDP increased 6 percent for the first time since 1998 and is projected to be 5.4 percent in
2010 (Figure 2).
Figure 2: Real GDP growth and contraction (in constant 2000 prices) and annual rates of inflation in 1995‐2008 (in millions of US dollars and percent)
Notes: Right axis—the values of CPI in percent; Left axis—GDP in millions of 2000 US dollars
Sources: World Bank WDI database, IMF Article IV Consultation Staff Reports, 2009 & 2011, and The 2010 Mid‐Year Fiscal Policy
Review, Ministry of Finance, Harare, 14 July 2010.
There were two intertwined channels through which Zimbabwe’s exports performance was negatively
affected: escalating macroeconomic instabilities combined with the overvalued official exchange rate;
and the dramatic contraction in output triggered the government’s program of "indigenization of
the economy" including the ill‐designed land reform. While other countries suppressed inflation to
single digit levels in the early 2000s, Zimbabwe was moving in opposite direction: after Zimbabwe's
23 21 19 3259 56
77
140
432
282 302
‐7.7‐100
0
100
200
300
400
500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
9,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (p)
Inflation, consumer prices (annual %)GDP (constant 2000 US$)
19 | P a g e
confiscation of white‐owned farmland and its repudiation of debts to the International Monetary Fund,
hyperinflation set in and lasted to 2009. Inflation exceeded 50 percent already by 1999 and continued
its march upwards to reach 432 percent in 2003 (see Figure 2). Inflation, as measured by CPI (Consumer
Price Index), slightly fell in 2004‐05, albeit it was still very high with three‐digit annual growth rates.
Subsequently, however, it rebounded exceeding one thousand percent in 2006 and swiftly moving to
stratospheric levels in 2007‐08 to peak in September 2008 “… at about 500 billion percent” (IMF 2009, p.
5). The decision, adopted in April 2009, to abandon printing of the Zimbabwean dollar, and instead to
use hard currencies (especially the US dollar and the South African Rand), with the Rand as the
reference currency, has put an end to hyperinflation and CPI, with the value of minus 7.7 percent,
moved to a negative territory in 2009 for the first time since independence in 1980 (see Figure 2).
While hyperinflation alone would have undercut both current economic activity and investments, as the
experience of a number of South American economies in the 1980s has demonstrated, Zimbabwe’s
misery was aggravated by two government’s interventions: one typical for a number of countries
undergoing hyperinflation and the second unique to Zimbabwe, i.e., the government’s program of
"indigenization of the economy." The first intervention was the usual government temptation to ‘solve’
hyperinflation by outlawing it and instead dealing with its symptoms, rather than with the root of the
problem, i.e. deficits financed by printing money. The government introduced price and interest rate
controls, exchange controls, state monopsonies (e.g., Grain Marketing Board) and foreign currency
surrender requirements on exporters. The latter amounted to the confiscation of a portion of revenue
from exports. These measures contributed to further distortions in the economy; increasing shortages of
daily necessities; and, predictably, the emergence of a black market and profiteering. Furthermore, since
controlled prices were set at a fraction of market prices, there was a shift to produce goods not subject
to central price controls further distorting the allocation of resources.
Another consequence of growing macroeconomic instability was that convertibility of the Zimbabwean
dollar for current account transactions became increasingly limited. The domestic currency became
increasingly overvalued in 2000‐03, which prompted the government to establish special regimes for
tobacco and gold exporters, while the parallel market premiums exploded (Muñoz, 2006). Black markets
emerged where the US dollar would be traded at exchange rates several times higher than the official
rate.12 Already in 2002 (the end of third quarter), US dollar was exchanged at ZWE$740 in parallel
markets while its official exchange rate was ZWE$55 (Sandawana 2007). Subsequently, the gap between
two rates expanded rapidly.
Exporters were of course negatively affected. The overvaluation of the official exchange combined with
extremely lax fiscal and monetary policies undercut competitiveness of Zimbabwean exports. The
growing of the parallel market premium led to smuggling at the expense of legal exports. Muñoz (2006)
empirically shows a strong negative relationship found between the parallel market rate depreciation
and the value of legal exports in Zimbabwe in 2000‐04. Furthermore, with the price of imports rising and
growing difficulties in accessing foreign currency, producers dependent on imported inputs would often
12 Various ad hoc measures, such as the introduction of a managed foreign exchange tender system early in 2004 or the gradual relaxation of the surrender requirements have failed to prevent the apreciation of the official exchange rate, simply because “… the demand for foreign exchange continued to pick up” (Muñoz, 2006 p. 4).
20 | P a g e
go out of business if no domestically produced substitutes were available. Those who did not
increasingly turned to customers abroad than sell their products domestically. While strict foreign
currency‐surrender requirements, often amounting to confiscation of up to half of foreign currency
earnings by the government, was clearly a disincentive to export,13 the rewards of having access to hard
currencies and escaping domestic inflation offset these losses for some products. On balance, one might
have expected some diversion of sales away from the domestic to foreign markets during this time and,
therefore, a lower contraction of exports than that of aggregate output.
The disastrous macroeconomic environment combined with political instabilities and the government’s
program of "indigenization of the economy" was bound to erode one, if not all of three pillars that
historically shaped Zimbabwe’s external performance, i.e., tourism, agriculture including agro‐
processing and other simple manufactures, and mining. Tourism is always the first victim of political
instability and violence and the first to recover once the situation warrants the removal of travel
warnings by foreign governments. In fact, by 2006, the current value of revenue from tourism exceeded
the peak value reached in 1996. In mining, given the size of ‘sunk capital’ this sector was less affected by
macro‐instabilities than agricultural production.
Nevertheless, extraction sectors have also not flourished: to the contrary, exports of most minerals fell
in terms of volume in the 2000s. Except for diamonds and platinum group metals, which significantly
expanded both production and exports in the 2000s, exports of other minerals in terms of volume stood
well beyond their peak levels in 2000‐01. Thanks to sharp increases in prices of gold and copper, the
value of their respective exports exceeded previous record levels in the 2000s set for gold in 2006 and
for copper in 2000, despite lower volumes exported (Table 3).
Table 3: Exports of selected minerals in terms of volume and value in percent of their peak performance and share in total exports in 2010 (in percent)
Volume, Index Values, Index Share in total exports
Minerals 2010 peak
year=100 2010 peak
year=100 In 2010
Platinum Group Metals (‘000 ounces) 63.6 2008 76.8 2008 18.9
Gold (‘000 ounces) 30.7 2001 106.3 2004 14.5
Diamonds (‘000 carats) 115.4 2009 89.3 2005 2.0 Nickel (tons) 33.3 2000 16.5 2007 1.9
Copper (tons) 95.5 2000 268.8 2000 1.1
Agricultural products
Flue‐cured tobacco (tons) 38.5 2001 67.3 2001 20.4
Sugar raw (tons) 80.0 2000 126.8 2000 3.4
Sugar refined (tons) 4.7 2002 5.2 2000 0.1
Flowers (tons) 23.9 2002 24.2 2002 1.1
Source: Derived from data provided by the Reserve Bank of Zimbabwe
The agricultural sector—the backbone of Zimbabwe’s economy—witnessed huge drops in output as the
prime victim of Zimbabwe’s chaotic land reform program, albeit not the only one. In 2004, the maize
production stood at around one‐third of its level in 1999; wheat production at around 8 percent; and
13 The surrender requirement is a tax on exports, as exporters are obliged to convert a portion (50% in 2003) of foreign currency earnings into domestic currency at official exchange rates several times below black market exchange rates. Since every dollar converted loses almost all of its value, exporters have incentive keep money abroad further aggravating the severe shortage of foreign currency.
21 | P a g e
tobacco production at around one‐fourth (Clemens and Moss 2005). Agricultural output fell below the
levels needed to feed the local population and Zimbabwe ceased to be one of the largest exporters of
foods in Africa and now relies on food aid. So did the volumes of agricultural exports fall and to a much
larger extent than those of minerals: except for raw sugar whose exports stood at 80 percent of their
volume in 2000 but with refined sugar exports at 5 percent of their level in 2002, exports of tobacco was
at 38 percent of their volume in its peak year 2001 and cut flowers at 24 percent of its peak in 2002. The
values of their exports were also well below their respective peaks in 2000‐02 (Table 3).
A decade long mismanagement of the economy combined with violations of private property rights and
ad hoc confiscations of private property by the government was also bound to extract a heavy toll on
manufacturing. New production capacities did not emerge in the 2000s and some existing industrial
capacities, deprived of investment, disappeared. Furthermore, since the farm sector supplied about 60
percent of the inputs to the manufacturing base (Richardson, 2005), its collapse led also to the
breakdown of manufacturing output. In contrast to most other African countries, Zimbabwe had a
sophisticated manufacturing base. In the 1990s, Zimbabwe was one of four African countries with the
share of manufactures (mainly textiles, cement, chemicals, wood products, and steel) in total exports
exceeding 20 percent: the other countries were Kenya, Mauritius, and South Africa (Wood and Jordan,
2000). Although exports of manufactured goods continued contributing more than 20 percent to the
total in 2000‐08, the value of exports of manufactured goods of US$556 million in 2008 was US$10
million lower or 2 percent less than in 1997.14 Moreover, this relatively high share was mainly the result
of a slight increase in the value of exports of steel and iron products. Consumer goods including textiles
and clothing were particularly negatively affected: their exports in current prices stood in 2008 at 58
percent of their peak level in 1996.
Hence, hyperinflation combined with a heavy dose of state micromanagement of most economic
activities including foreign trade was bound to bring about the retrenchment in exports and,
consequently, imports. Yet, the foreign trade sector had displayed quite remarkable resilience and its
contraction, although rather dramatic, strikes one as less steep than one might have anticipated given
the conditions of doing business in Zimbabwe in 2000‐09.
The second action that negatively impacted investment in Zimbabwe was the government’s program of
"indigenization of the economy," launched in 2000. Although initially its main target was confiscation of
around 4,000 large‐scale commercial farms—accounting for 70 percent of Zimbabwe’s arable land and
owned exclusively by white Zimbabweans—under the so‐called "fast‐track land reform" announced in
February of 2000,15 the program was subsequently expanded to foreign investment with the adoption of
the Indigenization and Economic Empowerment Bill of 2007. But already in 2000, the investors in other
14 Exports of manufactured goods, defined as SITC 5 through 9 minus 68, are based on imports from Zimbabwe reported by its trading partners to the UN COMTRADE database. 15 As Clemens and Moss (2005) note: “Most Zimbabweans (including white farmers) say that land reform was both necessary and inevitable. The tragedy of Mugabe's approach is that it has harmed those whom a well‐ordered, selective redistribution program could and should have helped. Generally the farms have not been given to black farm managers or farm workers.” Moreover, although the official goal was to divide the farms into hundreds of thousands of small plots for traditional black farmers, most plots ended up in the hands of Mugabe’s political supporters and government officials (Richardson, 2005).
22 | P a g e
sectors of the economy felt also threatened, as many white‐owned urban businesses and offices of
foreign corporations were plundered (Power, 2003).
The government’s program of “indigenization" that requires that 51 percent equity in firms worth over
US$500,000 be transferred to black Zimbabweans has remained a huge barrier to FDI inflows.16 Despite
a dramatic fall in FDI inflows in 1999‐2008 they failed to rebound with the improvements in domestic
politics following the signing of the Global Political Agreement in September 2009 (Figure 2). The
increase in FDI inflows from US$52 million in 2008 to US$105 million in 2009 not only falls well short of
the investment needed to jumpstart the economy but FDI inflows are projected to fall in 2010 to US$85
million.17
Figure 2: FDI in Zimbabwe and Zambia in 1994‐2009 (in millions of US dollars)
Sources: UNCTAD WIR database.
Two measures of Zimbabwe’s investment ‘deficit’ illustrate the depth of undercapitalization of the
Zimbabwean economy as a result of economic chaos in 2000‐08. The first derives from benchmarking
FDI flows to Zimbabwe against those to Zambia. The second relates to imports of machinery in a
historical perspective and also in comparison to Zambia.
For the first, Zambia has actively sought FDI to supply capital and know how, whereas Zimbabwe’s
policies have actively discouraged foreign investment. While in 1994‐99 flows to both countries were of
similar magnitude, except in 1998, when they peaked in Zimbabwe at US$444 million against Zambia’s
US$238 million, in 2000‐09 FDI into Zambia continued its upward movement while those into Zimbabwe
almost completely dried up. Total FDI inflows of US$878 million over 1994‐99 to Zimbabwe were larger
than those into Zambia of US$709 million. But this was reversed, subsequently, as total FDI invested in
Zambia in 2004‐08 amounted to US$3.6 billion, whereas FDI in Zimbabwe was just US$323 million over
the same period.
16 The indigenization program is still in place encouraging transfers of profits abroad from Zimbabwean firms not owned by “disadvantaged” ZWE citizens and discouraging foreign investments. It also continues in the agricultural sector: the Harare newspaper The Standard reported taking over by the government of the Tuli cattle breeding farm (“World‐famous Tuli cattle breeders thrown off farm,” The Standard, August 15 to 21, p. 8‐9). 17 Based on balance‐of‐payments statistics of the Reserve Bank of Zambia, Harare, August 2010.
0
200
400
600
800
1,000
1,200
1,400
Zimbabwe
Zambia
23 | P a g e
While very low inflows of FDI deprived domestic industries of access to modern technologies and, by the
same token, kept labor productivity from growing, there are indications that the manufacturing base
was not completely erased. First, while the economic climate in the 2000s was hostile to investment
activities, they did not appear to come to a complete halt. In the absence of domestic data, the best
information shedding light on investment activities can be derived from statistics on imports of capital
equipment.18 The data shows a dramatic decline in the value of these imports, which peaked in 1996 at
US$667 million and fell 70 percent to US$217 million in 2002. Yet, despite inflation followed by
hyperinflation, these imports began recovering in 2003‐07 and rose in 2007 to 80 percent of the 1996
peak level (Figure 3A).
Figure 3: Two different tales: Imports of machinery and equipment (index 1996=100) and FDI into Zimbabwe and Zambia in 1994‐2008 (index 1997=100)
A. Zimbabwe B. Zambia
Source: Own calculations based on partners’ trade data reported to the UN COMTRADE database and FDI data from UNCTAD
WIR database.
Zimbabwe’s imports of capital equipment have therefore fallen much less than FDI inflows and stood in
2008 at 75 percent of their level in 1996. However, Figures 3A and 3B present another stark contrast by
benchmarking Zimbabwe’s imports of capital against Zambia’s. They show that while machinery imports
by Zambia were almost six times higher than their value in 1996, in Zimbabwe, over 1995‐2008, they
were almost identical (Table 4).
Neither the current imports of machinery nor FDI inflows are therefore likely to elevate Zimbabwe’s
exports to bring them in line with the country’s potential. The comparison of machinery imports and FDI
into Zimbabwe with the flows into its northern neighbor, Zambia, gives some idea as to the magnitude
of flows that might be necessary to turn around Zimbabwe’s economy. Consider the following: the value
of machinery imported into Zimbabwe in 1995‐98 was almost three times higher than into Zambia and
18 As elsewhere, these are based on exports to Zimbabwe reported by other countries to the UN COMTRADE database.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
FDI inflows (1997=100)
Imports of machinery (1996=100)
0%
100%
200%
300%
400%
500%
600%
700%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
FDI inflows (1997=100)
Imports of machinery (1996=100)
24 | P a g e
total FDI flows over this period were 8 percent higher (Table 4). While total imports of machinery in
1999‐03 exceeded those into Zambia by 13 percent, total FDI inflows into Zimbabwe amounted to seven
percent of foreign capital invested in Zambia. The discrepancy further increased in 2004‐08: Zambia’s
total machinery imports were more than twice as large as Zimbabwe’s and total FDI into Zambia over
this period was more than ten times larger (Table 4).
Table 4: Imports of capital equipment and FDI flows to Zimbabwe and Zambia in 1995‐2008 (in millions of US dollars)
2007 2008 Total
1995‐98 Total
1999‐03 Total
2004‐08 Total
1995‐08
Machinery, excluding automobiles and parts (US$ millions)
Zimbabwe 533 510 2,592 1,463 2,140 6,195
Zambia 1,333 1,166 925 1,292 4,537 6,754
Ratio of Zimbabwe to Zambia 0.40 0.44 2.80 1.13 0.47 0.92
FDI inflows (in US$ millions)
Zimbabwe 52 60 719 65 323 1,108
Zambia 1,324 939 669 930 3,599 5,198
Ratio of Zimbabwe to Zambia 0.04 0.06 1.08 0.07 0.09 0.21
2007 2008 Average 1995‐98
Average 1999‐03
Average 2004‐08
Average 1995‐08
Machinery, excluding automobiles and parts (share in total imports in %),
Zimbabwe 23 22 32 23 22 25
Zambia 33 23 26 23 27 25
Ratio of Zimbabwe to Zambia 0.70 0.96 1.22 0.98 0.82 0.99
Sources: UNCTAD WIR database (FDI data) and UN COMTRADE database (trade data).
Indeed, the evolution of machinery imports and their share in total imports and developments in FDI
inflows shed light on the difference between the economic paths that the two countries embarked
upon. Zambia’s industrial basis was expanding in the 2000s, whereas that of Zimbabwe was either flat or
shrinking. The share of machinery imports in total imports was on average significantly larger in
Zimbabwe’s imports in 1995‐98; roughly equal in 1999‐2003; and five percentage points lower in 2004‐
08. Over the last decade or since 1999, Zambian economy imported 62 percent more machinery in
terms of value than Zimbabwe did. It is quite likely that a significant portion of these imports into
Zambia was related to foreign investment.
The decade of economic mismanagement has extracted a heavy toll on the export capacity of
Zimbabwe’s economy. Although mining was somewhat insulated, it has not survived without wounds
revealed in lower outputs. Despite suppressed investment activity, imports of machinery and parts
continued indicating that some industrial capacities have survived, albeit in desperate need of
modernization. Modernization can only occur insofar as the climate for private sector development
significantly improves. Macroeconomic stability is a necessary condition but without a genuine
reduction in the cost of conducting business there the current recovery cannot be sustained.
While large mining and farming (tobacco) operations tend to be more immune to unfriendly business
climates, small scale agricultural and industrial activities are highly sensitive to ill‐designed economic
policies and weak economic governance. Indeed, as we shall show in Section 3, exports that have been
most negatively affected were agricultural and simple industrial products. Exports of these low
25 | P a g e
technology labor intensive agricultural and miscellaneous industrial products have been consistently
declining since 1997. They have been largely responsible for Zimbabwe’s disappointing overall export
performance.
1.3. Zimbabwe’s foreign trade performance in a regional perspective Although the links between institutions, policies and foreign trade performance, are complex, one
would expect that Zimbabwe would be a laggard. Its quality of economic governance deteriorated and
was the worst among its neighbors while hyperinflation largely disorganized economic activities across
most sectors of the economy. Indeed, statistical data corroborate this expectation.
Due to weaknesses in foreign trade statistics in Zimbabwe (WB 2010), we use foreign trade data derived
from its foreign trading partners reporting to the United Nations. Zimbabwe’s exports include CIF (cost
of insurance and freight) and imports are FOB (free on board). By the same token, the data exaggerate
the value of exports and lower the value of imports: the latter should be borne in mind when comparing
foreign trade performance against that of other countries. Barring some major changes in the
composition of exports, this has no significant impact on the export performance over time as freight
and insurance usually do not undergo volatile changes over short periods of time.
For reasons of geography and policy, members of SADC (Southern African Development Community)
would be the first candidates against whom Zimbabwe’s foreign trade performance record can be
benchmarked. In terms of geography, they are located in the same region. As for policy, Zimbabwe
together with most other SADC members is also a participant in the SADC FTA (free trade area) which
came into force in 2008 but has been trading on preferential terms for much longer. The comparator
countries chosen, however, neither include all SADC member states nor are they limited to them, as
Rwanda has been also included (Table 5). The lack of data has eliminated such countries as Angola, DR
Congo, Lesotho and Swaziland. While the first two do not report trade data to the UN, two SACU
(Southern African Customs Union) members have gaps in foreign trade reporting: for Lesotho the data
are available only for 2000‐04 and Swaziland for 2000‐07. The inclusion of Rwanda derives from shared
geography (both are landlocked) and the legacy of major man‐made disasters. Moreover, it may provide
some indications of the dynamics that one may expect when a country takes strong measures to recover
from an economic crisis.
SADC is a highly diversified regional grouping in terms of the size and level of economic development of
its members, quality of economic governance as well as geography. The GDP per capita of the richest,
Seychelles, is almost forty‐times higher than that of Malawi—the poorest member of SADC. South Africa
towers over all other countries with its GDP amounting to around three‐fourths of the region’s and
population to less than one‐third of the total. The quality of economic governance is significantly higher
in SACU countries and Mauritius than in other SADC countries with Zimbabwe scoring the lowest
amongst them all in the 2000s in the World Bank’s surveys of the quality of governance covering 213
states across the world (see Section 1.1). Last but not least, geography and tourist attractiveness
profoundly impact foreign trade performance. Seychelles and Mauritius are islands as well as attractive
destinations for tourists. Exports of goods are not their main earners of foreign currency. On the other
hand, Botswana, Malawi, Rwanda, Zambia and Zimbabwe are landlocked depending on infrastructure
26 | P a g e
and quality of economic governance in other countries to get their products to seaports providing the
cheapest means of transportation.
Table 5: Foreign trade growth performance of selected Sub‐Saharan African countries in 2001‐08 (in millions of US dollars, dollars and percent)
EXPORTS Annual growth rates Average LSG rate Value of exports
2006 2007 2008 2001‐08 2000‐08 2008 (c) per capita (d) in % of GDP
Botswana 1.7 12.6 ‐4.6 8.3 9.1 4,838 2,431 39.8
Malawi 34.5 30.4 1.2 12.6 10.8 879 59 21.1
Mauritius 8.8 ‐4.5 7.8 6.3 6.3 2,401 1,876 25.2
Mozambique 36.4 1.3 10.0 30.6 23.9 2,653 122 27.8
Namibia 34.8 19.7 17.1 20.0 18.1 4,729 2,252 54.4
Rwanda (a) ‐6.2 33.2 117.1 35.0 24.5 398 37 8.1
Seychelles 11.8 ‐5.2 ‐31.7 4.4 6.2 246 2,826 25.6
South Africa 11.9 21.7 15.5 14.7 14.8 73,966 1,510 27.1
Tanzania 11.5 14.7 45.9 22.0 18.6 3,121 76 15.3
Zambia 108.3 22.5 10.4 28.4 24.9 5,099 430 37.6
Zimbabwe (b) 12.8 8.4 ‐7.6 2.5 3.6 2,230 196 56.9
Total 15.6 19.0 13.8 14.2 14.5 100,561 605 27.9
IMPORTS
Annual growth rates Average LSG rate Value of imports
2006 2007 2008 2001‐08 2000‐08 2008 (c) per capita (d) in % of GDP
Botswana ‐3.4 30.6 27.9 15.7 8.7 5,099 2,562 41.9
Malawi 3.6 14.2 59.9 20.5 17.3 2,204 147 52.8
Mauritius 15.3 7.1 19.7 10.9 12.3 4,670 3,648 49.0
Mozambique 19.1 6.3 31.4 17.7 17.1 4,008 185 42.0
Namibia 11.2 43.9 16.5 18.3 18.3 4,689 2,233 53.9
Rwanda (a) 34.2 25.1 64.4 22.3 21.1 1,146 107 23.3
Seychelles 12.2 13.4 6.1 14.2 12.2 912 10,481 94.9
South Africa 24.4 16.7 9.7 16.7 19.5 87,593 1,788 32.1
Tanzania 39.4 30.8 36.6 23.3 23.2 8,088 197 39.8
Zambia 20.2 30.3 26.3 24.9 23.1 5,060 427 37.3
Zimbabwe (b) 20.1 7.6 6.1 9.0 13.1 2,680 235 68.4
Total 22.4 18.4 14.6 16.7 18.7 123,467 759 40.1
Notes: (a) Rwanda is not a member of SADC; (b) trade data derived from partners’ foreign trade statistics; (c) in millions of US dollars; (d) in US dollars. GDP data are in current US dollars, and LSG rate stands for Least Square Growth rate. Sources: derived trade data as reported to UN COMTRADE database; and population and GDP from World Bank Development Indicators and UN social indicators databases.
Performance in exports of goods reflects these differences. Landlocked Zimbabwe with the worst quality
of economic governance in 2002‐2008 had by far the worst performance amongst comparator
economies: the average growth rates were between four‐ five times lower than the weighted average
growth rates for countries displayed in Table 5. A simple eyeballing of data leads to the following
general observation: Zimbabwe was the worst performer amongst comparators in terms of growth of
exports. The growth in 2000‐08 was by far the lowest: it was more than two percentage points below
the second worst case of Seychelles. However, exports per capita remain respectably decent: in fact,
they are larger on a per capita basis than in Rwanda, Tanzania, Mozambique and Malawi: however, if
the differential in export growth rates between them, on the one hand, and Zimbabwe, on the other, is
27 | P a g e
sustained over the next ten years, all will overtake Zimbabwe. Zimbabwe stands out in another respect:
the value of its exports in terms of the GDP was the highest amongst these countries.
Zimbabwe, a laggard among exporters, is also at the bottom in terms of import dynamics. Imports into
Zimbabwe grew faster in terms of LSG (least square growth19) rate over 2000‐08 than into frugal and
richer Botswana, but slower when measured as an average of annual growth rates. Zimbabwe’s double
digit LSG rate was mainly the result of a rebound following the sharp contraction in the value of imports
of more than one third in 2000‐01. In 2002‐06 imports grew at an average rate of 16 percent but still 10
percentage points below the growth experienced by neighboring Zambia. Other countries have
experienced strong double‐digit rates of imports growth in 2000‐08. Thanks to either surpluses in
services trade or economic aid, or both, other countries, with the notable exception of Zambia, had
imports per capita significantly higher than exports per capita.
Thus it comes as no surprise that Zimbabwe’s share in total region’s foreign trade has been on the
decline. Its share in exports fell from 5 percent in 2000‐02 to 3 percent in 2005 and further to 2.2
percent in 2008. In order to retain its share in 2002, the value of exports in 2008 would have to be US$5
billion or 2.3 times higher than it actually was in 2008. This shows the scope of decline in exports over
2000‐08. But the decline was smaller for imports. The contraction in the share of Zimbabwe in total
imports was less pronounced falling from 3.8 percent in 2000 to 2.6 percent in 2004‐06 and 2.2 percent
in 2008. Zimbabwe’s imports would have to be 1.8 times higher or US$4.7 billion rather than US$2.7
billion in order to retain its share in region’s imports in 2000. In the meantime, however, a traditional
surplus in trade in goods moved to deficits in the balance of merchandise trade.
1.4. Concluding observation The weakened state and collapsing regulatory quality led to a rapidly shrinking economy, as the cost of
conducting business operations skyrocketed and the competitiveness of Zimbabwean firms in global
markets was greatly eroded despite constant devaluations. According to most international assessments
comparing the quality of economic governance and competitiveness, Zimbabwe was consistently ranked
at the bottom with the worst investment climate and highest incidence of corruption.
While the restoration of macroeconomic and financial stability has been achieved thanks to replacing
the domestic currency with the US dollar and South African rand, other barriers—such as low
government effectiveness and poor quality of regulations—are still in place. The discussion of the
quality of economic governance points to a significant challenge facing the government in overhauling
the existing economic regime. This calls for deep structural reforms. Without them, economic
performance will remain wanting, albeit likely superior to that experienced in 2000‐08.
Given the low quality of governance, i.e., the absence of institutions and policies supporting competitive
markets, combined with restrictive foreign exchange controls, confiscatory taxes imposed on exporters
through surrender requirement, inflation and hyperinflation that were all trademarks of the economic
landscape during 2000‐08, it comes as no surprise that, cast against other countries of the region,
19 According to the standard definition, the least‐squares growth rate is estimated by fitting a linear regression trend line to the logarithmic annual values of the variable in the relevant period (for a discussion, see OECD Glossary of Statistics, available at http://stats.oecd.org/glossary/detail.asp?ID=6687).
28 | P a g e
Zimbabwe’s relative position as an exporter and importer vis‐à‐vis other comparator countries has
drastically deteriorated. But it is rather surprising that foreign trade had displayed such strong resilience
in the face of devastating macroeconomic policies and an unfriendly business environment. Note that
exports in terms of value still recorded growth in the 2000s, as did imports.
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2. Highlights of Zimbabwe’s trade performance: openness, dynamics, and direction of trade
Zimbabwe is unique. Except for the collapse of central planning across the former Soviet bloc and the
aftermath of civil or interstate wars, it would be difficult to find a country whose economy has been
declining for more than a decade at such a quick pace. The shrinking economy has been bound to affect
foreign trade as fewer goods were produced and fewer would be available for export. The question
addressed in this chapter concerns the long term perspective for development in trade and its linkages
with the country’s overall economy as captured by GDP.20 Both call for a careful statistical assessment as
hyperinflation made estimates of output and trade subject to wide margins of error. Yet, all signs point
to a more pronounced decline in Zimbabwe’s GDP than in its foreign trade.
Three other issues addressed in this chapter concern development in trade in services; a comparison of
price and volume changes in exports; and, shifts in geographical patterns of trade. For services, tourism
and transportation overshadow other areas in Zimbabwe’s services sector: tourism has been an
important source of foreign exchange earnings while Zimbabwe, as a landlocked country, has historically
run deficits in transportation services. In terms of prices, these have been favorable for Zimbabwean
exporters, although they did not take full advantage of them as their exports either stagnated or
declined in terms of volume. Although the period 2000‐07 witnessed a dramatic reorientation in
Zimbabwean foreign trade, Zimbabwe has not been successful in taking advantage of rapidly growing
import demand in other countries in the region. The competitiveness of Zimbabwe’s exports in regional
markets—as measured by their share in partners’ imports—has been on the decline with the exception
of South Africa.
2.1. Deceptive increase in openness Zimbabwe’s shrinking economy and stagnant foreign trade in goods in current prices led to an
unexpected increase in the openness of Zimbabwe’s economy as measured by its share of foreign trade
in GDP. Since foreign trade in goods has been stagnant and the economy has been contracting,
Zimbabwe’s openness has increased over the last decade or more.21 The stagnation in foreign trade was
due to a combination of falling exports and expanding imports in terms of value.
Zimbabwe’s economy has dramatically shrunk since 1998—the last year when GDP experienced growth
of 3 percent in real terms.22 While real GDP fell every year over 1999‐2008, Zimbabwe’s GDP in current
US dollars displayed a highly volatile picture of dramatic increases and declines with GDP increasing
almost 400% in 2001‐02. The period raising the most serious suspicions of statistical inexactness covers
the early 2000s. Recorded rates of GDP per capita growth swung from minus 25 percent in 1998 and
20 As for foreign trade statistics, we shall rely on foreign trade statistics reported by Zimbabwe’s trading partners to the UN COMTRADE database for the reasons discussed at some length in a background note prepared for this study (see Appendix 1). While the quality of Zimbabwe’s imports reporting is remarkably good, its exports statistics raise concerns. 21 It is important to note that ratio of trade to the GDP must not be interpreted as a trade policy indicator. The former depends on the size of an economy whereas the latter refer to the extent of policy‐induced barriers to trade. 22 In real terms (in 2000 prices), its GDP was falling every year at an average pace of minus 7 percent over 1999‐2008: its total GDP in real terms stood in 2008 at 35 percent.
30 | P a g e
minus 15 percent in 1999 to annual rates of growth of 40 percent, 58 percent, and 140 percent each
year between 2000 and 2002 (see Table 6). Since the population remained at roughly the same level of
12.5 million, this spectacular growth episode had nothing to do with a sudden dramatic increase in
population.
Table 6: GDP and its growth in real and value terms according to different sources over 1998‐2008 (in millions of US dollars and percent)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Index 2008, 1998=100
WB GDP * 6,066 5,964 7,399 10,256 21,897 7,397 4,712 3,418 3,711 3,553 3,180 52IMF GDP (1) 5,983 6,011 7,470 12,891 30,873 7,918 4,696 5,792 3,711 3,553 3,180 53IMF GDP (2) 6,851 5,801 8,136 12,883 30,856 10,515 4,713 4,627 5,596 3,583 3,929 57
Memorandum: annual change in percent . Cumulative
Current IMF GDP(2) ‐25 ‐15 40 58 140 ‐66 ‐55 ‐2 21 ‐36 10 70Real GDP 2.9 ‐3.6 ‐7.9 ‐2.7 ‐4.4 ‐10.4 ‐3.8 ‐5.3 ‐6.3 ‐6.9 ‐14.1 ‐63Real GDP (1998=100) 100 96 89 86 81 71 67 62 56 49 35
Notes: * There is no data available from WB from 2006 to 2009. (1) Based on IMF IFS database through official exchange rate and IMF Consultation Article IV paper 2009; and (2) Based on IMF World Economic Outlook database 2003/4, 2009, 2010; data for 2003-09 are estimates.
Neither did it have anything to do with positive developments in the real economy. Only external
intervention could explain the recorded increase in GDP per capita from US$486 in 1999 to US$2,466 in
2002 and subsequent contraction to US$376 in 2004 but this seems unlikely. One should also note a
significant divergence in IMF and World Bank’s estimates of Zimbabwe’s GDP in 2002 with the former
being 41 percent larger. Yet, in 2008, three estimates indicated a similar level of overall contraction in
relation to the 1998 level. Since the GDP statistics in current prices display rather unusual developments
in 2001‐02 with GDP increasing almost four times, which can be only attributable to a large statistical
inaccuracy, we exclude these years from our assessment of the change in the significance of foreign
trade to the Zimbabwean economy over time. Hence, years 2001 and 2002 do not show in Figure 4.
Figure 4: GDP and foreign trade in US dollars per capita and percent in 1997‐2000 and 2003‐08
Right Axis: in percent; Left Axis: US dollars Sources: GDP based on IMF IFS database through official exchange rate and IMF Consultation Article IV paper 2009; population from the World Bank’s World Development Indicators database; and trade from partner’s statistics as reported to the UN COMTRADE database.
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
0
100
200
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400
500
600
700
800
1997 1998 1999 2000 2003 2004 2005 2006 2007 2008
Trade in GDP (in percent)
GDP (IMF) per capita
Exports per capita (in US$)Imports per capita (US$)
Linear (Trade in GDP (in percent))Linear (GDP (IMF) per capita)
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These comments notwithstanding, the contraction in GDP was significantly larger than in foreign trade.
Imports per capita in value terms in 2008 were 21 percent higher than in 1997 and exports 1 percent
higher down from 9 percent a year earlier, whereas GDP per capita in 2008 was 64 percent lower than in
1997. The LSG rate of the contraction in GDP per capita over 1997‐2008 was 8.8 percent, whereas
imports grew at 3.5 percent and exports at 3.5 percent. As a result, foreign trade in terms of GDP grew
from 50 percent in 1997 to 154 percent in 2008.
This increased openness as traditionally defined is not, however, the product of a successful outward‐
oriented strategy but, rather, the ability of the foreign trade sector to better absorb the devastating
effects of bad economic policies pursued during this period. While the value of exports and, to a much
larger extent, that of imports continued to rise, Zimbabwe’s GDP was contracting. As Figure 4 above
graphically illustrates, the fall in GDP per capita was accompanied by an increase in foreign trade as a
percentage of the GDP solely because both exports and imports per capita fell much less.
2.2. Trade in services: transportation and tourism Detailed data on trade in services are always problematic not only in developing countries but also in
highly developed ones. Zimbabwe is no exception.
The quality of data is particularly low through most of the 2000s but has improved recently.
Consequently, the analysis is limited to three years—2008 and 2009 together with projections for 2010.
The balance of payments data made available by the Reserve Bank of Zimbabwe are not only relatively
aggregated but also, except for foreign trade in goods, cannot be independently assessed in terms of
their reliability. In the area where this is possible, i.e. foreign trade in goods, Zimbabwe’s balance of
payments statistics fail the ‘foreign trade mirror’ test in 2000‐06, especially so on the exports side (see
Appendix 1). They converge, however, in 2007‐08. Another ‘quality’ test can be derived from data on
international tourism. Except in 2003‐04, there is huge divergence between the Zimbabwean data and
those from the World Bank WDI (World Development Indicators) database. While no information for
2008 is available in the WDI database, Zimbabwe’s estimates for 2008 are in line in terms of magnitude
with the WDI data for 2007 indicating improvement in the quality of balance‐of‐payments reporting
observed in other verifiable areas of these statistics.
The developments in 2009 point to significant changes in Zimbabwe’s trade in services.23 The most
notable change has been the surge in exports of services. The value of these exports increased in 2009
by around 2.5 times or from US$219 million in 2008 to US$467 million in 2009 (Table 7).
Although imports of services also increased, the deficit in services trade contracted rather dramatically
from US$269 million in 2008 to US$112 million in 2009 and US$146 million in 2010. The deficit also
declined considerably relative to 2000, when it stood at US$322 million. Tourism, the largest net
exporter of services, was responsible for this improvement. Had net revenue from “travel” stayed at its
23 Non‐factor services include both commercial and government services. Unfortunately, Zimbabwe’s balance‐of‐payments statistics do not allow for an easy differentiation between the two. But this is not a significant problem as receipts from commercial services tower over government ones. Total trade in services includes ‘non‐factor services,’ i.e., receipts for shipment, passenger and other transport services, and travel, as well as current account transactions not separately reported, and ‘other services.’ The major item in the latter are fees for professional services and operational expenses of foreign‐owned companies in Zimbabwe.
32 | P a g e
2008 level, the deficit in trade in services would have reached US360 million rather than US$112 million.
The largest contributor to deficit has been transport, i.e., shipment and other transport taken together,
followed by professional, technical, and administrative fees.
Table 7: Zimbabwe’s trade in services in 2000 and 2008‐2010 (in millions of US dollars)
Receipts (exports) Payments (imports) Balance in services
2000 2008 2009 2010p 2000 2008 2009 2010p 2000 2008 2009 2010p
Total services 390 219 467 500 712 488 579 646 ‐322 ‐269 ‐112 ‐146
Shipment, of which 41 33 30 35 226 281 345 399 ‐185 ‐248 ‐315 ‐364
freight and insurance 22 19 17 20 187 234 287 331 ‐166 ‐215 ‐270 ‐311 transit freight 19 14 13 15 39 48 58 68 ‐20 ‐34 ‐45 ‐53
Other transport, of which 165 33 35 36 190 77 79 84 ‐25 ‐44 ‐44 ‐48
passenger fares 70 10 11 11 47 9 10 11 23 1.2 0.8 0.7
port services 95 23 24 25 148 68 70 73 ‐52 ‐45 ‐46 ‐48
Travel 89 102 350 375 79 17 22 25 10 85 328 350
Other services, of which 95 51 52 54 217 113 133 138 ‐122 ‐62 ‐81 ‐84
fees (professional, technical, administrative) 29 11 13 13 97 47 63 64 ‐68 ‐36 ‐50 ‐51
local operational expenses 21 15 15 16 0 0 0 0 21 15 15 16
Memorandum:
Non‐factor services */ 294 169 415 446 495 376 447 507 ‐201 ‐207 ‐32 ‐61 Diaspora remittances 0.4 75 198 229 n/a n/a n/a n/a n/a n/a n/a n/a
*/ total services excluding “other services;” (p) projected Source: derived from the Reserve Bank of Zimbabwe balance‐of‐payments statistics.
Not surprisingly, given that Zimbabwe is landlocked and has large deficits for trade in goods, the major
expenditure on the services side is transport, i.e. freight and insurance, as well as transit fees. The deficit
in goods trade raises the cost of shipments as trucks delivering imports return empty to their origin. In
relation to the value of imports (CIF), the cost of freight at 11 percent in 2008‐09 appears to be in line
with other estimates for African economies.24 Studies, using freight payments as a percentage of total
imports, show roughly similar values of this ratio for African landlocked countries. For instance, Stone
(2001) estimates that out of 15 landlocked African countries, 13 of them had a ratio higher than 10
percent, and for seven the ratio was even higher at 20 percent, compared with 4.7 percent for industrial
countries and 2.2 percent for the United States.25 But the caveat to be borne in mind is that, as Arvis,
Raballand and Marteau (2010) convincingly show, freight payments as a percentage of total imports are
complex to assess and prone to errors as the actual calculation of freight payments is often difficult to
conduct.
These comments notwithstanding, there is clearly a need to carefully examine the full logistics costs of
foreign trade in Zimbabwe and the reliability of supply chains servicing this trade in order to identify
sources of excessive costs. In particular, while the transportation costs for Zimbabwe’s imports appear
acceptable compared to other African landlocked countries, they nevertheless seem to be rather high
considering that Zimbabwe is in a much better situation than most landlocked African countries. This is
24 The cost includes fees paid for transit. The ratio slightly fell from 13 percent in 2000 to 12 percent in 2002‐04, and 11 percent in 2005‐10. 25 Quoted in Arvis, Raballand and Marteau (2010, p. 2).
33 | P a g e
because Zimbabwe not only has relatively good infrastructure but is also surrounded by ‘good
neighbors’ with very good infrastructure and respectable qualities of economic governance. For
example, around three‐quarters of Zimbabwe’s imports come from neighboring countries, mainly South
Africa. High costs therefore point to other reasons such as low levels of competition between shipping
services providers, concentration in the trucking industry market structure and restrictive transport
regulations in Zimbabwe.26
While transportation remains the biggest import item in services, tourism has been traditionally the
largest net foreign currency earner. The increase in revenue from international tourism in 2009 to
US$305 million from US$102 million in 2008 was spectacular and solely responsible for the growth in
services exports during that period.
But it seems that this estimate may be below the actual revenues. In marked contrast to official
estimates of trade in goods grossly exaggerating their values, especially in the early 2000s, the
differences between official data on travel and World Bank’s estimates were overall smaller in 2000‐04,
but huge in 2006‐07. The World Bank’s estimates of receipts from international tourism exceeded
reported receipts from travel by the Reserve Bank by the factor of more than two in 2006 and three in
2007 (Table 8).
Table 8: Receipt from international tourism according to Zimbabwe’s balance of payments statistics and the World Bank’ world development indicators database in 2000‐08
2000 2001 2002 2003 2004 2005 2006 2007 2008
WB: World Development Indicators 125 81 76 61 194 99 338 365 n/a
RBZ: Reserve Bank of Zimbabwe (travel receipts) 89 58 53 61 194 147 150 117 102
Ratio of WB to RBZ (in %) 140 140 143 100 100 67 226 312 n/a
Sources: WB; World Bank WDI database and RBZ; Reserve Bank of Zimbabwe.
Which estimate is closer to the real world? The answer to this question would call for an analysis going
beyond the scope of this study. Instead, we offer two observations pointing to the fact that revenues
were larger than estimated in official statistics. First, the potential for tourism in Zimbabwe is huge.
From internationally reconciled data, we know that in the 1990s there was substantial growth in
Zimbabwe’s exports of services as a result of increases in tourism. By 1994, travel (tourism) became the
most important item in Zimbabwe’s services exports accounting for almost half of its services exports in
that year. However, tourism receipts have fallen back sharply since then in the wake of the crisis.
Tourism receipts fell from over US$232 million per year at their peak in the 1990s in 1996 to US$61
million by 2003 and overseas arrivals fell from 331,000 in 2004 to 223,000 in 2008. Average room
occupancy rates have been about 40 percent since 2004 (see ZTA 2008).
Second, as in the case of goods trade data, which largely converged with the mirror statistics beginning
in 2006, the official estimate of revenues from travel of US$350 million for 2009 and projected receipts
of US$375 million in 2010 would fit more the World Bank’s trend than that of the RBZ. Since there is no
other information that would support a sudden increase in numbers of tourists coming to Zimbabwe in
26 Considering high expenditures on shipment and freight, their reduction would have significant positive impact on prices of imported products and would increase competitiveness of Zimbabwean exports. To our knowledge, there has been no recent study of the transport sector, regulations and cost structure in Zimbabwe.
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2009, it seems that the Reserve Bank of Zimbabwe has simply improved its methodology of estimating
receipts from international tourism. Furthermore, both the World Bank and the Reserve Bank give the
same estimate of receipts from tourism in 2003 and 2004. But in 2006 and 2007, the official estimates
were at 44 percent and 32 percent of the WDI data in spite of a significant increase in the number of
people coming to Zimbabwe: the increase was 35 percent in 2007 over 2004. This is rather implausible
that this increase be accompanied by a 40 percent fall in receipts from travel as reported in official
statistics. Hence, it seems that revenues from tourism in 2009‐10 may be even larger than reported in
Zimbabwe’s balance of payments statistics.
Whatever the exact level might be, it seems that Zimbabwe’s performance in the sector has significantly
improved since 2003. Receipts per arrival significantly improved from an average of around US$50 in
2000‐05 to almost US$150 in 2006‐07. However, they were still slightly below average amounts spent by
tourists in Zambia, but not by as much as in 2000‐05 when they were on average four times as large
(Annex Table 2).
Tourism has again become a very important source of foreign currency earnings for the country creating
new jobs and offsetting expenditures on transportation of goods into Zimbabwe. Promotion of tourism
through the implementation of measures that would facilitate expansion of services attracting tourists
appears to be an area where government involvement might produce tangible effects if negative
perceptions about the country can be overcome. In contrast, the fall in current account receipts from
passenger fares for air and railroad transport services, both of them monopolized by the state, suggests
that these are areas where government involvement should be carefully assessed.
2.3. Dynamics of foreign trade in goods in 19972008 Zimbabwe’s foreign trade has displayed rather an unusual dynamic: its imports plummeted in 1997‐
2001 and then quickly recovered reaching the 1997 level in terms of value around 2005‐06, while
exports after a decline in 1998 slightly increased and then fell only to rebound at rather flat growth
rates. Because of different time profiles, Zimbabwe ran a significant trade surplus in 1999‐2005 followed
by growing deficits in trade in goods. Exports coverage of imports fell from 130 percent in 2000 to 83
percent in 2008 (Figure 5).
Figure 5: Zimbabwe’s exports and imports of goods in 1997‐2008 (in millions of current US dollars)
Source: derived from partners’ data available in the UN COMTRADE database.
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2,800
199719981999200020012002200320042005200620072008
Exports
Imports
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High growth in the world economy and trade in 2000‐07 helped Zimbabwe recover from a contraction in
its exports in 2000‐2002 but it did little to significantly improve its exports performance. Over the whole
decade of 1997‐2008, the value of exports reached a bottom in 1998 and the value of imports bottomed
out in 2002 (Figure 5 and Table 9). In contrast to exports, imports have a distinct ‘U’ shape: they fell
rather precipitously between 1997 and 2000 contracting each year by between 11‐14 percent.
Subsequently they have been growing at an average Least Square Growth rate of 11 percent. As a result,
the value of imports was 88 percent higher than in 2000 while that of exports was 20 percent over its
value ten years earlier in 1998 but merely six percent over the value of Zimbabwe’s exports in 1997.
Table 9: Exports and imports of goods in terms of value and exports in percent of imports in 1997‐2008 (in millions of US dollars)
1997 1998 1999 2000 2003 2004 2005 2006 2007 2008 LSG rates
Exports 2,095 1,778 1,919 1,855 1,867 1,924 1,974 2,227 2,414 2,230 2.6 (a)
Imports 2,146 1,860 1,651 1,424 1,532 1,702 1,954 2,348 2,526 2,680 10.7 (b)
Exports in percent of Imports 98 96 116 130 122 113 101 95 96 83
Exports (1998=100 118 100 108 104 105 108 111 125 136 125 Imports (2000=100) 151 131 116 100 108 120 137 165 177 188
Note: (a) LSG (least square growth) rate over 1998-2008; (b) LSG rate over 2000-08. Source: derived from partners’ data available in the UN COMTRADE database.
When set against imports, the time profile of export performance differs in three respects: first, the
bottom was reached two years earlier; second, the growth was weaker; and third, the value of exports
contracted in 2008 by 8 percent, while imports increased 6 percent. The fall of exports in terms of value
is partly attributable to the Global Financial Crisis which began in 2008 and spilled over from the
financial sectors in highly developed countries to the world’s real economy. World merchandise output
fell 0.5 percent, while the rate of growth of goods significantly slowed down from 9 percent in 2006 to 6
percent in 2007 and 1.5 percent in 2008.27
Viewed in a longer perspective of the last two decades, one may distinguish three phases in Zimbabwe’s
export performance: two phases of moderate growth in 1990‐97 and 2003‐07 and a phase of
contraction in 1998‐2002. During the first growth phase an average annual growth rate was almost 10
percent, followed by contraction at an annual growth rate of 3.5 percent, and a rebound at an average
annual growth rate of almost 8 percent (Table 10). The third phase came to a halt in 2008 when exports
fell 8 percent.
Leaving aside the contraction phase, the differences in export growth performance between the 1990‐
97 and 2003‐07 phases point to a significant contraction in the country’s export base. The first phase of
growth was significantly more robust than the second one five years later: For starters, it was much
longer extending over 7 years rather than 5 years. Second, the value of exports during the peak year in
1997 stood almost 80 percent above the level in 1990, whereas the peak in 2007 was only 40 percent
above the level in 2002. Last but not least, the value of exports in 2002 stood at 82 percent of its peak
level in 1997 and that in 2007 only 15 percent. The value of exports in 2008 was only six percent above
its level in 1997.
27 Downloaded from http://www.wto.org/english/res_e/statis_e/its2009_e/its09_world_trade_dev_e.htm on May 1, 2010.
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Table 10: Three phases of export growth in 1990‐2008 (in percent)
Average annual Least Square Index, peak Share of EU Share of neighbors
growth rate Growth rate low=100 first year last year first year last year
Growth phase, 1990‐97 9.8 8.6 179 56.9 48.6 n/a 13.3
Contraction phase 1998‐2002 ‐3.5 ‐2.7 82 46.8 36.5 16.4 22.4
Moderate rebound, 2003‐07 7.0 6.4 140 30.8 22.0 31.7 43.6
Contraction in 2008 ‐7.6 n/a n/a 21.3 n/a 42.9 n/a
Source: Partners’ trade data reported to the UN COMTRADE database.
An interesting question is whether the fall in exports in 2008 sets the stage for a new contraction phase
or was it a temporary blip? Official data suggest that the contraction was limited to 2008‐09. Since
partners’ foreign trade statistics for 2009 were not available as of this writing (September 2010), it is
impossible to give a precise figure. According to the balance of payments statistics, compiled by the
Reserve Bank of Zimbabwe, exports contracted 4 percent in 2009. But they are projected to grow 21
percent in 2010. Production statistics seem to suggest that indeed exports were rebounding in 2010.
The critical question addressed in the next section concerns the extent to which increases in exports
have been driven by increases in prices of exported commodities or by increases in the volumes
exported.
2.4. Zimbabwe’s export rebound in 200307: was it priceled or quantitydriven? The value of exports during the moderate rebound phase was around 40 percent above its value in
2003. But was this growth merely the result of increasing world prices for commodities during the global
economic boom which took place during 2002‐07 or did real exports increase during this time?
Unfortunately, detailed information on Zimbabwe’s exports in natural units is not available except for a
selected group of products traced in the balance‐of‐payments statistics compiled by the Reserve Bank of
Zimbabwe, which raises questions about the reliability of official data. As discussed in Appendix 1 and
also shown in Table 11, the quality of official export reporting appears to be wanting. Leaving aside
absolute differences in estimates of the values of exports, the trend, which was similar in 2001‐02,
becomes different in 2003‐07: while mirror statistics point to the growth, official statistics point to the
collapse of exports in terms of value beginning in 2005. Beginning in 2006,28 the value of total official
exports is below the value of total mirror: while this is the way it should be considering that exports are
FOB (free on board) and imports from Zimbabwe are CIF, i.e., include cost of insurance and freight, the
difference cannot be explained by CIF. It is rather unlikely that the cost of insurance and freight was so
high at 29 percent in 2006 and increasing to 35 percent in 2008 as the ratio of CIF to the value of
Zimbabwean imports was ‘only’ above 10 percent.29
Yet, none of these should discredit the official data on selected commodities exports (for their list see
Table 12 below) and suggest that they are not worth a serious analysis. To the contrary, there are
reasons to believe that the use of official disaggregated statistics will not produce unreliable results as
28 One wonders whether a sudden change in 2006 with officially reported exports suddenly falling well below mirror exports had anything to do with firms’ attempts not to reveal exports in order to avoid confiscation of a growing portion of foreign earnings through the surrender requirements. 29 See the earlier discussion of shipping costs in Section 2.2 on trade in services.
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distortions in official reporting seem to have been related to other products than those for which data in
unit values are available. Consider the following: First, data on selected commodities were not the
source of grossly overvalued exports: note that as the quality of export reporting was improving, the
share of these commodities in total exports was increasing from 21 percent in 2000 to 70‐71 percent in
2006‐08 (Table 11). This indicates that exports of other products were overvalued to a much larger
extent. Put differently, other exports ‘were downsized’ rather than those of selected commodities.
Table 11: Exports of selected commodities and total exports as reported by Zimbabwe’s authorities and importers of Zimbabwe’s products in 2000‐08 (in current prices)
2000 2001 2002 2003 2004 2005 2006 2007 2008
Total exports of selected commodities*/ 1,305 1,158 945 946 1,173 1,065 1,222 1,297 1,161
Share in total exports 21% 24% 26% 27% 34% 37% 71% 71% 70%
Total exports 6,354 4,809 3,641 3,461 3,478 2,860 1,721 1,819 1,657
Total mirror exports 1,855 1,809 1,728 1,867 1,924 1,974 2,227 2,414 2,230
Ratio of exports of selected commodities to total mirror exports 70% 64% 55% 51% 61% 54% 55% 54% 52%
*/ Table 2 lists the commodities covered by this analysis.
Source: Reserve Bank of Zimbabwe and UN COMTRADE database.
Second, the ratio of exports of selected commodities to total mirror exports was relatively stable in
2001‐08 indicating again that official reporting of exports of selected commodities was decent. Note
also that the surge in the share of selected commodities exports in total exports from 37 percent in 2005
to 71 percent in 2006 coincided with the first year that official exports were not over‐reported: yet, the
ratio of selected commodities exports to mirror exports remained unchanged at around 55 percent. This
indicates an improvement in the quality of reporting.
Last but not least, another piece of evidence suggests there are no substantial differences in exports of
some of them, i.e., those for which finding an equivalent in mirror statistics is relatively straightforward
(e.g., cut flowers, raw sugar, tobacco), as reported in Reserve Bank’s statistics and foreign trade data.
The official data point to a significant contraction in volumes of exports of both agricultural and mining
products, albeit with two exceptions. One exception stands out: exports of PMG (platinum group
metals) skyrocketed in 2003‐08 increasing more than tenfold in 2003 alone (Table 12). This was the only
bright spot in an otherwise grim picture: the result of Impala Platinum, South Africa, taking over Zimplat
mines from BGP Delta, an Australian mining company, and turning them into profitability. Cotton Lint
was another exception, albeit with a caveat: exports in 2005‐08 were below the levels of 114 million
tons recorded in 2000 and 2004 (Table 12).
Otherwise, there were significant decreases in quantities exported across the board. The largest decline
was in registered exports of gold: volumes shipped abroad in 2008 stood at just 13 percent of exports in
2000. The contraction was particularly acute in 2005‐08 with entry into force of the law granting the
Reserve Bank of Zimbabwe exclusive rights to export gold which remained in effect until the
introduction of the multi‐currency system in early 2009. Since this amounted to 100 percent surrender
of hard currency earnings in return for (what became largely worthless) domestic currency, gold output
sharply declined. Hence, except for PGM exports, mining was not spared from the significant contraction
in exported quantities exacerbating the effects of a collapse in domestic agricultural production:
38 | P a g e
volumes of agricultural exports in 2008 were between 34 percent (flowers) and 49 percent (raw sugar)
of those in 2000. Exports of more processed refined sugar also contracted more strongly than exports of
raw sugar in 2008: they stood at 35 percent of their level in 2000 as compared to 49 percent (see Table
12).
Table 12: Major Zimbabwe’s exports in terms of natural units in 2000‐08
2000 2001 2002 2003 2004 2005 2006 2007 2008 Index 2007, 2003=100
Index 2008 2000=100
Flue‐cured tobacco (mlns tons) 177 195 141 102 69 64 67 73 71 72 40
Sugar raw (000 tons) 150 86 59 69 79 62 82 41 74 60 49
Sugar refined (000 tons) 101 95 107 50 61 46 61 48 35 96 35
Flowers (in 000 tons) 18 22 23 20 15 13 10 11 6 55 34
Gold ('000 ounces) 778 827 513 417 672 429 335 226 105 54 13
Platinum Group Metals (PGM) 21 36 12 128 369 436 536 574 574 448 2720
Nickel (000 tonnes) 9.0 6.3 4.9 7.3 7.4 6.6 6.9 6.5 4.2 89 47 High Carbon Ferro Chrome ('000 tons) 245 219 293 264 248 245 191 152 82 58 33 Cotton Lint ('000 tons) 114 80 52 48 114 95 98 94 95 196 83
Source: Reserve Bank of Zimbabwe.
Fortunately for Zimbabwean exporters, the prices of most commodities were moving up in 2000‐08,
albeit at different rates depending on the product. Except for flowers and cotton lint, the prices of other
exports tended to grow over the period. Prices of refined sugar were lower in 2002‐05 than in 2000‐01:
they rebounded in 2006‐07. So did the prices of chrome, albeit with a caveat: the prices rebounded
earlier in 2004. Prices of tobacco were flat throughout the whole period in 2000‐08. So were the prices
of cut flowers in 2001‐08. The strongest upward movement in prices was for gold and high carbon ferro
chrome. Volumes of exports for these commodities, however, declined rather dramatically: exports of
gold stood in 2008 at 13 percent of their level in 2000 and ferro chrome at 33 percent (see Table 13).
The most volatile prices were for nickel, which fell in 2001‐02 below their level in 2000, but
subsequently increased spectacularly in 2003‐07 before contracting by almost one‐half in 2008 thereby
significantly contributing to the contraction in total exports that year, which, in turn, was also
exacerbated by the fall in the volume of nickel exported (Table 13).
Table 13: Prices of major Zimbabwe’s exports in 2000‐08 (in US dollars per unit)
2000 2001 2002 2003 2004 2005 2006 2007 2008 Index 2008, 2000=100
Flue‐cured tobacco ($/kg) 3.050 3.000 3.030 3.120 3.250 3.170 3.070 3.180 3.240 106
Sugar raw ($/kg) 0.347 0.350 0.456 0.544 0.417 0.427 0.508 0.503 0.614 177
Sugar refined ($/kg) 0.431 0.420 0.346 0.348 0.341 0.367 0.644 0.650 0.670 155
Flowers ($/kg) 4.540 3.600 3.780 3.780 3.600 3.780 3.780 3.780 3.500 77
Gold ($000/1000 ounces) 0.278 0.273 0.311 0.365 0.391 0.445 0.601 0.680 0.897 323
PGM ($000/1000 ounces) 0.541 0.492 0.540 0.603 0.473 0.532 0.581 0.600 0.828 153
Nickel ($ per kg)) 8.700 5.587 6.480 9.386 12.927 14.500 23.144 34.974 18.575 214
High Carbon Ferro Chrome ($ '000/ton) 0.500 0.300 0.400 0.500 0.748 0.641 0.614 0.933 0.990 198
Cotton Lint ($/kg) 1.400 1.000 1.000 1.400 1.070 1.010 1.100 1.100 1.200 86
Source: Reserve Bank of Zimbabwe.
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To what extent did increases in world prices compensate for the contraction in exported values of
selected commodities? In order to answer this question, we calculate cumulative changes in prices and
quantities exported separately over 2001‐08 and the phase of “mirror” export rebound in 2003‐07. The
last column of Table 14 is the sum of cumulative changes of prices and quantities: zero indicates that
falling/increasing prices equal to increasing/falling quantities, whereas negative values indicate that
either prices or quantities drove exports down.
Table 14: Cumulative annual change in prices and quantities exported in 2001‐08 and 2003‐07 (in percent)
Cumulative change in prices Cumulative change in quantities Total change
2001‐08 2003‐07 2001‐08 2003‐07 2001‐08 2003‐07
Flue‐cured tobacco 6% 5% ‐74% ‐53% ‐68% ‐48%
Sugar raw 70% 16% ‐1% ‐8% 68% 8%
Sugar refined 66% 83% ‐64% ‐44% 1% 39%
Flowers ‐23% 0% ‐82% ‐64% ‐105% ‐64%
Gold 131% 86% ‐133% ‐48% ‐3% 38%
Platinum Group Metals 54% 15% 1241% 1240% 1295% 1255%
Nickel 139% 205% ‐49% 38% 89% 244%
High Carbon Ferro Chrome 107% 108% ‐83% ‐60% 25% 48%
Cotton Lint 0% 20% 48% 112% 49% 132%
Source: Own calculations based on the data from Reserve Bank of Zimbabwe.
Two observations can be derived from examining data in Table 14. First, prices tended to grow while
quantities of exports were contracting. As mentioned earlier, except for cut flowers, prices of all other
commodities increased.30 In terms of quantities exported, except for PGM and cotton lint, all other
exports had negative growth rates in 2001‐08. Exports of nickel increased but only in 2003‐07.
Second, the improvement in prices neutralized the fall in exported quantities of most commodities and
positively contributed to the increase in the value of exports in the case of all commodities except for
flue‐cured tobacco and cut flowers. For the whole period 2001‐08, one should also include gold whose
exports collapsed in 2008 due to the state taking them over. The largest increase in 2003‐07 was for two
commodities—PGM and nickel—whose both prices and quantities exported displayed strong growth.
Since the composition of exports has also been changing, the data in Table 14 do not allow us to
estimate the aggregate impact of changes in prices and quantities on total exports of these
commodities. As the first step to address this question, we calculate the values of exports of these
commodities using (a) constant prices and (b) constant quantities.31 Table 15 presents the results.
The values of exports in Table 15 at the diagonal are actual values of exports, i.e., quantities are
expressed in prices for the same year. Values in a row record the values of an export basket in
successive years in constant prices. For instance, the value in the row “in 2004” and in column “2007” is
the product of 2007 quantities multiplied by respective export prices in 2004. Put differently, as one
moves across the rows, successive changes in values are the result of changes in the volumes of exports
30 Cut flowers experienced a cumulative decline in prices of 23 percent, almost exclusively due to a 21 percent contraction in 2001. The price of cotton lint displayed huge volatility with annual contractions of 29 and 24 percent and increase of 40 percent in 2003. 31 In more formal terms, we calculated for each year the values of exports according to the formula ∑(pIt*qit) where pi and qi stand for price and quantity of a good i, and t for years.
40 | P a g e
in successive years expressed in terms of prices in the base year. In other words, the first row contains
information about exports in 2000‐08 in 2000 prices. Symmetrically, the entries in a column represent
values for quantities exported in the base year using prices in each year over the period 2000‐08. For
instance, the first column provides information about the values of exports in 2000 quantities valued in
prices in successive years. Hence, were the 2000 export basket reproduced in 2007, the value of exports
in this year would be US$1.982 billion rather than the actual US$1.297 billion and their value in 2007
prices would be 52 percent higher than in 2000 prices (see the last row). The data in the last row and
column are similar to Lespeyres and Paasche indexes, i.e., they summarize the impact of prices and
volumes on exports in 2007 expressed in terms of either volumes or values in a base year (the value on
the diagonal).32 Corresponding indexes were calculated for 2007, because this was the last year of the
moderate rebound phase of Zimbabwe’s total exports.
Table 15: Total values of exports of selected commodities expressed in constant quantities and prices in 2000‐08 (in millions of US dollars)
Column: Rows: exports in successive years in base prices
Base volume in current prices 2000 2001 2002 2003 2004 2005 2006 2007 2008
Index 2007 100=t i
in 2000 1,305 1,291 1,012 895 1,067 962 980 946 833 73
in 2001 1,151 1,158 885 768 909 815 840 814 728 70
in 2002 1,231 1,231 945 833 992 890 912 876 780 93
in 2003 1,400 1,375 1,056 946 1,157 1,034 1,056 1,007 893 106
in 2004 1,472 1,452 1,147 1,016 1,173 1,039 1,030 970 823 83
in 2005 1,490 1,472 1,144 1,024 1,208 1,065 1,063 1,002 852 94
in 2006 1,716 1,673 1,284 1,165 1,415 1,224 1,222 1,135 948 93
in 2007 1,982 1,905 1,492 1,382 1,650 1,429 1,408 1,297 1,051 100
in 2008 2,058 2,026 1,559 1,411 1,794 1,545 1,522 1,396 1,161 ….
Index 2007 100=t i 152 164 158 146 141 134 115 100 …
Notes: (1) For a list of products covered, see Table14; (2) index is a ratio of the value in 2007 to that in the diagonal of the table; (3) in bold are diagonal values of exports in current prices and quantities. Source: own calculations based on the data provided by the Reserve Bank of Zimbabwe.
The scope of the overall decline in export volumes was large and progressing every year. As can be seen
from the last row ‘in 2008’ showing the values of quantities exported in successive years over 2000‐08 in
2008 prices, except in 2004, the values were decreasing. Had Zimbabwe exported the same basket in
terms of quantities in 2008 as in 2000, its exports earnings would have been US$2.058 billion rather
than US$1.161 billion or 77 percent higher. Had the exports prices been the same in 2008 as in 2001, the
value of these exports would have been US$728 million or 37 percent less than in current prices. Indeed,
except in 2003, the value of exports in 2008 prices expressed in quantities of a base year was
significantly higher than in the preceding year: in terms of 2003, it was 21 percent less than for the 2004
32 The data in the last column can be thought of as the equivalents of the Laspeyres index: the ratios of the value of exports in 2007 expressed in prices for each year over the period 2000‐08 to the value of exports in quantities and prices of the base year or ∑(pIt0*qit1)/∑( p It0*qit0) where pIt0 is the price of good i in base period, qit1 is quantity of good i in period 1 or 2008, and pIt0 and qit0 are prices and quantities in base periods. The Laspeyres index captures the change in quantities. The data in the last row “Index 2007 100=ti” are equivalents of the Paasche index with the volume in a given (base) year expressed in prices in successive years or ∑(p It1*q it0)/∑( p It0*q it0). It denotes the impact of change in exports prices.
41 | P a g e
bundle. Yet, the value of 2003 exports in 2008 prices would be 1 percent higher than 2007 exports in
2008 prices. The 2000 exports bundle in 2008 prices would generate export earnings 47 percent above
the 2007 export bundle. In relation to actual 2008 exports, these earnings would be 77 percent. In a
nutshell, except for exports in 2008, any earlier export bundle would generate higher export earnings
than in the ‘peak’ year in 2007 (for more details, see Annex Table 3).
Since products covered in this analysis account for the bulk of Zimbabwe’s total exports, it is safe to
conclude that higher world prices rather than increased exported quantities drove total exports during
the modest rebound phase of 2003‐07. The rebound in real terms was minimal, if at all. Quantities of
these commodities exported in the trough years 2002‐03, which witnessed the largest fall in the value of
these exports, would yield higher export earnings than those accrued in the peak year of 2007.
Considering that firms operating in natural resource extractive industries might have been somewhat
immune to deficiencies in the overall quality of the business environment as they tend to be
geographically concentrated and depend less on local supplies, this finding comes as somewhat of a
surprise. It appears that extractive industries were not entirely spared from the reach of economic
policies.
2.5. Changes in Zimbabwe’s direction of trade: a shift in exports from the EU towards Southern African markets Zimbabwe’s exports to neighboring countries—SACU, Mozambique and Zambia—weakened the size of
contraction of export contraction between 1998 and 2002 and contributed to their rebound in 2003‐07.
Redirection of exports from the EU to neighboring countries, mainly to South Africa, has been significant
and taken place at least since 1990, i.e., well before the turbulent 2000s. While we do not have
information on neighbor‐destined exports until the mid‐1990s (Botswana until 2000), the share of
exports going to regional markets increased during both the contraction and moderate rebound phases.
It went up from the peak of the growth phase in 1997 from 13 percent to 16 percent in 1998, when total
exports fell 15 percent, and further increased in the last year of the contraction phase to 22 percent
indicating a cushioning effect of import demand in neighboring countries. Their export share further
expanded during the moderate rebound phase in 2003‐07.
The redirection of Zimbabwe’s exports has been unidirectional: the major lever of change was
expanding exports to South Africa and shrinking exports to the EU. While the average annual growth
rate of total exports in 2001‐08 was an unimpressive 2.5 percent (LSG rate over 2000‐08 of 3.6 percent
was slightly higher), Zimbabwe’s South Africa‐destined exports recorded an average growth rate of 22
percent. In contrast, exports to the EU were falling an average of 5‐6 percent per year. The share of the
EU in Zimbabwe’s total exports contracted 18 percentage points and the share of South Africa increased
24 percentage points over the same period from an average of 14 percent to 37 percent indicating a
significance increase in the reliance on a single export market (Table 16). Note also that the share of
exports to the rest of the world in total exports also fell from 32 percent to 27 percent in this period.
The change in the geographical pattern of Zimbabwe’s imports has been less pronounced, yet displaying
striking similarities with those of exports. For starters, although the increase in the share of South Africa
in Zimbabwe’s total imports in the 2000s was less pronounced, its share is much higher as almost three‐
42 | P a g e
quarters of imports originate there (Table 16). Second, the increase in South Africa’s share in imports
was almost the same as the fall in the share from the EU. Third, amongst major exporters to Zimbabwe,
only China has succeeded in increasing its presence in Zimbabwe’s market.
Table 16: Direction of trade in 2000‐08 (in millions of US dollars and percent)
Shares (in percent) Index 2008 Value Growth rates
Exports Avg.
2000‐02 Avg.
2003‐08 2008 Avg.00‐02=100 2008
LSG 2000‐08
Average annual 2001‐08
SACU, of which 14.3 30.9 37.4 260.9 834 18.7 17.1
South Africa 10.3 27.7 34.0 330.0 759 22.2 21.8
Botswana 3.6 2.1 2.1 57.4 46 ‐3.5 4.0
Mozambique 0.6 0.7 0.7 118.3 15 9.2 18.4
Zambia 4.9 6.7 4.8 98.1 107 4.6 14.9
Malawi 2.1 2.5 1.7 84.1 38 3.1 9.2
EU‐27 38.9 25.2 21.3 54.9 476 ‐5.6 ‐5.2
China 7.0 7.2 6.6 94.4 148 3.0 5.8
Rest of the world 32.2 26.8 27.4 85.1 611 0.7 ‐0.1
TOTAL 100 100 100 100 2,230 3.6 2.5
Memorandum: Neighboring countries
19.4 37.2 41.6 214 928 15.7 15.3
Imports
Shares (in percent) Index 2008 Value Growth rates
Avg. 2000‐02
Avg. 2003‐08 2008
Avg.00‐02=100 2008
LSG
2000‐08
Average annual
2002‐08
SACU, of which 60.5 67.9 71.3 118 1,911 12.6 16.3
South Africa 53.0 54.3 63.0 119 1,689 11.1 16.0
Botswana 6.4 9.5 8.0 125 215 18.5 22.9
Mozambique 4.1 2.6 3.0 74 81 6.7 18.1
Zambia 4.1 2.6 2.4 58 64 23.0 53.8
Malawi 0.6 1.4 0.8 151 23 26.9 82.2
EU‐27 16.1 9.1 7.2 44 192 ‐1.5 0.0
China 2.6 5.6 5.0 193 133 25.8 42.7
Rest of the world 12.1 10.9 10.3 86 277 3.8 9.2
TOTAL 100 100 100 100 2,680 10.7 12.9
Memorandum: Neighboring countries
67.6 68.9 76.5 113 2,050 12.3 15.7
Notes: Neighboring countries include Botswana, Mozambique, South Africa and Zambia Source: Derived from trade statistics reported to the UN COMTRADE by Zimbabwe’s trading partners.
The increase in overall geographical concentration of Zimbabwe’s exports has been also accompanied by
an increase in the concentration of its exports to neighboring countries. The share of South Africa in
Zimbabwe’s exports to its neighbors—Botswana, Mozambique, South Africa and Zambia—increased
from an average of 53 percent in 2000‐02 to 82 percent in 2007‐08. Although a number of other SADC
countries are highly export‐dependent on South Africa, Zimbabwe stands out. While the share of South
Africa in the total exports of Mozambique, Zambia and Malawi was between 10 percent and 15 percent,
it amounts to around 30 percent for Zimbabwe’s exports. Zimbabwe has become more dependent on
43 | P a g e
the South African market than most SACU members are: its share is only lower than that of Swaziland
which exports around three‐quarters of its goods to there.33
While large year‐on‐year variations in the annual values of its exports to Mozambique and Zambia
characterize Zimbabwe’s sales to these markets, commercial transactions with both South Africa and
Botswana appear to have been more stable. For instance, a sudden fall in the value of exports by 36
percent in 2003 was preceded by a 74 percent increase and followed by annual growth rates of 0.9
percent, 63 percent, 55 percent and another contraction of 48 percent in 2004‐07. Similar variability was
in exports to Zambia with the rates ranging between 109 percent in 2003 and minus 39 percent in 2004.
On the other hand, rates of South Africa‐oriented exports ranged between minus 11 percent in 2008
and 72 percent in 2003.
The shift in the geographical pattern of Zimbabwe’s exports was not triggered by expanding exports to
its major external markets. Neither was it triggered by a surge in exports to all of its neighbors as
exports increased only to South Africa. The shares of other neighboring countries in both exports and
imports were falling so was the share of the EU: the EU was taking almost half of Zimbabwe’s total
exports in 1994‐2000 and accounted on average for 24 percent of Zimbabwe’s imports. By 2008, these
shares fell to 21 percent for exports and 7 percent for imports (Table 16 above).
EU‐oriented exports have been the main casualty in the shift of Zimbabwe’s trade towards neighboring
markets, which occurred largely in 2001‐08. Exports to the EU fell rapidly from around US$1 billion in
1997 to US$476 million in 2008 while rest of the world‐oriented exports were stagnant and ranged
between US$650 million and US$800 million in 1997‐2008, and those to neighboring countries increased
from an average of US$313 million in 1994‐1999 to US$355 million in 2000‐02 and then began rapidly
expanding (Figure 6). Except in 2007 when they increased 7 percent over 2006, EU‐destined exports
continued falling at an average annual rate of 8 percent per year, whereas exports to neighbors grew at
an average rate of 16 percent per year over 2004‐07.
Figure 6: Exports to neighboring countries, EU‐27 and ROW in 1997‐2008 (in millions of current US dollars)
Source: Partners’ trade data reported to the UN COMTRADE database.
33 South Africa takes about 10 percent of Botswana’s total exports and 20 percent of Lesotho’s exports (IMF Directions of Trade Statistics).
0
200
400
600
800
1,000
1,200
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
ROW Exports
Exports to EU27
Exports to neighboring countries
44 | P a g e
The turning point in Zimbabwe’s transition to a new geographic pattern of trade was in 2003, when the
value of its exports to neighboring countries increased 53 percent overtaking its exports to the EU,
which contracted 9 percent in that year (Figure 6). This was in marked contrast to developments in
1994‐2002: exports to neighbors grew during this period at an LSG rate of 1 percent; total exports at 0.4
percent; and exports to the EU fell at 4 percent (Table 17).
Table 17: Exports to neighboring countries, EU‐27 and ROW in 1997‐2008 (in millions of current US dollars and percent)
1994 1997 2002 2003 2004 2007 2008 LSG 1994‐
2002 LSG 2002‐
2008 Index 2008 2002=100
Exports to EU27 706 1,018 631 574 564 531 476 ‐1.6 ‐4.0 75 Exports to ‘neighbors’ 303 278 388 593 634 1,053 956 1.0 15.3 247
ROW Exports 598 799 709 700 730 830 798 2.2 2.7 112
Total exports 1,607 2,095 1,728 1,867 1,927 2,414 2,230 0.4 5.1 129
Source: As in Figure 6.
The largest change occurred in 2002‐2008; the pace of contraction accelerated to 4 percent, while
exports to neighbors expanded at a LSG rate of 15.3 percent. Although the value of ‘neighbors‐destined’
exports fell 9 percent in 2008, this contraction wiped out the annual increase of 9 percent in 2007.
Consequently, the value of neighbor‐oriented exports in 2008 was almost 2.5 times higher than in 2002,
whereas EU‐destined exports stood at 75 percent of their value in 2002.
The shift towards South Africa and other neighboring countries cannot be explained solely in terms of
the redirection of Zimbabwe’s exports away from EU markets. Annual increases in neighbor‐destined
exports over 2003‐06 in terms of value were larger each year than the annual falls in EU‐destined
exports: in aggregate, the former increased US$578 million whereas the total contraction for the latter
was US$136 million. In 2007 exports to both markets increased: to neighbors by US$87 million and
US$35 million to the EU followed by contraction in 2008 by US$96 million and US$55 million
respectively. In all, the value of total exports was 29 percent higher in 2008 than in 2002 (Table 17
above).
2.6. Zimbabwe’s export performance in regional markets Hence, regional exports were the only bright spot in an otherwise grim picture of Zimbabwe’s foreign
trade performance. An interesting question is about Zimbabwe’s performance in these markets. Some
general insights can be derived from comparing the changes in total imports of neighboring countries
with the growth in imports from Zimbabwe. This is a very general measure of competitiveness that does
not take into account developments in individual markets and changes in relative prices. Yet, it sheds
some light on the responsiveness of export sectors to opportunities offered in adjacent markets within
easy reach, at least in terms of logistics.
Based on the data in Table 18, the answer is unequivocal: Zimbabwe’s exporters increased their
presence in the largest and most important market in the region ‐ South Africa ‐ whereas they were
outperformed in other regional markets. South African imports from Zimbabwe expanded at an
impressive LSG growth rate of 24.5 percent in 2000‐08, albeit with a caveat. The caveat is that the
45 | P a g e
contraction in imports in 2008 resulted in a fall of Zimbabwe’s share in total South African imports from
1.1 percent in 2007 to 0.9 percent. This share is below its levels in 2004‐07 and 1994‐96.34
Table 18: Zimbabwe’s export performance in neighboring countries in 2000‐08 (in percent)
Average annual rates in 2001‐08
LSG rates in 2000‐08 Share of Zimbabwe in total imports
Index, (d)=100
Memo: Share in total
(a) (b) (a) (b) 2004 2005 2006 2007 2008 (c)= 100 exports, 2008
Botswana 15.7 4.0 8.1 ‐4.3 1.58 1.54 1.56 1.25 0.91 32.6 2.1
Mozambique 17.7 18.4 15.7 10.8 0.47 0.65 0.84 0.41 0.38 54.9 0.7
South Africa 16.7 21.8 18.0 24.5 0.90 0.89 1.00 1.07 0.87 143.7 34.0
Zambia 24.9 14.9 22.2 7.4 5.78 4.30 5.72 2.79 2.12 29.3 4.8
Notes: (a) total imports; (b) imports from Zimbabwe; (c) average share in 2000-01; (d) average share of Zimbabwe in total imports in 2007-08. Source: Derived from trade statistics reported to the UN COMTRADE by Zimbabwe’s trading partners.
Zimbabwe has lost market share in other neighboring countries, as well. The average share in 2007‐08
stood well below its average in 2000‐01 in Botswana’s imports at 33 percent of an earlier average,
Zambia’s imports at 29 percent, and Mozambique’s imports at 55 percent. Moreover, volatility in
market shares suggests randomness in commercial transactions, which does not augur well for the
future expansion or even sustainability of Zimbabwe’s exports to these destinations.
2.7. Concluding comment Zimbabwe’s foreign trade performance has been lackluster even against regional standards, albeit much
better when cast against its poor overall economic growth performance record. Imports were much less
affected by the collapsing economy than exports of goods. Thanks to increased tourism, exports of
services dramatically expanded, although Zimbabwe remains a net services importer mainly because of
high transportation costs associated with bringing goods in and out of the country.
Zimbabwe clearly failed to take advantage of the boom in commodity trade in 2002‐07. Total exports
continued falling through 2000‐02 and rebounded only in 2003‐07 thanks to increasing exports prices.
Growth performance was not impressive: their value reached the 1999 level only in 2004 and their value
exceeded the earlier record level reached in 1997 only in 2006 with the value of total exports only 6
percent higher; US$2.2 billion as compared with US$2.1 billion. It appears that the increase was solely
the result of improved terms of trade for commodity exporters during this period: except for cut flowers
and cotton lint, the prices for other commodities exported significantly increased in the 2000s.
The depth of contraction can be illustrated as follows: assuming Zimbabwe’s exports of basic
commodities were the same in terms of quantities as in 2000 and that their share in total exports was
the same as in 2000, the value of its total exports would be 30 percent higher than they were in 2008,
that is, US$2.9 billion rather than US$2.2 billion. In terms of volume, exports in 2008 were 36 percent
below their level in 2000.
The contraction in exports of major commodities in terms of quantities over 2000‐08, raises concerns
about prospects for the country’s future export performance. While world trade contracted and
34 The average in this period was 1.12 percent. It subsequently fell to 0.63 percent in 1997: the average for 1997‐02, i.e., before the surge in 2003, was 0.7 percent.
46 | P a g e
commodity prices fell during this period, the fall in the share of Zimbabwe in South African imports may
suggest a more serious problem in competitiveness of Zimbabwe’s exports. The next section seeks to
answer this question by taking a closer look at the evolution of Zimbabwe’s export basket in terms of
factor intensities and degree of processing.
47 | P a g e
3. Drivers of Zimbabwe’s trade performance: evolving patterns of specialization
Zimbabwean businesses operated in a highly unfriendly environment in 2000‐08. In addition to rampant
inflation and damage inflicted on the agricultural sector by the land reform program, certainty about the
government’s disregard for private property rights and sanctity of contracts has created a highly
unstable business environment hostile to domestic and foreign investments alike. An examination of
foreign trade performance offers important insights on how the economy coped with policy‐induced
adversities. Its strength derives also from the fact that the quality of domestic statistics can be checked
by ‘mirror’ statistics, i.e., data collected by Zimbabwe’s trading partners. Domestic developments
viewed through the lens of foreign trade performance allow for the identification of sectors that
survived and those that did not. More importantly, they also offer some glimpses at which sectors may
recover once the economy recovers and the business environment becomes friendlier. With the
restoration of macroeconomic and financial stability, the conditions for recovery have greatly improved,
although other barriers have to be removed in order put the economy on a path of sustainable
economic growth (see Chapter 4).
Thus, questions addressed in this chapter boil down to the following: How diversified or concentrated
has Zimbabwe’s exports become? What do the changes in exports depending on the degree of
processing and levels of technology embodied in exported products tell us about Zimbabwe’s industrial
capacities and its revealed comparative advantage? What characteristics do products, in which
Zimbabwe specializes, embody in terms of technology and production factor intensities? Which sectors
survived and which ones have disappeared from Zimbabwe’s export basket?
3.1. Diversity in exports has declined Zimbabwe’s exports have always been relatively highly concentrated with a few commodities generating
the bulk of export revenues. But the concentration of exports increased further in 1994‐2008 by most
measures, although the increase began to take place already in the late 1990s. One measure relates to
the share of top exporters in total exports: Table 19 tabulates the shares of the top five, ten, and twenty
four‐digit SITC sectors in total exports.35 These shares kept increasing for each turning point in the
export cycle. In 1994 the remaining 80 percent of four‐digit SITC sectors contributed 28 percent to total
exports; by 2007‐08 their contribution fell to 18‐19 percent (Table 19).
Other measures also point to the decline in diversification of Zimbabwe’s exports in 1994‐97, and
acceleration of this trend in 2002‐08. The number of SITC four‐digit products exports increased from 774
(out of 1018 items) in 1994 to 803 in 1997 and 859 in 2002. This points to an increase in diversification,
albeit with a caveat. The caveat is that most of these exports were negligible, as simultaneously the
number of products with the value of annual exports exceeding US$100,000 slightly fell from 377 in
1994 to 367 in 1997 and 351 in 2002. By the same token, the number of products with exports below
US$100 thousand increased from 397 in 1994 to 508 in 2002: by itself, this was a positive development
that, if sustained, could lead to a greater diversification. However, this trend was not sustained as both
35 For a list of top twenty four‐digit SITC products in Zimbabwe’s total exports in these years, see Annex Table 5 and 6.
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the number of products exported at all and that with exports above US$100,000 fell in 2002‐08. Hence,
by these two measures, the 2000s witnessed a strong tendency towards concentration of exports.
Table 19: Various indicators of concentration in 1994, 1997, 2002, 2007 and 2008 (in percent and numbers)
Four‐digits SITC sectors 1994 1997 2002 2007 2008 Index 2008 1994=100
TOP FIVE (in percent) in total exports 45 55 52 61 60 134
TOP TEN (in percent) in total exports 60 69 65 72 72 120
TOP TWENTY (in percent) in total exports 72 80 75 82 81 113
REMAINING 998 SECTORS (in percent) in total exports 28 20 25 18 19 67
Memorandum:
Number of sectors involved in exports 774 803 859 791 746 96 Number of sectors exporting more or equal to US$100,000 377 367 351 296 270 72 Values of Herfindahl‐Hirschman index 666 950 1,188 927 783 111
Source: Derived from trade statistics reported to the UN COMTRADE by Zimbabwe’s trading partners.
Yet, another measure of concentration—the Herfindahl‐Hirschman Index (HHI)36points in the other
direction, i.e., towards diversification in 2002‐08. During both export expansion in 1994‐97 and
contraction in 1998‐2002, the values of the HHI kept increasing indicating an increase in the
concentration of exports but decreased between 2002‐08 suggesting diversification. Despite the decline
in diversification in terms of shares of dominant products and the range of products exported, the
values of the HHI suggest an increase in diversification.
What is then the final verdict? In order to answer this question, Table 20 gives information on the
average share of the top ten exports in total exports during each phase of export development and the
values of HHI during these phases not only for total exports but also for Zimbabwe’s exports to its two
major export markets: South Africa and the European Union. The increase in average shares of the top
ten exports is less pronounced as the averages appear to moderate an upward trend shown for
individual years. Furthermore, the number of sectors with exports above US$1 million fell.37 Thus, both
these measures point to the increase in the degree of concentration of Zimbabwe’s exports.
So do the values of HHI increase, although only for exports to South Africa and not to the European
Union. Zimbabwean exports to South Africa have undergone a dramatic change towards greater
concentration. The values of the HHI increased from a very low level of 18000, indicating reliance on a
few crop exports, to 1,426 in 2003‐07 and 2,208 in 2008. The latter indicates a high level of
concentration. In contrast, EU‐oriented exports have remained moderately concentrated, although the
trend has been towards higher levels of concentration. The average value of HHI slightly increased
36 The Herfindahl index (HI) is a measure of concentration equal to the sum of the squared shares of exports of products in total exports. It assumes values ranging from zero to 10,000: zero when shares are equal and 10,000 if only one product is exported. Values between 1,000 and 1,800 are considered as depicting moderate levels of concentration. 37 The number of these products was steadily falling from 140 in 1994‐97 to 133 in 2003‐07 and 114 in 2008: expressed in terms of the total number of four‐digit product lines of 1018, it fell from 14 percent to 13 percent and 11 percent. At a first glance, this might strike one as a small contraction. But this is not so. Consider that the US dollar significantly depreciated during this time: assuming, for illustrative purpose, that the 2008 US dollar equals $0.75, the number of product lines in 1994‐97 would go from 140 to 165.
49 | P a g e
during the export retrenchment phase in 1998‐02, fell during the expansion phase in 2003‐07 but—as
was the case for South Africa—significantly increased in 2008. Since the values of HHI of both South
Africa‐ and EU‐destined exports were significantly higher than their respective averages in 2003‐07, this
suggests that hyperinflation undercut the competitiveness of a large number of firms in 2006‐08. It is
also interesting to note that within sectors such as steel, the degree of concentration of exports
significantly increased (Annex Table 7).
Table 20: Shares of top ten in total exports and values of Herfindahl‐Hirschman index of total exports and of exports to South Africa and European Union: four‐digit SITC items
1994‐97 Average 1998‐02 2003‐07 2008
Index 2008 1994‐97=100
Share of top 10 in total (in percent) 62 63 65 72 118
Values of HHI for exports to South Africa 180 567 1,937 2,208 1229
Values of HHI for exports to European Union 1,109 1,426 1,051 1,415 128
Memorandum:
Number of products with exports above $1 million 140 138 133 114 81
Source: Derived from trade statistics reported to the UN COMTRADE by Zimbabwe’s trading partners.
In all, one might conclude that over the past decade: (a) Zimbabwe exported very similar products but
often in lower quantities and (b) its export basket has shrunk and the level of concentration has
increased. The dramatic increase in the concentration of Zimbabwe’s exports to South Africa has
coincided with lackluster performance in most markets. Considering the proximity and intimate
knowledge of the South African market by most Zimbabwean firms, this is clearly a sign of a contracting
export base because of de‐industrialization and higher costs of doing business.
3.2. The degree of processing embodied in exports and imports An examination of the composition of trade in terms of end‐use product categories sheds light on the
changes in domestic demand for various goods as well as in export composition depending on the
extent of their processing. For instance, an increase in imports of machinery usually points to an ongoing
industrial restructuring effort. In a similar vein, an increase in automobiles and parts may be related to
the emergence of firms specializing in production of parts or automobiles. In contrast to machinery, this
would call for an in‐depth investigation of imports. Furthermore, the increase in the combined shares of
foods and feeds and industrial raw materials merely indicates that processed goods play a growing role
in a country’s trade.
How have Zimbabwe’s exports performed according to these criteria? As a first step in answering this
question, it is interesting to compare developments in trade during the two phases of export growth in
1994‐97 and 2003‐07 (Table 21). Note, first, that except for automobiles and parts and textiles and
clothing, exports of other product groups recorded relatively strong growth. As discussed earlier, the
decline of the clothing and textile sectors did not start in the 2000s but was a continuation of a trend
already observed throughout the 1990s. Leaving aside fuels, the product group that experienced the
strongest growth was iron and steel followed by agricultural foods and feeds. In marked contrast, the
phase of modest rebound in 2003‐07 characterized a greater dispersion in export growth rates and a
larger number of end‐use products fell in terms of value.
50 | P a g e
But there were other more telling contrasts between the two expansion phases. The most glaring
contrast is a steep contraction in exports of foods and feeds and acceleration in the growth of industrial
raw materials during the second phase. The average growth rate in exports of foods and feeds changed
by 20 points: it moved from a positive growth rate of 11 percent to a negative growth rate of 9 percent
that was already preceded by falling exports in 1998‐02. Exports of industrial raw materials, which grew
at an LSG rate of 3.2 percent in 1994‐97 exploded to 31 percent in 2002‐07 emerging as the single most
important driver transforming Zimbabwean exports. With exports of foods and feeds falling and
industrial raw materials expanding, the shares of other end‐use product groups have remained relatively
unchanged.
Table 21: Developments in Zimbabwe’s exports in terms of end‐use product categories
Least Square Growth rate in Annual Average share in Share in
Exports 1994‐97 1997‐02 2002‐07 2008 1994‐97 1997‐02 2002‐07 2008
Agricultural Food & Feeds 11.4 ‐1.8 ‐9.4 ‐0.6 57.6 61.0 40.5 33.4 Industrial Raw Materials 3.2 ‐1.4 31.1 ‐26.8 12.8 12.2 32.5 40.1 Iron and steel 17.7 ‐8.9 11.4 42.1 10.4 9.2 10.1 14.7 Machinery, excluding auto 9.8 ‐4.2 ‐2.4 ‐23.4 2.1 1.7 2.2 1.5 Automobiles & Parts ‐2.6 6.7 18.4 ‐52.5 0.4 0.3 0.6 0.3 Textiles & Clothing ‐15.2 ‐4.1 ‐5.0 ‐37.1 5.2 3.5 2.0 1.2 Consumer Goods 14.4 ‐4.1 3.9 ‐9.0 10.3 11.1 10.9 7.7 Fuels 32.2 ‐17.6 ‐5.1 86.9 1.1 1.0 1.3 1.0
Total 9.9 ‐2.9 6.3 ‐11.0 100 100 100 100
Note: (1) The end-use categories are defined as Agricultural Food & Feeds (SITC 0+1+2+4-27-28); Industrial Raw Materials (SITC 27+28+68);Iron and Steel (SITC 67); Machinery, excluding automobiles (SITC 7-78), Automobiles & Parts (SITC 78), Other Consumer Goods (SITC 5+6+8+9-67-68); Fuels (SITC 3); and All Goods (0 to 9): (2) The data does not include exports of aircraft etc parts (SITC 7929) valued at US$91 million in 2008 attributable to an error as there are no indications of any significant production of aircraft parts in earlier trade data and other available information. Source: Based on world's reporting to UN COMTRADE Statistics.
But the relative stability in the commodity composition of Zimbabwe’s exports of other product groups
(i.e. excluding industrial raw materials and agricultural food and feeds) falls well short of capturing the
extent to which Zimbabwe’s integration into global markets has changed since the peak of exports
expansion in 1997. The most notable change is that the degree of import coverage by exports declined
and imports of foods and feeds exploded. Although the level of processing embodied in exports, as
captured by changes in the weight of foods and feeds together with industrial raw materials,38 has not
changed over the last decade, the level of processing embodied in Zimbabwe’s imports has fallen (Table
22).
More disturbingly, however, the balance of trade, although still in surplus, in traditional inputs has
dramatically deteriorated as a result of a three‐fold increase of these types of imports in terms of value
between 2002 and 2008. Although Zimbabwe is a net exporter of traditional inputs, exports of
agricultural foods and feeds as a proportion of the imports in these products fell from 530 percent in
2002 to 116 percent whereas exports of industrial raw materials in terms of their imports increased
38 It increased during the commodity boom in 2002‐07 and slightly contracted in 2008. The aggregate share of foods and feeds and industrial raw materials, however, was even slightly lower than in 2008: 72 percent versus 74 percent.
51 | P a g e
from 346 percent to 437 percent. However, this was only around half the value of this indicator in a
peak year 1997 as compared with 2007.
Table 22: Developments in Zimbabwe’s trade by end‐use product categories in selected years over 1997‐2008 (in millions of US dollars and percent)
1997 2002 2007 2008 Index 2007 1997 2002 2007 2008
in millions of US dollars 1997=100 Composition of exports (in %)
Agricultural Food & Feeds 1,248 1,044 707 703 57 60.6 61.8 29.9 33.4
Industrial Raw Materials 239 233 1,152 843 482 11.6 13.8 48.8 40.1
Iron and steel 224 128 217 308 97 10.9 7.5 9.2 14.7
Machinery, excluding autos 44 37 42 32 95 2.1 2.2 1.8 1.5
Automobiles & Parts 6 9 15 7 264 0.3 0.5 0.6 0.3
Textiles & Clothing 71 52 40 25 57 3.4 3.1 1.7 1.2
Consumer Goods 202 175 177 161 88 9.8 10.4 7.5 7.7
Fuels 25 13 12 22 47 1.2 0.8 0.5 1.0
Total 2,059 1,691 2,361 2,101 115 100.0 100.0 100 100
(exports in percent of imports) Composition of imports (in %)
Agricultural Food & Feeds 693 530 203 116 17 8.7 17.2 15.3 26.2
Industrial Raw Materials 803 346 323 437 54 1.4 5.9 15.7 8.4
Iron and steel 321 470 377 569 177 3.4 2.4 2.5 2.3
Machinery, excluding autos 7 17 8 6 95 32.1 19.0 23.4 22.2
Automobiles & Parts 2 6 7 3 141 13.9 13.1 8.9 11.1
Textiles & Clothing 57 90 85 51 88 5.9 5.0 2.1 2.2
Consumer Goods 29 46 27 29 101 33.6 33.3 28.3 23.8
Fuels 132 28 13 25 19 0.9 4.1 3.8 3.8
Total 99 148 104 95 96 100 100.0 100 100
Note: (1) The end‐use categories are defined as Agricultural Food & Feeds (SITC 0+1+2+4‐27‐28); Industrial Raw Materials (SITC
27+28+68);Iron and Steel (SITC 67); Machinery, excluding automobiles (SITC 7‐78), Automobiles & Parts (SITC 78), Other
Consumer Goods (SITC 5+6+8+9‐67‐68); Fuels (SITC 3); and All Goods (0 to 9): (2) The data does not include exports of aircraft
etc parts (SITC 7929) valued at US$91 million in 2008 attributable to an error as there no indications of any significant
production of aircraft parts in earlier trade data and other available information.
Source: Based on world's reporting to UN COMTRADE Statistics.
Figure 7: Developments in trade balances of traditional inputs and Zimbabwe’s total trade balance in 1994‐08 (n millions of US dollars)
Source: as in Table 22.
‐400
‐200
0
200
400
600
800
1,000
1,200
1994 1997 2001 2002 2003 2004 2005 2006 2007 2008
Trade balance
Agricultural Food & FeedsIndustrial Raw MaterialsIron and steel
52 | P a g e
The combination of falling exports and rising imports of foods and feeds has been responsible for the
contraction in the surplus of traditional inputs in Zimbabwe’s trade. Despite strong growth performance
in net exports of industrial raw materials, the contraction in net exports of foods and feeds was steep.
The surplus in trade of agricultural foods and feeds fell from US$1.1 billion in 1997 to US$ 99 million in
2008, whereas aggregate surpluses in industrial raw materials and iron and steel increased from US$364
million in 1997 to US$ 995 million in 2007 and fell in 2008 to US$905 million (Figure 7 above).
Another indication of slow growth in the industrial base has been developments in imports of capital
equipment and industrial raw materials. Although the latter grew at an impressive average rate of 38
percent per year in 2004‐07, this does not appear to be the result of growing domestic production of
more processed goods but rather high prices for primary commodities during this period. Consider that
the average rate of exports during this period was 34 percent. Moreover, the average rates including the
contraction of both exports and imports in 2008 were 22 percent for exports and 21 percent for imports.
But there is no similar ambiguity if another indicator of industrial development (i.e. imports of capital
equipment) is taken into account. The share of imports of machinery in total imports fell from an
average of 32 percent in 1994‐97 to 28 percent in 1998‐2001 and 21 percent in 2002‐08.
The shift in the composition of imports towards agricultural products and away from consumer goods
points to the rapidly deteriorating standards of living and growing pauperization of society over this
period. The share of agricultural products in total imports has dramatically expanded since 1997. It
increased from 9 percent in 1997 to 17 percent in 2002 and 26 percent in 2008. Simultaneously, the
combined share of cars, clothing and other consumer goods in imports fell from 53 percent in 2006 to
37 percent in 2008. The average in 1994‐2002 was 51 percent with a very small dispersion of annual
data.
Table 23: Direction of Zimbabwe’s exports by end‐use to South Africa, European Union and rest of the world in 1997 and 2008 (in percent)
1997 2008 Index 2008 1997 2008 Index 2008 1997 2008 Index 2008
Share of S. Africa 2002=100 Share of EU 2002=100 Share of ROW 2002=100
Agricultural Food & Feeds 11 12 182 52 27 60 37 60 126
Industrial Raw Materials 7 71 247 26 11 47 67 18 37
Iron and steel 2 2 76 57 50 134 41 48 80
Machinery, excluding autos 35 50 333 51 3 54 14 46 59
Automobiles & Parts 77 7 52 8 1 7 15 92 122
Textiles & Clothing 14 30 994 79 23 53 7 46 88
Consumer Goods 38 14 71 56 14 56 6 72 130
Fuels 32 43 84 24 0 0 44 57 118
Total 13 36 317 50 22 58 37 42 83
Source: Based on world's reporting to UN COMTRADE Statistics.
Major markets for Zimbabwe’s exports by‐end use product categories changed between 1997 and 2008:
driven by declining exports to the EU. While around 80 percent of exports of textiles and clothing were
shipped to the EU in 1997, only 23 percent were sold there in 2008 (Table 23 above). Since the value of
these exports contracted around 70 percent, other markets absorbed only a small fraction of the lost
sales to the EU. The EU, however, accounted for 50 percent of iron and steel exports in 2008, only 7
percentage points below the 1997 level. On the other hand, South Africa emerged as the major market
53 | P a g e
for industrial raw materials: its share increased from seven percent in 1997 to 71 percent in 2008.
Except for three product groups—food and feeds, consumer goods, and fuels, whose combined exports
accounted for 43 percent of the total in 2008—South Africa and the EU take more than half of other
exports.
The preceding discussion leads to the following observations: First, the level of processing embodied in
Zimbabwe’s export basket has remained unchanged since 1994. The share of primary inputs has
remained at slightly below three‐quarters of total exports independent of their levels. Second, exports
of food and feeds, iron and steel and consumer goods were the main drivers of export growth during
the growth phase in 1994‐97. The picture changed during the period of recovery in exports in 2003‐2007
in two important respects: first, food and feeds contracted, and second, consumer goods ceased to be a
driver. Industrial raw materials topped them all. Third, except for iron and steel, positive net exports
across all end‐use product categories have been falling. Not surprisingly, the largest decline has been in
food and feeds and industrial raw materials. Finally, the shift in imports from consumer goods to food
products is an indication of declining standards of living and a declining surplus in agricultural output, as
discussed below
3.3. Agriculture and agroprocessing: contraction of net exports Since agricultural output significantly contracted in response to land reform, interesting questions worth
exploring in more detail concern the impact this has had on foreign trade performance of raw foods and
agricultural products in 1997‐2008 and product groups in which Zimbabwe ceased to be a net exporter.
In order to address these issues, we extract trade data, as reported by Zimbabwe’s trading partners,
grouped through the filter of agricultural products in terms of SITC items developed in a paper by Ng
and Aksoy (2008). They distinguish between four broad categories: the first category is called “raw food”
and it includes meats and dairy, grains, and fruits and vegetables; the second category, referred to as
“cash crops,” includes tropical foodstuffs, feeds, oil seeds and tobacco; other food including processed
food and seafood; and agricultural raw materials or non‐food products. Table 24 presents net exports of
these products in 1997‐2008. Exports of all these products still exceeded their imports in 2008, although
the surplus, (i.e. net exports) had kept falling since 2001. The contraction was particularly acute in 2006‐
08, when they fell from US$482 million to US$150 million. We do not have data for 2009, but it seems
that net exports somewhat rebounded mainly thanks to an increase in exports of tobacco, Zimbabwe’s
largest exportable among agricultural products.39
While, with the exception of seafood, net exports in 2005‐08 were lower than in 1997‐2001, some fared
better than others. The least affected were agricultural raw materials. The value of their total net
exports was on average only around 20 percent lower than in 1997‐2001 as compared to a 50 percent
contraction in exports of cash crops (mainly tobacco). In terms of magnitude, by far the largest change
was in net exports of raw food (mainly maize): the pendulum swung from an average of US$99 million of
net exports in 1997‐2001 to net imports of US$ 166 million on average in 2005‐08. Net exports moved to
negative territory in the third year into the land reform program in 2002.
39 According to the data from the Reserve Bank of Zimbabwe, the value of these exports increased from US$229
million in 2008 to projected US$301 million in 2009.
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Table 24: Net exports of raw food and agricultural products in 1997‐2008 (in current millions of US dollars)
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Meats and Dairy Products, of which 40.8 38.2 41.4 46.0 32.1 11.6 11.4 9.4 6.5 11.2 25.7 4.9
Beef, fresh, chilled or frozen 35.7 28.0 29.4 30.5 19.5 1.0 1.8 0.0 0.0 0.0 0.1 ‐0.1
Grains and Cereals, of which 60 ‐18 ‐31 2 3 ‐88 ‐99 ‐102 ‐161 ‐92 ‐165 ‐385
Wheat and meslin ‐6 1 8 5 ‐1 ‐4 ‐5 ‐9 0 ‐6 ‐9 ‐21Maize (corn), unmilled 70 ‐15 ‐37 3 5 ‐82 ‐87 ‐85 ‐154 ‐77 ‐150 ‐354
Vegetables and Fruits, of which 49 52 62 55 60 55 56 27 47 42 38 21
Vegetables, fresh, chilled or frozen 21 23 26 22 18 18 18 ‐3 11 13 ‐3 ‐7Fruits, citrus etc. 23 24 30 28 38 34 34 29 33 26 39 24
Tropical Products, of which 91 121 98 88 89 77 74 101 90 91 49 68
Sugars, beet and cane, raw, solid 35 57 48 42 55 40 36 66 62 67 34 55Coffee, green, roasted or sub 37 34 23 15 10 10 8 10 8 7 4 3Tea and mate 8 10 11 20 17 15 17 16 15 14 8 8Spices 12 20 16 12 7 12 13 9 5 3 2 3
Feeds, Oilseeds and Tobacco, of which 647 487 640 540 598 613 520 368 246 189 254 292
Tobacco, unmanufactured; tobacco refuse 652 485 637 531 587 615 527 369 257 190 256 272 Oil seeds and oleaginous fruits ‐5 0 2 8 10 ‐2 ‐7 ‐1 ‐11 ‐1 ‐2 20
Processed Food, of which 2 ‐10 ‐10 12 40 12 19 18 ‐76 31 ‐10 ‐79
Meat & edible offals, prep. & preserved 8 8 4 3 2 1 3 5 4 4 3 1 Milk & cream, preserved, concentrated 2 0 0 5 4 3 0 0 ‐1 4 2 ‐1 Meals and flour of wheat, other cereal preps. nes 7 ‐4 ‐4 6 16 ‐9 5 ‐8 ‐102 ‐5 ‐43 ‐62 Refined sugars and other products 2 0 1 2 5 5 5 14 14 15 20 15Bran, oil cake, meal fodder and other food wastes 1 3 4 1 5 2 ‐1 0 ‐1 ‐5 ‐2 1 Misc. edible products and preparation ‐4 ‐3 2 0 1 1 ‐4 ‐8 ‐5 1 ‐3 ‐11 Non alcoholic beverages nes 0 0 0 ‐2 ‐3 0 0 ‐1 0 0 ‐1 ‐4Alcoholic beverages ‐3 ‐2 ‐3 ‐1 ‐2 ‐2 ‐1 ‐1 ‐2 ‐2 ‐2 ‐13Tobacco manufactured 6 ‐2 ‐10 ‐2 4 10 19 25 30 28 33 21Animal/vegetable oils and fats, processed ‐9 ‐6 ‐7 ‐6 1 ‐3 ‐11 ‐13 ‐15 ‐14 ‐19 ‐22
Seafood, of which ‐8 4 3 2 9 10 12 12 10 11 16 18
Fish, fresh (live or dead), chilled, frozen ‐5 1 0 1 3 1 2 4 0 0 4 5 Fish, dried, salted or in brine ; smoked ‐4 0 ‐1 ‐1 ‐1 ‐1 0 ‐2 ‐1 ‐1 0 0 Fish, crustaceans and molluscs, prep. 1 3 4 6 6 8 8 10 10 12 13 13
Agricultural Raw Materials, of which 259 246 245 295 293 234 124 313 255 199 202 210
Hides, skins and furskins, raw 6 5 4 7 6 7 7 8 10 12 11 16Cork, wood, pulp and waste paper 11 5 5 9 3 7 ‐103 17 21 23 20 18
of which: softwood (2482) 13 10 10 11 8 8 10 17 19 20 18 15Textile fibres, silk, cotton, jute etc. 137 119 113 141 149 89 86 185 140 110 110 116of which: raw cotton, excl linters 146 126 117 146 152 92 89 190 145 113 114 117Crude animal and vegetable materials 56 62 64 73 69 67 69 53 45 30 34 32
of which cut flowers 58 62 62 68 68 67 69 55 44 30 34 30
Total above 1,140 920 1,047 1,041 1,123 926 717 748 416 482 411 150
Sources: Partners’ statistics reported to the UN COMTRADE based on taxonomy of agricultural products in Ng, Francis and M. Ataman Aksoy. 2008. "Who are the net food importing countries?" Policy Research Working Paper 4457, World Bank, January.
While output has fallen across all raw food sectors, the largest contributor to the contraction in net
exports of raw food was maize. In the 1994‐2001 period imports of maize exceeded their exports twice
55 | P a g e
in 1998‐99. In most years until 2002, Zimbabwe was a traditional net exporter of this crop. The situation
changed beginning in 2002: when Zimbabwe’s imports started to exceed its exports each year with the
gap reaching the record level of US$354 million in 2008. Excluding maize, Zimbabwe is a net exporter of
raw food, although net exports have fallen from US$63 million in 2002 to US$55 million in 2007 and
US$5 million in 2008. Furthermore, excluding maize total net exports of raw food and agricultural
products in 2008 would amount to $448 million rather than US$150 million.
The processed food sector, whose importance stems not only from its contribution to foreign currency
earnings but also to employment creation, appears to have somehow withstood adversities of the
economic environment. The value of exports of processed food was higher in 2005‐07 than in the peak
years in 1995‐06. Although net exports were negative in 2007‐08, the sector overall recorded a positive
growth with an annual average LSG rate of 8.7 percent over 1997‐2008. The strongest growth, LSG rates
above 20 percent per year, was experienced in manufactured tobacco, refined sugars and other
products, other sugar syrups, artificial fruits and vegetable juices. The overall position of this sector was
negatively affected by the expansion of imports of cereal preparations, meals and flour of wheat.
Excluding these products, the sector was a positive net exporter with an average of US$23 million per
year in the 2000s except in 2008 (minus US$17 million). Although their contribution to foreign exchange
earnings pale in comparison to revenue derived from tobacco and agricultural raw materials whose total
net exports averaged around US$600 million a year in 2000‐08, the importance of processed goods has
to be measured in terms of their employment effect.40
In all, the smallest contraction was in net exports of “agricultural raw materials” followed by “cash
crops” (mainly tobacco). Zimbabwe became a net importer of both “other food”—almost exclusively
because of huge imports of meals and flour of wheat and other cereal preparations—and “raw food”
due to the fall in output of maize. Relative to the average in 1997‐01, the largest contraction in net
exports was in “other food.”
3.4. Factor and technology content of foreign trade and revealed comparative advantage Changes in the pattern of trade in goods reflect differences in comparative advantage as determined by
different factor endowments. A country tends to export those goods, which use its factors in relative
abundance. Exploring a full causal chain linking factor endowments, comparative advantage and trade
patterns is not relevant for this discussion. The general question here concerns an assessment of broad
changes in relative factor intensities and technological content as revealed by Zimbabwe’s total exports.
Natural resource‐based products have driven Zimbabwe’s export dynamics: two peak points of
expansion phases represented the peak share of resource‐intensive exports in total exports in each cycle
except in 2007. Indeed, their growth was the fastest during periods of expansion and their contraction
brought down the value of total trade. Their share in total exports has been growing since 1994, peaked
at 88 percentage points in 1997 fell to 83 percent in 2003, and climbed to 91 percent in 2007 and grew
further to 92 percent in 2008. Although net exports of natural resource‐based products remain high, as
40 These amounts were below the levels achieved in the 1990s, except for net exports of skins and fur skins and soft wood.
56 | P a g e
the value of these exports was more than twice that of imports, the trend is unidirectional: exports in
terms of imports fell from the average of 510 percent in 1994‐97 to 164 percent in 2008 (Table 25).
The narrowing of the gap between Zimbabwe’s South Africa‐ and EU‐destined exports in terms of factor
intensities also underlies a growing reliance on natural resources. While the share of natural resources
in EU‐oriented exports was on average 23 percentage points larger than in Zimbabwe’s exports to South
Africa in 1994‐97, the difference fell to an average of 10 percentage points in 2002‐07. By 2008, the
difference dropped to 3.3 percentage points, and two export baskets have almost fully converged (Table
25).
Table 25: Change in factor content of Zimbabwe’s trade in goods in 1994‐97, 1997‐2003 and 2002‐07
LSG rate in Annual Average share in total exports Share in
Exports 1994‐97 1997‐02 2002‐07 2008 1994‐97 1997‐02 2002‐07 2008
Natural Resources 11.0 ‐2.9 7.6 ‐6.7 83.8 85.7 85.9 92.0
Unskilled labor ‐13.0 ‐1.1 ‐4.3 ‐19.3 7.5 5.6 4.5 2.7
Capital intensive 1.8 0.8 ‐4.0 ‐13.1 3.0 3.1 3.2 2.1
Skilled labor 1.7 3.0 ‐2.9 ‐21.4 5.6 5.6 6.4 3.2
Imports
Natural Resources 14.0 4.1 17.4 21.5 14.6 24.0 38.0 47.0
Unskilled labor 18.1 ‐14.2 ‐0.6 0.7 8.1 8.1 6.0 3.7
Capital intensive 10.8 ‐18.7 15.4 ‐16.5 44.0 42.2 32.7 28.5
Skilled labor 9.6 ‐15.4 11.4 15.2 33.3 25.7 23.3 20.8
Memorandum: Exports in percent of imports Absolute difference: S. Africa and EU
1994‐97 1997‐02 2002‐07 2008 1994‐97 1997‐02 2002‐07 2008
Natural Resources 510 441 224 164 ‐22.9 ‐21.7 ‐10.1 ‐3.3
Unskilled labor 82 84 80 60 6.4 6.5 4.9 1.6
Capital intensive 6 9 10 6 5.3 5.4 0.7 0.6
Skilled labor 15 26 26 13 11.2 9.8 4.5 1.1
Source: Based on partners data from UN COMTRADE Statistics.
The rise to prominence of natural resource intensive exports in Zimbabwe’s export bundle has not been
the result of different rates of expansion of products with different factor endowments but, rather,
shrinking exports in other categories including those of unskilled‐labor intensive products. The latter
development is particularly worrisome considering that Zimbabwe has a large pool of unemployed
labor. Paradoxically, exports of these products experienced the second largest decline: the negative LSG
rate of 4.3 percent was larger than the pace of decline of capital intensive exports of 4.0 percent but
lower than that of skilled labor intensive products. However, exports of skilled labor intensive products
recorded the largest decline in 2008. Their share in total exports fell from an average of 6.4 percent in
2002‐07 to just 3.2 percent in 2008. Developments in Zimbabwe’s exports have contributed to the
increase in unemployment, as exports of labor‐intensive products stagnated or contracted.
Zimbabwe’s revealed comparative advantage (RCA)41 in world markets has been increasingly
concentrated in products with low level of processing and high natural resource content. Since the
41 The RCA is the ratio of the share of a given product in BH’s total exports to the share of that same product in the world’s total imports. The RCA with a value that exceeds unity suggests a strong specialization in the product (Balassa, 1965).
57 | P a g e
classification used above to identify exports in terms of their factor content does not distinguish
between levels of technology and assigns most agricultural products to resource‐based products,42 a
better filter to account for the dominance of natural resource‐based products is the simple classification
developed by Landesman and Stehrer (2003). It distinguishes among three broad categories of
production activities: (1) Low technology and labor intensive activities, (2) resource intensive activities,
and (3) medium‐ to high‐technology production activities. Low technology and labor intensive activities
include, among others, agricultural foods and feeds, some animal and vegetable oils, simple
manufactured goods, textiles and clothing. Resource intensive activities, accounting now for around
two‐thirds of Zimbabwe’s total exports, cover such sectors as mining, steel and iron, chemical industries,
and simple industrial products based on intensive use of natural resources (e.g., wood materials,
cement, alloys, etc). Medium to high‐technology intensive products include machinery and transport
equipment as well as some miscellaneous manufactures such as medical furniture parts or instruments.
The long term picture that emerges from examining the development of exports in terms of technology
content can be summarized as follows: Zimbabwe’s exports of medium‐ to high‐technology products, in
terms of value, were flat in 1994‐2008; exports of low technology and labor intensive products fell in
1997‐2008; whereas those of resource intensive products increased dramatically in 2002‐07.
Zimbabwe’s exports over 1997‐2008 switched from a dominance of products characterized by low‐
technology labor intensive activities to resource intensive ones while exports of medium‐ to high‐
technology products stagnated. Their value varied between US$70 million in 2008 and US$112 million in
1994‐2008. In 2004, resource intensive exports exceeded low‐tech labor intensive exports (Figure 8).
Zimbabwe’s major exports include nickel, ferro alloys, tobacco, raw cotton, cement, precious metal
scrap, cut flowers, and citrus fruits. These products account for the bulk (around 70 percent) of
Zimbabwe’s total exports. They fall within two groups of industrial activities: resource intensive and low
technology labor intensive products. The major product in the latter group is tobacco, which accounted
for around 50 percent of these exports in 2002‐08. Nickel ores and nickel alloys emerged as Zimbabwe’s
major exports in the 2000s (Table 26). Their aggregate share in resource intensive exports rose from 22
percent in 2002 to 60 percent in 2007 and then fell to 49 percent in 2008 almost exclusively due to the
fall in their world prices over this period (see Section 2.4).
42 The goodness of results obtained hinges critically on the quality of a classification used to examine export baskets over time by factor mix. The choice is always controversial. There are woeful difficulties to define and measure factor intensity, and trade theorists have long wrestled with it. Special problems emerge when a classification aims to capture “quality” of factors involved (Winters 1997). Some definitions of the groups of goods by factor intensity are overlapping and non‐exhaustive. Definitions used here do not suffer from these shortcomings‐‐all industries are taken into account and an industry appears only in one classification; and the classification distinguishes among four types of factors. Since some industries are intensive in terms of more than one factor, the results may be distorted. But even assuming that the initial classification captures adequately factor proportions at a given point of time, with the passage of time it may provide a distorted picture. Some industries may become more capital‐intensive or less active in technological terms.
58 | P a g e
Figure 8: Exports of low‐technology labor intensive products, resource intensive and medium to high‐tech products in 1994‐2008 (in millions of US dollars)
Source: Own estimates based on data from the UN COMTRADE database
Table 26: Exports in terms of technology intensities in 1997 and 2002‐08 (in millions of US dollars and percent)
1997 2002 2003 2004 2005 2006 2007 2008
Low‐tech, labor intensive 1,240 1,007 934 822 708 685 667 638
of which: tobacco (121) 692 627 544 400 284 235 290 297
Resource intensive 732 604 805 1,010 1,141 1,387 1,633 1,416
of which: nickel ores (28) 4 55 132 181 221 343 436 479
nickel alloys (68) 117 79 137 158 227 340 537 219
Medium to High‐tech 106 101 112 73 108 112 82 71
Total reported 2,078 1,712 1,851 1,904 1,956 2,185 2,381 2,125
(in percent)
Low‐tech, labor intensive 60 59 50 43 36 31 28 30
of which: tobacco (121) 56 62 58 49 40 34 43 47
Resource intensive 35 35 43 53 58 63 69 67
of which: nickel ores (28) 1 9 16 18 19 25 27 34
nickel alloys (68) 16 13 17 16 20 24 33 15
Medium to High‐tech 5 6 6 4 5 5 3 3
Source: Based on partners data from UN COMTRADE Statistics.
In contrast, the value of exports of medium to high technology intensive products was stuck between
US$70 million (in 2001) and US$112 million (2006) and their degree of concentration was lower than in
other product categories. Ceramic plumbing (8122), automotive parts (7812), electro‐thermic
equipment (7758) and wood furniture (8215) were major exportables in 2008. These five three‐digit
SITC sectors contributed 42 percent to total exports of medium to high technology intensive in 2008. By
this measure, the level of concentration was 63 percent in low technology labor intensive products and
79 percent in a resource intensive group.
The combination of falling exports of low‐tech labor intensive products and expanding exports of
resource intensive products in 2002‐07 has been responsible for a dramatic shift in technology content
of Zimbabwe’s exports. The contraction of exports of low‐tech labor intensive products in terms of value
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Low‐tech, labor intensive
Resource intensive
Medium to High‐tech
59 | P a g e
since 1997 has been nothing short of dramatic. They have been consistently falling since 1997: in 2008
they stood at 51 percent of their peak value in 1997. The surge of resource intensive products coincided
with the commodity boom of 2003‐07. Indeed, the share of resource intensive products in total exports
increased from 35 percent in 2002 to 44 percent in 2003 and 58 percent in 2006. It stood at 67 percent
of total exports in 2008, while the share of low‐tech labor intensive fell from an average of 60 percent in
1994‐97 to 30 percent in 2008 (Table 27). Although resource intensive exports grew fastest during the
growth phase in 1994‐97, exports of other product groups also experienced a strong growth. During the
next two phases, resource intensive exports contracted the least in 1998‐2002 and grew the fastest in
2003‐07 whereas exports of other products experienced negative growth.
Table 27: Dynamics of Zimbabwe’s trade in terms of technology and factor intensities in 1994‐97, 1998‐2002, 2003‐07, and 2008 (in percent and millions of dollars)
Least Square Growth rate Annual Average share in Share in
Exports 1994‐97 1997‐2002 2002‐07 2008 1994‐97 1998‐2002 2002‐07 2008
Low‐tech, labor intensive 8.2 ‐3.1 ‐9.0 ‐4.3 60.0 58.8 37.8 30.0
Resource intensive 12.2 ‐2.4 19.2 ‐13.3 34.6 36.5 57.4 66.7
Medium to High‐tech int. 9.3 ‐3.3 ‐1.8 ‐14.4 5.4 4.7 4.8 3.3
Imports
Low‐tech, labor intensive 21.1 ‐6.5 8.3 69.5 10.7 15.4 19.8 28.4
Resource intensive 10.6 ‐6.3 17.4 ‐25.4 36.1 42.4 47.1 35.2
Medium to High‐tech int. 10.1 ‐22.3 11.2 4.3 53.2 42.2 33.1 36.4
Memorandum: Exports in percent of imports Trade Balance (US$ millions)
1994‐97 1997‐02 2002‐07 2008 1994‐97 1997‐02 2002‐07 2008
Low‐tech, labor intensive 533 532 238 97 883 848 418 ‐19
Resource intensive 89 117 144 173 ‐92 91 343 600
Medium to High‐tech int. 9 16 17 8 ‐960 ‐507 ‐491 ‐774
Source: Own estimates based on data from the UN COMTRADE database
Developments in imports coverage by exports by technology, natural resource and labor intensities paint a familiar picture: net exports of both high‐ and medium‐ technology intensive products and low technology labor intensive products continued to fall in 2006‐08 while those of resource intensive products kept increasing. The collapse of net exports of low technology intensive products, mainly of agricultural products, resulted in the deficit in the balance of trade in these products of US$19 million in 2008.
3.5. Victims and survivors: new and vanishing specializations This section takes a broad look at the change in the composition of Zimbabwe’s exports at the level of
four‐digit SITC sectors. In order to eliminate single, random commercial transactions, we average the
exports data for three periods identified by the earlier examination of export dynamics: the 1994‐07
expansion; contraction in 1998‐2002; and modest rebound in 2003‐07. Average exports of four‐digit
SITC in terms of value in each period can be then compared with each other or from a vantage point in a
selected year.
The broad picture that emerges from this analysis can be summarized by the following three
observations:
The range of four‐digit sectors involved in exports significantly declined in 2003‐08;
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The losses were more widespread in term of the number of product lines and their values of
exports more uniformly distributed while increases in the value of exports were limited to a
smaller number of product lines;
Survivors included exporters of minerals and other low‐processed raw materials, which
registered modest gains in terms of value, whereas victims included exports of agricultural
products and those of unskilled labor intensive clothing.
Zimbabwean firms turned inward or went out of business in the 2000s. As a result, Zimbabwe’s export
basket became less diversified in terms of the number of four‐digit SITC sectors especially in 2005‐08.
During this period, the number of sectors that were not involved in exports (the value of exports equal
zero) dramatically expanded indicating either a shift to the domestic market or exit from production
altogether. Out of a total of 1,018 four‐digit SITC sectors, 49 sectors were not involved in exports in
1994‐97, this number dropped to 31 in 1998‐2003, and increased to an average of 63 in 2003‐07. But,
the average conceals developments in 2007 when the number of zero‐exported products increased to
227 and in 2008 their number further increased to 272 sectors with zero‐exports up from 159 in 2002.
Some further insights can be derived from the differences between exports of four‐digit SITC items in
2008 and their average values in 1994‐07, 1998‐2002 and 2003‐07. Although these differences are in
current dollars, i.e. they do not take into account changes triggered simply by falling or rising prices,
they identify sectors that experienced the largest changes in exports in 2008 vis‐à‐vis averages for
earlier periods. Table 28 provides information on the number of four‐digit SITC sectors with exports
higher (survivors) or lower (victims) in 2008 than in a previous phase; the share of top ten in total gains
or losses; and the top five four‐digit SITC items with the largest positive or negative differences in the
values of exports in 2008 and respective phases.
Three observations can be derived from eyeballing the data in Table 28. First, the gains appear to have
been highly concentrated, i.e. limited to around ten four‐digit SITC sectors. The 2008 export basket,
when set against averages during the three periods, shows little change in terms of numbers of sectors
that expanded their exports and their share in total gains. Note that the number of sectors referred to
as survivors varies between 205 and 212, while the share of the top ten in the total increase of exports
varies between 80 percent and 85 percent.
Second, producers of minerals and their products have displayed the largest resistance to economic
adversities while exporters of agricultural products were the main victims, albeit there were some
exceptions also among manufactured exporters. Except for raw cotton, Portland cement and oil seed,
mineral exporters figured among the top five export survivors with nickel, both ores and mattes, topping
the list in each case. New minerals became available for exports in the 2000s: nickels (SITC 284) top
them all. The value of these exports never exceeded US$10 million before 2002 when their value
reached US$55 million and grew each year to reach US$479 million in 2008 accounting for 22 percent of
total exports. Other examples, admittedly much less spectacular than nickel, include copper (both ores
and refined), diamonds, and common salt. There also some examples of emerging manufacturing
exports: exports of ceramic plumbing fixtures (SITC 8122), which over 1994‐2007 only once reached
US$90,000 in 1994, rose to US$11 million and so did exports of steel structures and acyclic mono‐
hydrogen alcohols. Among agricultural products, two sectors deserve mention: soya beans, whose
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exports collapsed in 2001‐07, rebounded in 2008 to US$12 million; and oil seeds, whose exports soared
from an of average US$50,000 in 1994‐2007 to US$12 million in 2008 placing this sector among the top
five survivors (see Table 28).
Table 28: Victims and survivors in 2008 against the average in 1994‐97, 1998‐2002 and 2003‐07 (in millions of US dollars and four‐digit SITC product lines)
2008 vs.1994‐97 2008 vs. 1998‐2002 2008 vs. 2003‐07
# of sectors
Loss/ Gain
# of sectors Loss/ Gain .
# of sectors
Loss/ Gain
Survivors 212 1,150 Survivors 205 1,160 Survivors 219 586
top ten 10 925 top ten 10 942 top ten 10 500
share in total gain 10 80% share in total gain 10 81% share in total gain 10 85%
Losers 766 ‐767 Losers 790 ‐739 Losers 744 ‐427
top ten losers 10 ‐447 top ten losers 10 ‐456 top ten losers 10 ‐200
share in total loss 10 58% share in total loss 10 62% share in total loss 10 47%
top five survivors
Nickel mattes/sinters (2842) 240 Nickel mattes/sinters (2482) 242 Nickel mattes/sinters (2482) 168
Nickel ores/concentrates (2841) 234 Nickel ores (2841) 223 Other ferro alloys (6715) 122
Other ferro alloys (6715) 125 Other ferro alloys (6715) 156 Nickel ores (2841) 48 Nickel/alloys unwrought (6831) 110 Nickel/alloys unwrought
(6831) 133 Prec. metal waste (2892) 17
Raw cotton, excl linters (2631) 32 Portland etc cements (6612) 28 Oil seed/etc (2239) 12
top five losers
Tobacco stripped/stemmed (1212)
‐135 Tobacco stripped (1212)
‐215 Nickel/alloys unwrought (6831 ‐61
Tobacco, not stripped (1211) ‐85 Tobacco, not stripped (1211) ‐60 Tobacco stripped/stemmed (1212)
‐43
Asbestos (2784) ‐49 Cut flowers/foliage (2927) ‐35 Asbestos (2784) ‐20
Maize ex sweet corn nes (0449) ‐38 Asbestos (2784) ‐31 Cut flowers/foliage (2927) ‐16
Beef, fresh/chilled (0111) ‐37 Gold non‐monetary (9710)
‐26 Raw cotton, excl linters (2631) ‐14
Memorandum:
difference in total exports 383 421 159
Source: Derived from trade statistics reported to the UN COMTRADE by Zimbabwe’s trading partners.
On the other hand, exports of agricultural products overshadowed other sectors in terms of contraction
but almost exclusively when exports in 2008 are compared with averages during the phase of export
growth in 1994‐97 with the exception of tobacco (both stripped and not stripped). Tobacco was the
major victim accounting for 29 percent, 37 percent and 10 percent of losses in 2008 calculated against
average exports in 1994‐97, 1998‐2002 and 2003‐07, respectively. Maize and beef were among big
“absentees” in 2008 exports when cast against exports in 1994‐97 but not against those in 1998‐2002 as
they became so miniscule that they failed to qualify as big losers when their exports in 2008 are
compared to exports in the subsequent two phases. But cut flowers did: and they took a hit in relation
to their exports during both the contraction and the moderate rebound phase.43
As for manufactured goods, there were plenty of losers, i.e. whose exports either completely
disappeared or were less than 50 percent in 2008 of their peaks in 1994‐2007. Exports of furniture (SITC
8215) peaked in 2005 and then fell precipitously. So did exports of precious metals and jewels (SITC
8973), footwear (SITC 8514) and industrial washing dryers (SITC 7452). Although exports of clothing, 43 Exports of cut flowers were affected not only by the fall in volumes but also by flat world prices in the 2000s (see Table 11 in Section 2.4 of this report).
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mainly those of mens/boys trousers (SITC 8414), also dramatically declined from US$23 million in 1994
to US$7 million in 2008, their collapse cannot be attributed to an unfriendly economic environment in
2000‐08 but rather the result of much earlier declines in competitiveness due to increasing labor costs
and increased competition from large Asian producers. Exports of clothing (SITC 84) have declined in all
phases: they fell from US$52 million in 1994 to US$39 million in 1997, US$29 million in 2002 and US$13
million in 2008. Third, the number of sectors that experienced contraction by far exceeded those that
registered increases in their exports. Moreover, since this number displays a relatively low variation
(with the number of declining sectors ranging between 790 in 1998‐2002 and 744 in 2003‐07) this
suggests a consistent pattern of export contraction. In other words, some sectors were exporting less
and less of the same products.
Returning to an earlier question whether the fall in the number of sectors suggests an increase in
specialization and greater involvement in global division of labor, the answer is unambiguously negative.
The developments in Zimbabwe’s exports in 2003‐08 point to a significant retrenchment in export
activities caused either by external developments or by domestic policies or both. The exit of firms from
export activities and fall in exports of around 70 percent of all four‐digit SITC products more than offset
expanding exports by the remaining sectors of the economy. Hence, the fall in the number of products
in Zimbabwe’s export basket was an indication of a shrinking export base in 2003‐08.
3.6. Revealed comparative advantage: predictable shifts from agriculture to extractive sectors Despite a weak overall export performance in 1998‐2008, some of Zimbabwe’s firms still succeeded to
increase their presence in world markets. As can be expected from the previous discussion, the loss of
external markets was the most serious for agricultural products. But other sectors, including both low‐
technology labor‐intensive and medium‐ to high‐technology intensive products, have also lost their
competitive edge.
Yet, the total number of three‐digit SITC sectors with revealed comparative advantage (RCA) above unity
did not change between 1997 and 2008: in both years there were altogether 42 product groups. But the
composition did change reflecting developments in Zimbabwe’s exports with the number of resource
intensive products increasing and the number of both low technology, unskilled labor‐intensive and
medium‐ to high‐technology intensive products slightly falling.
Although the number of three‐digit SITC sectors with comparative advantage in world markets for low
technology, labor intensive products only slightly fell from 21 to 20, there was a change in their
composition (Table 29). Ten out of 22 product groups had comparative advantage in both 1997 and
2008. New comers in 2008 i.e. 12 product groups, were exporterd in both 1997 and 2008. Products that
had RCA exceeding unity in 1997 but not in 2008 were such food products as maize, meat, wheat, and
cereal. Other products included gold, cotton, tea and charcoal. Products that gained comparative
advantage in 2008 included among others eggs, confectionery sugar, oil seeds, textile yarn, animal
feeds, and phenols.
Although driven by the same products, the expansion in natural resource exports in 2001‐2008 triggered
an increase in the number of sectors with revealed comparative advantage from 20 in 1997 to 22 in
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2008. Among 22 sectors in 2008, there were 13 products that made the list in both years (Table 30).
Exports of nickel and raw cotton were also the largest in this category: combined accounting for 58
percent of resource intensive exports in 2008.
Table 29: Low technology labor intensive products with the values of RCA exceeding unity in 1997 and 2008
Products (SITC. Rev. 3) 1997 2008
121 Tobacco, raw and wastes 224 121 Tobacco, raw and wastes 202
075 Spices 17 061 Sugar/mollasses/honey 21
044 Maize except sweet corn. 17 211 Hide/skin (ex fur) raw 18
245 Fuel wood/wood charcoal 10 074 Tea and mate 11
074 Tea and mate 8 122 Tobacco, manufactured 7
061 Sugar/mollasses/honey 7 025 Eggs, albumin 7
011 Beef, fresh/chilled/frozen 7 075 Spices 5
046 Flour/meal wheat/meslin 6 611 Leather 3
071 Coffee/coffee substitute 5 057 Fruit/nuts, fresh/dried 2
971 Gold non‐monetary ex ore 4 062 Sugar confectionery 2
017 Meat/offal preserved 4 222 Oil seeds etc ‐ soft oil 2
091 Margarine/shortening 4 651 Textile yarn 1
054 Vegetables, fresh/chilled/frozen 3 091 Margarine/shortening 1
611 Leather 3 054 Vegetables, fresh/chilled/frozen 1
211 Hide/skin (ex fur) raw 3 017 Meat/offal preserved n.e.s 1
652 Cotton fabrics, woven 2 081 Animal feed ex unml cer. 1
057 Fruit/nuts, fresh/dried 2 841 Men’s/boys wear, woven 1
841 Men’s/boys wear, woven 2 059 Fruit/vegetable juices 1
122 Tobacco, manufactured 1 512 Alcohols/phenols/derivatives 1
048 Cereal etc flour/starch 1
Note: Products marked in bold had values of RCA exceeding unity in both 1997 and 2008. Those marked in italics had comparative advantage in 1997 but not in 2008 Source: Own calculations based on partners’ data reported to the UN COMTRADE database.
Table 30: Resource intensive products with values of RCA exceeding unity in 1997 and 2008
Products (SITC. Rev. 3) 1997 Products (SITC. Rev. 3) 2008
683 Nickel 53 284 Nickel ores/concentrates/etc 251
671 Pig iron etc. ferro alloy 46 683 Nickel 69
263 Cotton 35 263 Cotton 67
325 Coke/semi‐coke/retort c 24 671 Pig iron etc. ferro alloy 37
278 Other crude minerals 18 223 Oil seeds‐not soft oil 34
532 Dyeing/tanning extracts 15 273 Stone/sand/gravel 21
292 Crude vegetable materials 10 532 Dyeing/tanning extracts 15
289 Precious metal ore/conc. 9 661 Lime/cement/const. materials 9
284 Nickel ores/concentrates/etc 4 289 Precious metal ore/conc. 9
273 Stone/sand/gravel 4 278 Other crude minerals 8
689 Misc non‐ferrous base metal 3 292 Crude vegetable materials 8
288 Non‐manufactured base metal waste 3 325 Coke/semi‐coke/retort coke 7
223 Oil seeds‐not soft oil 2 283 Copper ores/concentrates 4
693 Wire prod exc. Install. electrical 2 248 Wood simply worked 3
635 Wood manufactures. 2 287 Base metal ore/concentrates 3
248 Wood simply worked 2 261 Silk 3
277 Natural abrasives 1 642 Cut paper/board/articles 1
697 Base metal household equipments 1 247 Wood in rough/squared 1
345 Coal gas/water gas/etc 1 682 Copper 1
678 Iron/steel wire 1 691 Iron/steel/alum structures 1
667 Pearls/precious stones 1
697 Base metal household equipment 1
Note: Products marked in bold had values of RCA exceeding unity in both 1997 and 2008.Bold italics denote products with RCA exceeding unity in 1997 but not in 2008 Source: Own calculations based on partners’ data reported to the UN COMTRADE database
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The decrease in the diversity of exports in terms of a number of exported products with the value of RCA
exceeding unity has been the result of Zimbabwe’s export performance in two of its most important
markets ‐ South Africa and European Union. In both, diversification has decreased and the profile of
specialization shifted away from low technology, labor intensive products. The number of low‐tech labor
intensive sectors that outperformed other suppliers, as measured by the RCA’s equivalent, the ESI
(export specialization index),44 has contracted in both markets indicating a loss of competitiveness
(Table 31).
The change in the specialization profile of Zimbabwean exports to the EU and South Africa reflects
transformation in its export basket in terms of concentration and commodity composition. The
contraction in the number of products with ESI above unity comes as no surprise in light of the earlier
discussion on export concentration (see section 2 of this chapter). In 1997, Zimbabwe had 70 three‐digit
SITC product groups with the values of ESI exceeding unity, including 30 representing low‐tech labor
intensive activities and ten representing medium‐ and high‐technology intensive activities. In 2008, the
number of products enjoying specialization advantage dropped to 29 product groups in 2008 (Table 31).
All products enjoying specialization advantage dramatically fell across each group with the largest
decline of medium‐ to high‐ tech intensive products. The number of three‐digit SITC items with ESI
above unity was smaller in EU markets and did not change significantly, although its composition did in a
predictable manner. The number of low‐tech, labor intensive products fell while that of resource
intensive products increased.
Table 31: Export specialization in South African and EU markets in 1997, 2002 and 2007‐08: number of SITC three‐digit products with values of ESI exceeding unity in terms of technology, natural resource and labor content
South Africa European Union
1997 2002 2007 2008 1997 2002 2007 2008
Low‐tech labor intensive 33 31 18 15 21 15 15 14
Resource intensive 27 20 17 13 9 11 14 12
Medium and high tech intensive 10 5 2 1 0 0 0 0
Total 70 56 37 29 30 26 29 26
Source: Own estimates based on partners’ data from the UN COMTRADE database
Zimbabwe’s revealed export specialization in both the EU and South African markets has become
increasingly similar, focusing on resource intensive products. This appears to have been the result of
Zimbabwe’s South African‐destined export basket converging towards the composition of Zimbabwe’s
exports to the EU. Considering the proximity of South African markets and their knowledge among
Zimbabwe’s exporters, this may point to internal supply constraints rather than the disappearance of
sales opportunities in South Africa.
44 The export specialization index (ESij) for a product j of country i, is specified here as follows: ESij = (xij/Xi) /(mj/M),
where: xij is country i’s exports of product j to South Africa or the EU; Xi = j xij is country i’s total exports to South Africa or the EU; Mj = j xij is South Africa’s or EU’s total ‘external’ imports of a product j; M = i j xij is South Africa’s or EU’s total external imports. A value for this index below unity indicates a comparative disadvantage. If the index takes a value greater than unity, the country is considered to have a "revealed" comparative advantage in the product. In this particular case, Zimbabwe has a revealed comparative advantage in a product if its export of that item as a share of its total exports exceeds South Africa or the EU imports of the item as a share of South Africa or EU total imports.
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Falling exports of both agricultural and manufactured products have driven the changes in patterns of
Zimbabwe’s revealed comparative advantage in world markets and export specialization in EU and
South African markets. As we have seen, the largest decline was in exports of agricultural foods and
feeds. The share of food and live animals in Zimbabwe’s total exports fell from 15 percent in 1997 to 14
percent in 2002 and 9 percent in 2008. The value of their exports fell 34 percent from US$251 million to
US$165 million. It stood in 2008 at 49 percent of its peak value in 1994 during the 1994‐2008 phase of
exports expansion. Products of this group recorded also the largest change in terms of lost revealed
comparative advantage.
Food and live animals products is the only category of agricultural products whose values of RCA fell
below unity indicating a loss of international specialization in 2002‐08. The number of three‐digit SITC
food and live animals items with values of RCA exceeding unity fell from 21 in 2000 to 11 in 2008. So did
their exports, which fell from US$189 million in 1997 to US$32 million in 2002 and 9 million in 2008
(Table 32). The largest contributor to the contraction of exports of this group was maize (SITC 044),
whose exports in current prices fell from US$71 million in 1997 to less than US$1 million in 2008. It
accounted for 40 percent of the difference between exports in 1997 and 2008 of these products. The
second largest ‘losers’ were live animals (SITC 001) and beef (SITC 011): their aggregate contribution to
the difference between 1997 and 2008 amounted roughly to another 40 percent.
Table 32: Agricultural ‘losers:’ values of RCA and exports in 1997, 2002‐2008 (in millions of US dollars)
Values of RCA indices
SITC Products 1997 2002 2003 2004 2005 2006 2007 2008 Int.
001 Live animals except fish 0.6 1.0 0.4 0.5 0.3 1.1 0.8 0.7 LTL
011 Beef, fresh/chilled/frozen 6.8 0.3 0.4 0.0 0.0 0.0 0.0 0.0 LTL
044 Maize except sweet corn. 16.8 2.3 0.4 0.1 0.1 0.0 0.1 0.0 LTL
045 Cereal grains 0.3 1.6 0.4 0.4 0.9 0.1 0.2 0.2 LTL
046 Flour/meal wheat 5.8 0.2 3.6 0.1 0.0 0.0 0.0 0.0 LTL
047 Cereal meal/flour 0.1 0.3 0.1 0.2 0.1 0.0 0.1 0.0 LTL
048 Cereal etc flour/starch 1.1 3.3 4.4 2.0 1.8 1.4 1.2 0.7 LTL
056 Vegetable root/tuber prep/pres 0.4 2.3 2.4 2.5 0.7 0.5 0.4 0.2 LTL
058 Fruit preserved/fruit preparations 0.4 0.6 0.6 0.6 0.5 0.7 0.4 0.3 LTL
071 Coffee/coffee substitute 5.4 4.1 3.2 3.9 2.8 2.0 1.1 0.9 LTL
Exports (millions of US dollars)
SITC Products 1997 2002 2003 2004 2005 2006 2007 2008 Int.
001 Live animals except fish 33.5 2.9 1.3 1.0 0.6 2.9 0.0 0.0 LTL
011 Beef, fresh/chilled/frozen 35.7 1.0 1.8 0.1 0.0 0.0 0.0 0.0 LTL
044 Maize except sweet corn. 71.4 6.7 1.3 0.4 0.2 0.0 0.2 0.2 LTL
045 Cereal grains 0.2 0.7 0.2 0.1 0.3 0.0 0.1 0.1 LTL
046 Flour/meal wheat 3.8 0.1 1.3 0.0 0.0 0.0 0.0 0.0 LTL
047 Cereal meal/flour, nes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 LTL
048 Cereal etc flour/starch 5.8 14.2 21.3 9.3 8.5 6.9 6.9 3.9 LTL
056 Vegetable root/tuber prep/pres 1.7 6.6 7.3 7.5 2.1 1.6 1.2 0.7 LTL
058 Fruit preserved/fruit preparations 0.5 0.5 0.6 0.7 0.6 1.0 0.5 0.2 LTL
071 Coffee/coffee substitute 36.7 9.8 8.6 10.0 8.5 6.7 4.4 3.6 LTL
Total above 188.9 42.3 43.7 29.1 20.8 19.2 13.1 8.7
Share in exports of food and live animals 63.2 20.0 21.1 13.0 10.2 9.5 7.0 5.3
Share in total exports 9.0 2.5 2.3 1.5 1.0 0.9 0.6 0.4
Source: Based on partners data from UN COMTRADE Statistics.
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The contraction of these exports has had significant negative impacts on employment and poverty
reduction, as all of these products represent low technology, labor intensive activities andcreate
employment opportunities in poor rural areas.
The loss of Zimbabwe’s competitive edge has not been restricted to the agricultural sector but has also
occurred in manufacturing activities. Several manufacturing sectors have ceased exporting, either partly
or totally, over the last fifteen years. This list of ‘losers’ includes a variety of sectors ranging from
chemicals, iron and steel, miscellaneous manufactured products and agricultural equipment. Leaving
aside the loss of comparative advantage in world markets, they share another rather surprising feature:
except for three product groups, all others represent resource intensive activities. Three exceptions are
manufacturing activities falling within the medium‐ to high‐technology intensive groups (see Table 33).
Table 33: Exports and values of RCA of three‐digit SITC manufactured products that lost comparative advantage in world markets in 1997‐08 and their technology and factor content
SITC Products 1997 2002 2003 2004 2005 2006 2007 2008 Intensities
554 Soaps/cleansers/polishes 0.84 1.94 3.08 1.69 0.98 0.49 0.16 0.11 RI
635 Wood manufactures 1.99 1.56 1.54 1.40 1.00 0.96 0.73 0.71 RI
672 Primary/prods iron/steel 0.48 2.98 2.18 3.25 1.02 0.19 0.00 0.01 RI
676 Iron/steel bars/rods/etc 0.64 0.32 0.78 1.30 1.07 0.81 0.45 0.35 RI
677 Iron/steel railway materials 0.06 0.01 0.09 0.05 0.04 0.19 0.26 0.00 RI
678 Iron/steel wire 1.08 3.84 6.72 4.92 2.12 0.58 0.40 0.23 RI
693 Wire prod excl. installations electrical 2.05 3.14 6.32 3.78 3.07 1.35 0.73 0.24 RI
721 Agric machine ex tractors 0.48 0.88 1.44 1.15 1.08 0.69 0.71 0.96 MH
821 Furniture/stuff furnishing 0.83 0.75 0.94 0.81 1.36 0.74 0.45 0.40 MH
897 Jewellery 4.08 4.45 1.90 1.04 0.55 0.60 0.43 0.23 MH
1997 2002 2003 2004 2005 2006 2007 2008
(in millions of US dollars)
554 Soaps/cleansers/polishes 4.9 9.8 16.3 12.8 5.1 4.8 2.4 1.9 RI
635 Wood manufactures 9.0 6.0 6.3 5.7 3.8 4.1 3.3 2.6 RI
693 Wire prod excl. installations electrical 3.7 3.9 8.7 5.9 5.0 2.6 1.6 0.5 RI
721 Agriculture machines excl. tractors 2.2 2.9 5.2 4.2 4.0 2.8 3.3 4.7 MH
821 Furniture/stuff furnishing 15.2 13.8 18.9 16.3 26.5 15.8 10.7 7.8 MH
897 Jewellery 26.2 27.3 12.3 6.8 3.7 4.6 3.6 1.7 MH
Total above 61.2 63.8 67.8 51.6 48.1 34.7 25.0 19.1
Share in manufactured exports 21% 22% 20% 19% 14% 10% 8% 8%
Iron and steel products (in millions of US dollars)
672 Primary/prods iron/steel 3.0 11.3 10.9 21.2 7.1 2.5 1.5 1.8 RI
676 Iron/steel bars/rods/etc 1.3 1.4 3.4 7.8 5.7 7.8 5.2 5.0 RI
677 Iron/steel railway materials 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.0 RI
678 Iron/steel wire 1.7 4.3 8.2 7.2 3.1 0.9 0.7 0.4 RI
Total above 6.0 17.0 22.5 36.2 16.0 11.3 7.6 7.2
Share in exports of iron and steel 3% 13% 15% 17% 7% 5% 4% 3%
Source: Based on partners data from UN COMTRADE Statistics.
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In contrast to products from other sectors of the economy where the loss of comparative advantage was
associated with falling exports of the sector as a whole,45 the iron and steel sector stands apart as a
success story. The weak export performance and the loss of comparative advantage have been limited
to selected products. Exports of other products of this sector have more than offset the contraction in
sales of steel products listed separately in Table 33. Since 2003, Zimbabwe’s exports of iron and steel
(SITC. 67), taking advantage of the boom in prices in world markets, have been growing fast, albeit
erratically. They leaped 46 percent in 2004 and 42 percent in 2008 and contracted 4 percent in 2007: in
other years, annual growth rates were between 14 percent in 2003 and 2 percent in 2006. With exports
worth of US$308 million in 2008, the share of iron and steel products in total Zimbabwe’s increased
from 8 percent in 2003 to 15 percent in 2008.
But developments in exports of iron and steel are not an unambiguous success story. It has been driven
exclusively by foreign sales of other ferro alloys (SITC. 6715). Their share in total exports of iron and
steel products increased from 82 percent in 2003 to 97 percent in 2007 and 98 percent in 2008 (Annex
Table 7). This spectacular rise was not only the result of an increase in exports, although their value
almost tripled (2.6 times) in 2008 over 2003. This was also the result of falling exports of other iron and
steel products: their aggregate value fell from US$38 million in 2004 to US$31 million in 2006 and US$7
and US$6 million in 2007 and 2008, respectively. The number of subsectors with exports exceeding US$1
million fell from seven in 2004‐05 to four in 2006 and two in 2007‐08.
While, without an up‐to‐date industry‐oriented study, it would be difficult to draw any definite
conclusions about broader implications of this increasing reliance on a single product, these
developments raise concerns about the future sustainability of the iron and steel sector in Zimbabwe.
They may imply growing obsoleteness and falling competitiveness of many steel plants starved of
investment and access to modern technologies. Whatever the explanation, this is an another indication
of the growing concentration of Zimbabwe’s exports.
The case of products whose values of RCA exceeded unity in the 2000s is not only less ambivalent but
their aggregate values of exports are considerably lower than those of ferro alloys.
Yet, these products are of interest as they may point to a future evolution of Zimbabwe’s exports
basket. There are 16 triple‐digit SITC product groups, which represent specializations developed in 1997‐
2008 and retained in 2008. Data on these exports and their technological content are tabulated in Table
34. Several observations can be derived from eyeballing the data. First, while there is significant
variation in rates of growth of individual product groups in 2002‐08, total exports in this group have
grown very rapidly since 2002: their LSG growth rate was significantly larger than that of total exports
with their share in total exports having had more than doubled since 2002 and almost tripling since
1997. There are two exceptions: textile yarn (SITC 651) and pearls and precious stones (SITC 667).
Despite a sluggish growth performance, they retained comparative advantage as the share of world
imports of these products in total world imports fell more than their respective shares in Zimbabwe’s
total exports.
45 The decline of exports of furniture furnishing (SITC. 821), and associated loss of comparative advantage, was experienced by all other major products of this sector. Exports of furniture (SITC. 82) peaked in 2005 at US$23 million and fell to US$11 million in 2007 and US$8 million in 2008 (partners’ data in the UN COMTRADE database).
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Second, these new entrants with values of RCA indices above unity do not necessarily signal any serious
reshuffling in the composition of Zimbabwe’s exports. The largest increase in exports was recorded by
medium‐ to high‐technology intensive products, albeit from a very low level and those relying on
resource intensive activities continue to tower over other product groups. This is a rather surprising
development, which resulted from a sudden surge in exports of ceramic plumbing heating fixture (SITC
8122) from US$14 thousand in 2007 to US$11.4 million in 2008. Considering that sales of these products
averaged US$50 thousand over 1994‐2007 and only once exceeded US$100 thousand in 2001
(US$112,000), its exports in 2008 were either a statistical error or some new investments. Neither did
statistical services of South Africa nor customs in the EU report imports of SITC 812 products over 1994‐
2008. The latter reported imports of non‐electric boilers (8121) to the tune of US$2 million in 1999 but
nothing in other years. South Africa reported these imports only in 2001 and 2006 worth US$13.5
thousand and US$4.1 thousand respectively. Hence, it seems to be a statistical misinformation as no
new investments have been made in this industry. If this was indeed the case, then resource intensive
exports had the best performance: their share in ‘rising’ exports increased from 51 percent to 67
percent and that of low technology labor intensive products fell from 49 percent to 33 percent in 2002‐
08.
Table 34: Exports of three‐digit SITC sectors that acquired revealed comparative advantage in 2007‐08 (in millions of US dollars in 1997 and 2002‐08)
SITC 1997 2002 2003 2004 2005 2006 2007 2008 LSG 02‐08
Tech cont.
025 Eggs in shell 0.4 2.1 2.3 3.4 3.9 3.6 20.6 3.4 21.3 LTL
059 Fruit/vegetable juices 0.3 0.8 0.4 0.4 0.8 2.9 2.7 2.3 31.7 LTL
062 Sugar confectionery 0.6 2.9 2.2 3.0 3.6 4.2 4.1 2.2 2.7 LTL
081 Animal feed 4.6 4.8 2.0 4.0 4.1 2.2 5.7 8.7 11.7 LTL
222 Oil seeds etc ‐ soft oil 5.6 1.1 0.3 0.9 1.4 1.1 1.0 13.1 37.2 LTL
247 Wood in rough/squared 2.4 2.6 1.9 1.6 1.7 2.2 2.9 3.1 6.2 RI
261 Silk 0.0 0.0 0.0 0.01 0.0 0.0 0.0 0.2 21.9 RI
283 Copper ores/concentrates 1.2 9.2 3.4 11.2 12.1 33.0 26.9 23.2 28.7 RI
287 Base metal ore/concentrates 1.3 3.5 0.5 0.6 0.5 0.7 11.8 14.6 38.9 RI
512 Alcohols/phenols/derivatives 0.8 4.5 4.5 3.2 6.6 6.4 9.4 7.5 13.3 RI
642 Cut paper/board/articles 3.0 4.7 9.8 5.9 9.0 10.4 8.1 10.2 9.9 RI
651 Textile yarn 12.6 15.0 12.1 16.3 11.1 15.1 13.4 8.5 ‐5.7 LTL
667 Pearls/precious stones 1.1 0.3 0.9 0.1 0.8 1.1 0.2 0.1 ‐15.7 LTL
682 Copper 12.3 1.8 2.0 5.6 29.2 44.3 51.4 21.2 56.7 RI
691 Iron/steel/aluminum structures 0.3 2.2 1.9 2.1 2.2 3.5 3.7 8.1 21.1 RI
812 Sanitary/plumb/heating fixtures 0.1 0.1 0.2 0.0 0.0 0.0 0.0 11.4 47.8 MHT
TOTAL ABOVE 47 55 44 58 87 131 162 138 21.9 Share in total exports 2.2 3.2 2.4 3.1 4.4 6.0 6.8 6.5
Source: Based on partners data from UN COMTRADE Statistics.
Third, despite a weak growth of low technology, labor intensive products, the level of processing
embodied in ‘newly’ specialized products appears to have increased. The share of traditional inputs fell
from 76 percent in 2002 to 65 percent in 2007 and 67 percent in 2008. The largest exports of low
technology labor intensive products were in oil seeds: its exports increased from an average of around
US$1 million in 2002‐07 to US$13 million in 2008.
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3.7. Conclusion Zimbabwe’s exports were, on the one hand, “frozen in time” and, on the other hand, underwent huge
transformation as a result of the collapse of agricultural production and the lack of new investment
activity. They remained “frozen” only in terms of the degree of processing embodied in exports. With
exports of agricultural products falling and industrial raw materials expanding, the share of low
processed primary inputs—the total of agricultural and mineral exports—has remained largely
unchanged. So has the share of other end‐use product groups.
But on all other counts, almost a decade of economic decline has transformed Zimbabwe’s foreign trade
not only in terms of its geographic pattern but also in terms of its composition with significant
implications. On the import side, the level of processing embodied in this trade has fallen. The share of
resource‐ and unskilled labor‐intensive products has increased while imports of medium‐ to high‐
technology intensive products have fallen. So has the share of non‐agricultural consumer goods. Both
are indicative of falling standards of living and depressed investment activity. On the export side, the
shift from agricultural to mineral products has amounted to a shift from unskilled labor, low technology
intensive activities to capital and natural‐resource intensive activities significantly suppressing demand
for labor in the economy and contributing to unemployment.
To sum up, the main conclusions drawn from the empirical analysis may be summarized as follows:
First, the level of processing embodied in Zimbabwe’s exports has remained unchanged since
1994. The share of primary inputs has remained at slightly below three‐quarters of total exports
independent of their levels;
Second, exports of foods and feeds, iron and steel and consumer goods were the main levers of
export growth during the growth phase in 1994‐97 but the picture changed during the period of
export recovery in 2003‐2007 in two important respects: first, food and feeds contracted, and
second, consumer goods ceased to be a driver in terms of exports in current prices;
Third, except for iron and steel, positive net exports across all end‐use product categories have
been falling. Not surprisingly, the largest decline has been in food and feeds and industrial raw
materials.
Fourth, factor and technology content changed with resource activities raising to prominence at
the expense of falling exports of low‐tech, unskilled labor intensive products.
Fifth, the gamut of products exported to South Africa has narrowed and revealed comparative
advantage shifted away from labor intensive products.
Sixth, the shift away from agricultural products has been dramatic with negative impacts on
employment and poverty reduction.
In all, developments in foreign trade in the 2000s have also created a huge gap between Zimbabwe’s
endowment of skilled and disciplined labor and its revealed comparative advantage shifting towards
natural‐intensive minerals.
Yet, a detailed analysis of exports suggests that not all producers of labor‐intensive goods have been
wiped out. Against the background of lackluster export performance and falling diversification in export
offer, there are some bright spots rising hope Zimbabwe’s export offer may move more in line with its
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endowments with a large pool of cheap and relatively well skilled labor force. There are 16 triple‐digits
SITC product groups, which represent specializations developed in 1997‐2008 and retained in 2008.
While their aggregate exports remain relatively low, they contribute significantly to employment.
Whether they expand in years to come, it will hinge critically on improving business climate together
with foreign trade regime. The importance of the latter has become critical since the largest barrier to
foreign trade has been removed with the switch to “dollarization” and “randarization” of the economy
in early 2009. These are the issues addressed in the next chapter.
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4. Moving forward: how to revive exports? Zimbabwe’s foreign trade performance has been lackluster from the perspective of both its past
performance and that of its neighbors. This has not been the result of adverse external developments as
these were highly favorable 1994‐2008, so disappointing export performance has been exclusively
home‐grown. Exports, most negatively affected, were agricultural and simple industrial products.
Exports of these low technology, labor intensive products have been consistently declining since 1997.
They have been largely responsible for Zimbabwe’s disappointing overall exports performance. While
large mining and farming (tobacco) operations tend to be more immune to unfriendly business climates,
small scale agricultural and industrial activities are highly sensitive to ill‐designed economic policies and
falling quality of economic governance.
Their impact has been particularly visible in terms of Zimbabwe’s export performance in the South
African market. Consider the following: First, falling exports of small scale agricultural and industrial
products have shaped Zimbabwe’s export profile there. The number of products with comparative
advantage has dramatically contracted with the largest losses incurred by products characterized by
high to medium technology and low technology labor intensive intensities. Zimbabwe’s export basket
has become extremely concentrated exceeding the levels of concentration in Zimbabwe’s exports to the
EU. It has also become similar in terms of revealed profiles of export specialization increasingly limited
to a falling number of natural resource‐intensive products.
Second, South African‐destined export expansion has also revealed supply limits to Zimbabwe’s natural
resource‐intensive sectors. Except for industrial raw materials, the values of other exports to South
Africa in terms of end‐use in 2008 were either below their values in 1996 or less than US$1.5 million
above (steel and iron by US$1.4 million, fuels by US$1.3 million and machinery by US$0.9 million). The
value of exports of foods and feeds was US$50 million below the value in 1996. Despite the fall in
agricultural exports, the share of industrial raw materials intended for further processing increased to 92
percent in 2008 from 56 percent in 1996. Hence, minerals, iron and steel and other industrial raw
materials have been the levers of export expansion to this market.
Third, the expansion of South Africa‐destined exports appears to have been at the expense of exports to
the EU and have not led to an increased presence of Zimbabwean exporters in the world market. The
share of South Africa in total Zimbabwe exports increased from around 10 percent at the turn of the
century to 37 percent in 2008 while over the same period the share of the EU fell from 16 percent to 7
percent. Yet, the share of Zimbabwe in South African total imports contracted in 2008 to the level
preceding its South Africa export boom in 2001‐07. Zimbabwe has also failed to increase its export
presence relative to other suppliers in other neighboring markets as well as in the EU, its historically
largest market.
Zimbabwe’s foreign trade performance can be explained in terms of a contracting supply base as a result
of ill‐designed policies and political instabilities. Foreign trade policies and institutions have been largely
irrelevant to the outcome. Even the best policies would have failed to elicit a supply response in the
absence of a friendlier business climate and political instabilities. International experience demonstrates
that improvements in trade policy are only effective when supplemented by improvements in the
business environment. This should not suggest that barriers to foreign trade, as exemplified by very high
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transaction costs of conducting foreign trade operations in Zimbabwe, should not be addressed and
removed but indicates that their impact on foreign trade would be limited unless other barriers
restraining a supply response are also removed.
These comments notwithstanding, steps should be taken to streamline and lower the transaction costs
of foreign trade while simultaneously taking measures to remove barriers faced by the private sector in
moving towards higher levels of processing of domestically available natural resources and agricultural
foods and feeds.
Three sectors have traditionally underpinned Zimbabwe’s external performance: agriculture, mining,
and tourism. While developments in 1999‐2008 have undercut each of them, they are not completely
wiped out and some have survived in better shape than others. By the same token, the capacity to
recover also varies across them with mining probably being the easiest to revive. Agriculture and
industries based on agricultural inputs appear to have been the largest loser of all of them. Yet, with the
right policies in place, all can be rebuilt relatively quickly.
Reviving exports of labor intensive products is critical for Zimbabwe to enter a path of sustained
economic growth. The alternatives are high unemployment, poverty and a high level of aid dependence,
as sales of minerals, including diamonds, may not generate sufficiently large earnings to pay for rapidly
growing imports. The purpose of this chapter is to take stock of the issues to be addressed in the context
of the earlier findings of this study.
In contrast to a lot of other developing countries, Zimbabwe’s developmental challenges can be
addressed by measures that are relatively cost free in economic terms and could be implemented
quickly, provided the government is genuinely committed to a pro‐growth agenda. The potential for
growth derives not only from Zimbabwe’s rich endowments in natural resources, human capital and
geographic location but also the fact that the economy has been suppressed by government policies
neither external nor domestic physical constraints. Zimbabwe has several assets. Its labor force is
among the most educated in sub‐Saharan Africa and, as the experience of Zimbabwean emigration
shows, one of the most disciplined and hard working. Its natural environment is not only attractive to
tourists but also uniquely suited for agricultural production. Its fertile soil, water and climate are highly
favorable to agricultural production and once made Zimbabwe one of the largest net exporters of foods
and feeds in Africa. It is also amply endowed in mineral resources including recently discovered
diamonds. Despite being landlocked, it has access to high quality infrastructure in neighboring South
Africa. In a nutshell, Zimbabwe has a solid ‘hardware’ for economic development.
While in some sectors of the economy this potential can be relatively quickly activated by the removal of
policy‐induced barriers to economic activity, in other sectors—staved off capital investment for many
years—this will take time and will require foreign investment and technology. While we do not have
reliable data about capital formation, many indicators suggest that the level of investment has been
very low for the last decade or so. FDI inflows have been negligible: the total amount invested over
1999‐2008 amounted to US$389 million compared to US$4.5 billion in neighboring Zambia. Although
the FDI inflows more than doubled in 2009 from US$52 million a year earlier to US$105 million, they are
estimated to have fallen to US$85 million in 2010. Another indicator of the investment challenge is
imports of capital equipment excluding motor vehicles; their share in total imports of goods fell from an
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average of 32 percent in 1995‐98 to 22 percent in 2004‐08. While in 1995‐98 the value of these imports
into Zimbabwe was 2.8 times larger than into Zambia, in 2004‐08 these imports were 50 percent lower.
The remainder of this chapter briefly discusses the restoration of macroeconomic stability and its impact
on economic activities as well as implications for foreign trade policy. It also identifies measures that
could improve the business climate, increase investment and boost exports.
4.1. Restoration of macroeconomic stability: its initial impact and the challenge ahead Two events—the Global Political Agreement (GPA), signed on September 15, 2008, and the introduction
of a multi‐currency regime in April 2009—set the stage for the recovery of the Zimbabwean economy.
The former has provided a modicum of political stability, whereas the latter has restored
macroeconomic stability. Dropping the domestic currency was not a component of the reform package
except for getting rid of hyperinflation as well as the host of administrative measures earlier introduced
in futile attempts to combat it. Put differently, the quality of the business environment has improved
but only marginally as other barriers that put Zimbabwe at the bottom of several international rankings
have remained in place. There has been no improvement in its investment climate, despite the removal
of some constraints on current business activities (e.g. the removal of surrender requirement, foreign
exchange controls).
While too short a period of time (15 months at the time of this writing) has elapsed since the restoration
of macro‐stability to assess its longer term impact on investment and output, several improvements can
be easily identified. For starters, inflation fell from an astronomical 500 billion percent in 2008 to 3.6
percent year‐on‐year as of August 2010 and its immediate result has been a revival of economic growth.
Zimbabwe’s economy grew five percent in 2009 and the outlook for economic growth—with projected
GDP growth of 5.4 percent in 2010 ‐remains positive. Considering that inflation had not been below
double‐digit rates since the early 1990s and GDP had been falling every year since 1998, these are
remarkable accomplishments.
Second, thanks to restored macroeconomic stability and the removal of ‘anti‐hyperinflation’ measures,
chronic food and fuel shortages experienced in 2008 have completely disappeared. Zimbabwe has now
ceased to be supply constrained: it has become demand constrained as domestic markets have
extended their reach to products that previously were subject to direct government controls. The
removal of direct state controls over foreign exchange, prices of basic commodities and foreign trade
flows have removed perverse incentives and gone some way towards restoring domestic production and
exports, at least those that are less sensitive to the quality of business environment. The volumes of
exports of some minerals, both mining—platinum group metals, gold, nickel, and diamonds —and value‐
added activities such as high carbon ferro chrome, iron and steel products, and agricultural products are
projected to significantly increase in 2010 (Table 35).
The growth in volumes exported is projected to be quite substantial reaching very high levels for raw
sugar and gold. Due to rising prices, increases in the values of exports will be significantly higher than
increases in their physical volumes. The largest price effect will be for copper followed by cut flowers
and nickel. Among agricultural products, tobacco regained in 2010 its traditional top position in
Zimbabwe’s total exports of goods that it lost back in 2004, first to gold and then to platinum group
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metals products, as the volumes of gold exports fell in 2005‐08. The share of tobacco in total exports is
estimated to have reached 20 percent in 2010. In addition to tobacco that recorded strong growth
recently, other encouraging signs of recovery in the agricultural sector are increases in output of maize
and sugar but also indications of increases in the output of agro‐processing. While data for 2009 and
first two quarters of 2010 are still not fully available to assess developments following the switch to
dollars and rands, some food processing companies are reporting increases in sales and profits. The milk
processing firm, Daribord, has announced a 50 percent increase in sales and US$3.1 million profit for the
half‐year. This was made possible by a 30 percent increase of milk production. An impressive
achievement, although the 3.7 million liters per month now produced is still below the domestic
demand estimated at 5.5 million liters.46 In all, agriculture, which contributes 16 percent to GDP, is
expected to grow by almost 19 percent in 2010.47
Table 35: Projected exports of selected agricultural and non‐agricultural commodities in current prices and volumes in 2010 (in percent)
Projected growth in 2010 over 2009 Share in total
Volume Value exports
Flue‐cured tobacco 28% 32% 20%
Sugar raw 85% 90% 3%
Sugar refined ‐75% ‐83% 0%
Flowers 10% 20% 1%
Gold 59% 80% 14%
Platinum Group Metals (PGM) 3% 3% 19%
Diamonds 15% 25% 2%
Copper 5% 156% 1%
Nickel 11% 20% 2%
High Carbon Ferro Chrome 4% 6% 7%
Cotton Lint 0% 0% 9%
TOTAL EXPORTS n/a 21% 79%
Source: own calculations based on data provided by Reserve Bank of Zimbabwe, Harare, August 2010.
Yet, the recovery has so far fallen short of expectations considering both Zimbabwe’s developmental
potential and the depth of the economic contraction experienced over 1998‐2008. While the cumulative
GDP growth rate in 2009‐10 of slightly above 10 percent is impressive in itself, this has to be cast against
the cumulative contraction of 63 percent in terms of real GDP rates over 1999‐2008. Despite projected
export growth of 21 percent in 2010, exports of most major commodities in terms of volume are still
below the levels achieved in the past. Copper, cotton lint, together with platinum group metals and raw
sugar remain the only major products whose exports both in terms of value and volume exceeded in
2009 their respective levels in 2000. Exports of other traditional products were in 2010 around 70
percent below their volumes in 2000‐01 with nickel and flue‐cured tobacco 60 percent below their
respective volumes in these years. There are also signs that the recovery may be faltering as jobs are
being shed and productive capacity remains idle.
46 Madera, Bright. 2010. “Firms struggle to recapitalize.” The Herald Business, Harare, August 18 (B3) 47 According to Business Reporters Bloomberg 08/18/2010, quoted in The Herald, Harare, the agricultural output is expected to grow 20 percent in 2010 driven by tobacco whose production is estimated at around 115,000 tons. This is still more than 50 percent below the 2000 level but almost twice above the output in 2003.
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Indeed, as captured by export data, the contribution of labor intensive activities to total exports does
not appear to have increased following the restoration of macroeconomic stability. The major drivers of
export growth in 2010 remain tobacco and minerals. The share of products listed in Table 35 above is
estimated to be 79 percent in 2010 up from an average of 73 percent in 2006‐08. This means that the
share of other products fell from 27 percent to 21 percent during this period. There is some consolation
due to the fact that the increase of exports of labor‐intensive tobacco has, alone, driven this change: its
share increased from an average of 13 percent in 2006‐08 to 20 percent in 2010.
The key challenge therefore remains in reviving exports of other labor intensive manufactured goods as
well as exports of natural‐resource products. This is especially important not only for job creation but
also considering that the recovery has triggered increased imports while exports have been falling
behind resulting in growing deficits in the balance of trade. Although export earnings are projected to
increase to US$1.9 billion in 2010 from US$1.59 in 2009, imports are expected to grow even stronger
from US$3.2 billion in 2009 to US$3.9 billion in 2010. So the trade deficit is projected to grow 24 percent
in 2010 from US$1.6 billion to US$2 billion. Ultimately, sustaining expanding import demand calls for a
significant expansion of exports of goods and services.
Since there was little, if any, significant investments into the economy in 1999‐2008, expansion of
exports calls for a radical increase of investment, domestic and foreign alike. Contrary to expectations,
the restoration of macroeconomic stability in 2008 has so far had no impact on FDI inflows as the fears
of property confiscation under the Indigenization and Economic Empowerment Act of 2007 have likely
discouraged foreign investors from getting engaged into investment activities in Zimbabwe. Uncertainty
created by the Indigenization and Economic Empowerment Bill of 2007 remains an effective barrier to
both domestic and foreign investments.
Time works against any delay in modernizing industrial capacities. As was shown earlier, some export
capacities in agro‐business and the agricultural sector appear to have survived both hyperinflation and
the policy shift from wealth creation to wealth confiscation and redistribution in the 2000s. They appear
to have somehow withstood adversities of the economic environment. Although net exports have
dramatically fallen, exports still exceed imports and some capacities can be restored as they were likely
temporary victims of hyperinflation, the wrongheaded exchange rate policy, and other direct state
controls. Indeed, the largest decline took place in 2005‐08: surpluses were between US$800 and US$1.1
billion in 1994‐2002, fell to around US$0.7 billion in 2003‐04, about US$0.4 billion in 2005‐07, and
US$150 million in 2008. With the passage of time, some of these capacities still existing in the processed
food sector but may still be inadvertently wiped out. Considering high unemployment and the fact that
the importance of this sector stems not from its contribution to foreign currency earnings but to
employment creation, it would be a great loss to the country’s welfare if they did.
4.2. A new setting for foreign trade policy: implications of the multicurrency regime The restoration of macroeconomic stability that has come with the dumping of the domestic currency
has created new challenges for enhancing competitiveness of Zimbabwe’s products in international
markets. The increased exposition of domestic firms to competition from imports calls for an overhaul of
various regulations that unnecessarily increase transaction costs and reduce incentives to invest by
domestic and foreign firms alike. The hassle cost of doing business or investing in Zimbabwe towers over
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other impediments to expanding exports that is needed to put Zimbabwe back on a path of sustained
economic growth based on the best use of its unique endowment of natural resources and human
capital.
The introduction of the multi‐currency regime in April 2009 has drastically altered the parameters
underlying the conduct of foreign trade operations and the overall thrust of foreign trade policy simple
because getting rid of the Zimbabwean dollar has also automatically removed exchange controls as well
as put an end to confiscatory taxes on exports, that is, surrender requirement on export earnings.48
During the tumultuous years preceding the dumping of the Zimbabwean dollar, imports became
increasingly subject to control through non‐trade measures (IMF 2009). While duties and various border
charges might have raised the prices of imports, this was of little relevance for two reasons. First, with
constant devaluations of the Zimbabwean dollar, imports became more and more expensive. The
devalued currency provided protection unmatched by tariffs or NTBs: the Zimbabwean dollar (Z$)
quickly lost value throughout the 2000s. In May 2002, one US$ was equal to Z$350, by the end of July
US$1 would command Z$600 and on December 20, 2002, the exchange rate was Z$1,350. The pace
accelerated subsequently and in May 2007 the exchange rate reached Z$60 million (Sandawana 2008).
This alone created barriers to imports. Second, imports of many goods were indirectly controlled by the
state through the direct allocation of foreign exchange or offering preferential exchange rates for some
purchases abroad. In a nutshell, successive devaluations and foreign exchange controls made foreign
trade policy tools irrelevant in shaping flows of imports.
Yet, three things have not changed: the large share of customs revenues in total government revenues;
commitments related to participation in regional trade agreements; and continued instability of tariff
policy. They remain constant fixtures of Zimbabwe’s economic landscape. Taxes and border charges
collected by customs at the border still remain a very important source of government revenue.
Revenue from customs duties levied on imports amounted to US$132.8 million or 14.3 percent of
government revenue in January‐June 2010 down from 31.5 percent in the same period in 2009 (MoF
2010). The decline in the share was simply due to the surge in revenue from other taxes triggered by
economic recovery and improved collection. Hence, revenue considerations are likely to remain an
important factor in shaping future tariff policy.
The freedom in setting tariffs is restricted by bilateral PTAs (preferential trade agreements). Zimbabwe is
party to a host of PTAs of which the most comprehensive are the SADC Trade Protocol and the COMESA
free trade area. Before these went into effect, Zimbabwe also signed and implemented bilateral trade
agreements with Botswana, Malawi, Namibia, and South Africa (Gilson 2010). According to an official
Zimbabwe Government document (MoF 2010),49 goods originating from the COMESA and SADC
48 Although this was a commendable decision, it was flawed. Instead of two currencies, which is reminiscent of running concurrently gold and silver, one currency should have been chosen as an official means of payments. The introduction of two currencies creates problems if their respective exchange rates move in different directions vis‐à‐vis each other. The appreciation of a currency triggers hoarding of this currency. Weaker currency pushes stronger one from circulation. 49 “The Free Trade Area Protocols provide for duty free importation of goods from COMESA and SADC Member states, provided such goods meet the set criteria on the rules of origin” (MoF 2010, p. 172).
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Member States are imported duty free. Since preferential partners account for around three‐quarters of
Zimbabwe’s total imports, this implies that only one quarter of imports is subject to tariffs.
Yet, PTAs do not seem to be a binding constraint. First, in fact, not all imports originating in preferential
partners appear to enter Zimbabwe duty‐free as there are exemptions listed as sensitive products. The
list is extensive encompassing almost all sectors of the Zimbabwean economy that have been engaged in
exports. Sensitive products account for between 22 percent and 39 percent of total imports excluding
minerals, i.e., industrial raw materials.50 Their share in total imports has significantly decreased since
2002 when it was almost 40 percent. Their contraction reflects falling agricultural output as sensitive
products are mostly agricultural products (Table 36).
Table 36: Zimbabwe’s exports and imports of sensitive agricultural and non‐agricultural products in 2002‐09 (in percent)
Zimbabwe's imports (in percent)
2002 2003 2004 2005 2006 2007 2008 2009p
Agricultural products 54 48 47 79 48 50 60 81 Non‐agricultural products 46 52 53 21 52 50 40 19
Share in total imports 5 5 3 8 3 3 4 6
Zimbabwe's exports (in percent)
Agricultural products 95 97 97 96 95 98 98 99 Non‐agricultural products 5 3 3 4 5 2 2 1
Share in total exports excluding industrial raw materials 39 34 26 20 17 23 21 22
Note: ** 2009 data is very preliminary estimates due to some countries reported to UN COMTRADE System late or still missing values (at least 10% below at expected world level). Source: Based on mirror data from UN COMTRADE Statistics.
Second, even imports of non‐sensitive products originating from preferential trading partners do not
appear to be spared from tariffs even, in one case, exceeding a corresponding applied MFN tariff rate.
As of August 1, 2010, the government raised tariff rates on “selected finished products from the SADC
region” (MoF 2010, p. 174). While the preferential rates on five eight‐digit CN products were increased
from 0 percent to the MFN tariff rates on these goods ranging between 15 percent and 20 percent ad
valorem, the tariff rate on SADC‐originating imports of other food preparations (CN 2106. 9090) was set
at 10 percent whereas imports from MFN sources pay a tariff of 5 percent ad valorem. This is a unique
case of reverse discrimination going afoul.
Another element of Zimbabwe’s foreign trade regime is the lack of stability in its tariff policy. Tariff rates
are often changed: interestingly, changes go in both directions as some tariff rates are increased and
others reduced. Since the introduction of the multi‐currency regime, all customs duties in Zimbabwe are
now levied in foreign exchange only. Partly as a result of this, tariff rates have generally been reduced
across the board, although the Zimbabwean authorities have recently taken steps to re‐establish import
duties on the list of basic commodities for which revenue collection has suspended since 2008 under the
Short Term Emergency Recovery Program. Needless to add, some modicum of stability and
predictability of changes is important for investment and other business decisions.
50 Although one might ponder over the wisdom of protecting internationally competitive sectors, note that their share in total exports has been falling since at least 2002. This suggests the loss of competitiveness in activities in which Zimbabwean producers have comparative advantage. Hence, as a measure supporting reconstruction, it does not raise much concern.
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The adoption of US dollar or rand has had benefits and costs relating to foreign transactions. Benefits
include enhanced macroeconomic stability and lower country risk; lower transaction costs for firms;
elimination of exchange rate risk cancelling the related premium in domestic interest rates; and stronger
competition. The downside is the loss of the ability to use interest rates and the exchange rate for
macroeconomic stabilization purposes, which, in the case of an asymmetric shock can lead, all else
equal, to higher variability in output and employment. With the formal ‘dollarization’ of the economy,
trade policy is now the only line of protection for domestic producers as there is no resort to
devaluation or revaluation of the domestic currency. World prices are directly transferred into the
economy. A sharp appreciation of the US dollar against the currencies of Zimbabwe’s regional trading
partners may undercut competitiveness of Zimbabwean firms vis‐à‐vis other regional producers in
regional markets and make imports from local partners cheaper, possibly putting domestic industries
under stress.51 In response, these industries may lobby the government officials for protection from
competing imports. On the other hand, the effect of a falling US dollar may be offset by Zimbabwe’s
partners’ devaluing their currencies, although devaluations are unlikely to be introduced to erode the
competitiveness of Zimbabwean imports.
Hence, the adoption of the US dollar is likely to lead to a growth in foreign trade thanks to the
combination of lower transaction costs, disappearance of exchange rate risk, and increased price
transparency. But at the same time, it may lead to increased shopping for protection as a weak domestic
currency can no longer offer protection from competition from imports. This calls for considerable
improvements in Zimbabwe’s business climate to lower the cost of trade and increase competitiveness
rather than ad hoc trade policy interventions as exemplified by the recent introduction of a 15 percent
duty on exports of chrome ores and fines ostensibly designed to increase value added.52
In other words, the benefits of the multiple‐currency regime will not come by default. Moreover, their
attainment only marginally depends on foreign trade policy, although ad hoc protectionist measures
raising transaction costs may prevent their coming to fruition.
As for transactions costs, Zimbabwean firms face high formal barriers to doing business including those
associated with foreign trade that are not so much related to weak infrastructure but stem from
burdensome regulations.53 As such these could be quickly addressed and removed. Zimbabwe has one
of the highest hassle costs of doing business related to its regulations. In trading across borders,
Zimbabwe was ranked 167th out of 183 countries or 11 ranks below the average for its neighbors and its
ranking is the lowest among comparators in 2009. Since regional benchmarks are not very demanding in
terms of transaction costs associated with foreign trade activities, Zimbabwe’s performance offers
plenty of space for improvement.
51 The case in point is the loss of market share of Argentina’s exporter to those from Brazil, its preferential trading partner from Mercosur in the late 1990s and early 2000s: under the pressure of balance of payments crisis, Brazil devalued its currency whereas Argentina was on a currency board with the US dollar as an anchor, which strongly appreciated at the time. 52 This measure reflects negatively upon the quality of business environment: in countries where capital flows freely to the best use, this type of tax is not only counterproductive but also redundant, as the international experience amply demonstrates. 53 For a detailed discussion, see Appendix 2.
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Zimbabwe’s low ranking in terms of exploiting opportunities offered by foreign trade‐led economic
development stems not from its geographical location but self‐inflicted policy‐induced costs. Zimbabwe
has the third highest cost to import and to export in the world after Chad and Central African Republic.
While it would be tempting to associate these high costs with those associated with transportation,
exacerbated by the lack of direct access to cheaper maritime transport, being landlocked is only part of
the explanation as Botswana, Malawi, Rwanda and Zambia, which are also landlocked, have lower costs
of both imports and exports Both exporters and importers from Zimbabwe need significantly more time
to complete both export and import transactions: they also spend more money.
The barriers are therefore more policy rather than physically ‐induced. Bureaucratic procedures
consume more time than dealing with infrastructure‐imposed or technical constraints while the latter
account for most of the total transaction cost incurred by exporters and importers alike. Meeting
bureaucratic requirements accounts for the bulk of the time needed to complete both export and
import transactions.
Lower infrastructure‐related costs in Zambia than in Zimbabwe raise suspicion that they are under‐
stating the latter since Zambian exports often transit Zimbabwe. But this does not seem to be the case,
as shipments from Zambia can also go directly to ports in Mozambique by‐passing Zimbabwe altogether.
Furthermore, the cost of delivering shipments and getting them ready for shipping by sea for Malawi’s
firms is much lower than for firms in Zimbabwe: the cost of ports and terminal handling and inland
transportation is US$1,240 for Malawi as compared with US$2,800 and for imports it is US$2,140 against
US$4,349.54 In all, foreign trade transaction costs of Malawian firms are roughly half of what their
Zimbabwean counterparts have to pay (Appendix Table 10).
Hence, geography and infrastructure are not huge barriers to foreign trade but governance is and the
main reason why the Zimbabwean economy is unable to fully tap opportunities offered by global
markets. Within governance, the crucial issue is that the government lacks credibility in protecting
private property rights.
4.3. Expanding the export base calls for new investments but barriers persist Expanding exports seems to be one of the most pressing tasks if Zimbabwe is to avoid an aid‐
dependency trap and enter the path of sustained economic growth. Taking into account the swing in its
foreign trade balance in goods from historically a traditional surpluses (including surpluses on the
current account) to deficits beginning in 2006 and increasing each year over 2007‐10, the challenge
facing policy makers is to find ways of financing ‘excessive’ imports of goods and therefore current
account deficits.55 Leaving aside foreign borrowing, assistance and slashing imports, which would
undercut economic growth, this can be achieved by expansion of exports of goods and services as well
as by attracting FDI inflows. The latter, if not lured by special concessions and political deals, may boost
exports of both goods and services by supplying capital and know‐how.
54 This is also surprising that, as Gilson (2010) notes, trucks registered in Zimbabwe and in South Africa are allowed on a reciprocal basis to transport goods between two other countries even if the third country is used as a point of transit. 55 The Reserve Bank of Zimbabwe projects the current account deficit of US$1,363 million and of goods foreign trade of US$1,765 million in 2010. The corresponding deficits in 2009 were US$928 million and US$1,622 million.
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While in publications and discussions of Zimbabwe low capacity utilization is a dominant theme, the crux
of the matter is not excessive capacity but rather its absence. Lack of maintenance and investment has
resulted in a significant reduction in electricity generation capacity, collapse of water supply, and major
disruptions to railway services. The contraction in the volumes of exports of capital‐intensive mineral
products points to many mines being undercapitalized. Judging also by the significant decrease in
diversity of Zimbabwe’s exports as measured, among others, by the number of exported goods
exceeding US$1 million, many firms have either disappeared or limited their sales to domestic markets.
So it is clear that without infusion of new investment Zimbabwe’s exports capacity will simply not be
rebuilt.
Yet, some sectors probably can rebound even without significant investments or improvements in the
business climate. As was argued earlier (see Section 3.3), some export capacity in agro‐business or the
agricultural sector appear to have survived adverse economic policies. Agro‐business still appears to be
alive: several developments point also to the potential for sustained growth. Although net exports have
dramatically fallen, exports still exceed imports and some capacities can be restored as they were likely
temporary victims of hyperinflation, wrongheaded exchange rate policy, and other direct state controls.
Indeed, the largest decline took place in 2005‐08: surpluses were between US$800 million and US$1.1
billion in 1994‐2002, fell to around US$0.7 billion in 2003‐04, about US$0.4 billion in 2005‐07, and just
US$150 million in 2008. Preliminary estimates suggest that they increased in 2009. Although significantly
depressed, some investments have still taken place in Zimbabwe’s mining and industrial sector offering
hope for a relatively quick rebound. Furthermore, diamonds, whose extraction does not require
significant capital outlays, from the Marange field could reportedly generate output worth U$1.7 billion
a year.56 If this happens and the Kimberley Process requirements are satisfied, this would almost double
the value of projected total exports and close the deficit in goods trade in 2010. This would be mixed
news as it would reduce pressures for economic reforms which are indispensable to increased
employment and sustained economic growth.
Similarly, a significant increase in tobacco output could also be achieved without large investments.
While the policy of confiscation of commercial farms “… is likely the main reason that maize production
fell by three‐quarters” (Clemens and Moss 2005) in 2000‐04, other factors also contributed to the
contraction. These include inflation and monopolistic powers of the state‐run Grain Marketing Board
designated as the sole buyer and distributor of meat and wheat as well as a price‐setter in Zimbabwe.
With prices of all other goods increasing faster than prices set by the Grain Marketing Board,
profitability of growing maize fell and farmers shifted to crops that were not subject to state price
controls. Hence, production of maize should expand now macroeconomic stability has been restored.
Indeed, this has already happened as exports increased 28 percent in terms of volume and 32 percent in
2010 (see Table 35 above in Section 4.1): the amounts involved are still, however, almost 60 percent
below the 2001 level indicating a large scope for improvement.
But other industries as well as mining need much more substantive capital outlays in order to address
years of neglect and under‐investment. Those firms that have survived the economic chaos of 2000‐08
are in desperate need of modernization. But barriers to achieve this goal are significant. For starters,
56 See http://www.bbc.co.uk/news/business‐10945366 accessed on August 11, 2010.
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despite some improvements and greater political stability, Zimbabwe remains one of the worst
countries in the world in terms of the quality of economic governance and hassle cost of doing business.
While large firms may find ways to navigate murky waters of doing business there small firms—critical
to reducing persistently high unemployment rates—experience many more difficulties. As compared to
its neighbors, Zimbabwe’s taxation regime stands out as being particularly oppressive (for a detailed
discussion, see Appendix 3): while this may be of little relevance to mining companies, although it often
is,57 it is potentially a huge barrier to small businesses often engaged in low‐technology, labor‐intensive
activities. But this should not suggest that a reform should be confined to the taxation regime. What is
badly needed is an overhaul of the existing economic regime and policies.
Second, the single largest obstacle to economic recovery is the Indigenization and Economic
Empowerment Act of 2007, whose administrative implementation framework, i.e., Indigenization and
Economic Empowerment regulations, were issued in 2010. They identify sectors where only ‘formerly
disadvantaged Zimbabwean citizens” are allowed to operate and those where they have to have equity
in both existing and future commercial and industrial establishments. As chairman of Zimplats, which—
with US$1 billion invested over 2002‐10—is by far the largest foreign investor in Zimbabwe,
emphatically stated in his expose to shareholders:
“The Indigenization and Economic Empowerment Regulations that provide the administrative framework
for the implementation of the Indigenization and Economic Empowerment Act were gazetted during the
year. As shareholders are aware, this act seeks to ensure that all companies operating in Zimbabwe are
majority owned by local Zimbabweans. It is important for me to highlight that your board understands the
need for and fully supports the meaningful involvement of Zimbabweans in the country’s economy. It is
however our firm belief that at this time, Zimbabwe’s greatest need is for increased levels of foreign
direct investment to create more employment in the country. We therefore urge the authorities to
implement this law in a way that does not compromise Zimbabwe’s desire to be seen as a preferred
investment destination.” (Zimplats 2010, p. 5).
The Act, among other actions, is responsible for the government’s lack of credibility among investors,
foreign and domestic alike. With investors remaining skeptical about the evolution of the political
situation since the coalition government took office in February 2009, it should come as no surprise that
FDI inflows remain negligble. As Zimplats’ annual report diplomatically asserts, “international investors
and the donor community whose support is critical for the country’s economic recovery remain skeptical
of the political processes that have been underway for the past 18 months, as evidenced by the lack of
funds flow” (Zimplats, p. 6),
But the Indigenization and Economic Empowerment Act not only effectively keeps foreign investors at
bay, it also discourages expansion of domestic firms and leads to capital flight and transfers of profits
abroad. Uncertainty about ownership status pushes firms to reduce their operations in Zimbabwe to a
minimum.
Uncertainty created by the Indigenization and Economic Empowerment Bill together with capital
scarcity bodes ill for the prospect of re‐industrialization of the Zimbabwean economy. Businesses
complain that real interest rates even on short‐term loans running at double‐digit levels raise the bar of
57 See Zimplats 2010
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profitability extremely high. Furthermore, longer‐term loans are almost impossible to secure. The
combination of the absence of collateral and lax enforcement of private property rights by the judicial
system appears to be one of major reasons for the high cost of capital there.
=Expanding the exportbase calls for new investments. But as long as the investment climate is not
overhauled, these investments will not come. And without them, the prospects for a significant increase
in exports are doomed to failure.
4.3. Conclusion While a decade of economic chaos has exacted a heavy toll on Zimbabwe’s industries, the problem is
that policy changes introduced so far have done little to address major weaknesses in the business
climate and remove the threat of confiscation of foreign‐owned firms (or more precisely firms not
owned by formerly ‘disadvantaged people’) by the state. It seems that the government has not taken
advantage of the window of opportunity created by the decision to move to a multiple currency regime
and overhaul its economic regime.58 Instead, the reform package was confined to the removal of
regulations introduced earlier as part of government effort to combat hyperinflation through such
administrative measures as price controls and foreign currency surrender requirements.
The absence of measures that would make the investment environment friendlier to private business
activities will continue hampering the recovery. Except for the removal of some direct price controls, no
steps have been taken to improve the notoriously poor business climate. In contrast to, for instance,
Poland’s stabilization‐cum‐ transformation program from central planning, which included measures
such as liberalizing foreign trade (suspension of import duties together with the removal of other
measures raising the cost of imports and exports) and other regulations relevant to the cost of doing
business, Zimbabwe’s decision to replace its domestic currency with US dollars and the South African
rand was not part of an in‐depth structural reform program that would address weaknesses in its
investment and business climate. Other policy measures that accompanied the abandoning the
domestic currency included price liberalization and discontinuation of the foreign exchange surrender
requirements. Poland’s measures went further and deeper. Exposition of domestic producers to
competition from imports, easy access to imported products and services, and the creation of an
attractive investment climate for domestic and foreign direct investment were all critical to a powerful
supply response and Poland’s entry on the path to sustainable economic growth. These ingredients are
still missing in Zimbabwe’s economic regime, as vividly illustrated by the shift in the composition of
exports towards “big‐items,” whose production has been relatively immune, albeit not completely, to
weaknesses in the business environment.
Reviving private business activity and the concomitant recovery of exports of both goods and services
through measures including the removal of administrative barriers to conducting business operations
and investment, improving government’s capacity to enforce contracts and private property rights and
targeted interventions to increase competitiveness should be a top priority for the government. This
58 Even this decision was flawed, as one currency should have been chosen as an official means of payments. The introduction of two currencies creates problems if their respective exchange rates move in different directions vis‐à‐vis each other. The appreciation of a currency triggers hoarding of this currency. Weaker currency pushes stronger one from circulation.
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calls for the development of a comprehensive program of economic reforms that would address all
aspects of Zimbabwe’s economic policy regime. Without significantly reducing the regulatory hassle and
fiscal burden of conducting business in Zimbabwe, the revival of labor‐intensive exports will be
impossible. But this is not only needed for job creation but also to alleviate the very real risk that the
country will become even more dependent on foreign aid and continue under‐performing relative to its
significant potential.
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Baumol, W.J., R.E. Litan and C.E. Schramm. 2007. Good Capitalism, Bad Capitalism and the Economics of Growth and Prosperity. Yale University Press, New Haven and London.
Balassa, Bela. 1965. "Trade Liberalization and 'Revealed' Comparative Advantage," Manchester School 33, pp. 99‐123.
Clemens, Michael and Todd Moss. 2005. “Costs and Causes of Zimbabwe’s Crisis,” CDG Notes, Center for Global Development, Washington D.C.
Collier, Paul. 2007. The Bottom Billion. Why the Poorest Countries Are Failing and What Can Be Done About It, Oxford University Press, Oxford, New York.
Djankov, Simeon, Caroline Freund and Cong S. Pham. 2008. “Trading on Time.” Review of Economics and Statistics, November.
Gilson, Ian. 2010, “Deepening Regional Integration to Eliminate the Fragmented Goods Market in Southern Africa,” mimeo, World Bank, Washington D.C.
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Implast 2009: Mineral Resource and Mineral Reserve Statement 2009, Impala, Rustenburg.
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MoF 2010: The 2010 Mid‐Year Fiscal Policy Review, presented by the Minister of Finance, Hon. T. Biti, Harare, July.
Muñoz, Sònia. 2006. “Zimbabwe’s Export Performance: The Impact of the Parallel Market and Governance Factors.” IMF Working Paper WP/06/28, African Department, International Monetary Fund, Washington DC, January.
Ng, Francis and M. Ataman Aksoy. 2008. "Who are the net food importing countries?" Policy Research Working Paper 4457, World Bank, January.
Power, Samatha. 2003. “How to Kill a Country: Turning a breadbasket into a basket case in ten easy steps—the Robert Mugabe way,” Atlantic Monthly, December.
Raballand, Gaël, Charles Kunaka, and Bo Giersing. 2008. “The Impact of Regional Liberalization and Harmonization in Road Transport Services: A Focus on Zambia and Lessons for Landlocked Countries.” Policy Research Working Paper 4482. World Bank, Africa Transport Department, Africa Sustainable Development Division, January.
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Richardson, Craig. 2005. “How the Loss of Property Rights Caused Zimbabwe's Collapse,” Economic Development Bulletin No. 4, CATO Institute, Washington DC, November 14.
Rotberg, Robert I. and Rachel M. Gisselquist. 2009. Strengthening African Governance: Index of African Governance, Results and Rankings 2009, Cambridge, MA.
Sandawana. 2007. Africae Sandawana 2002—2007, The Sandawana Column, The New Zanj Publishing House, Second Edition, Harare
Stone, J. I. 2001. Infrastructure Development in Landlocked and Transit Developing Countries: Foreign Aid, Private Investment and the Transport Cost Burden of Landlocked Developing Countries. UNCTAD/LDC/112. Geneva: UNCTAD.
Weiner, Dan, Sam Moyo, Barry Munslow, and Phil O’Keefe. 1985. “Land Use and Agricultural Productivity in Zimbabwe,” The Journal of Modern African Studies 23.2., 251‐85.
Winters, L Alan. 1997. ‘The Economics of “Catching up” Revisited’, The Vienna Institute for Comparative Economic Studies, Reprint Series, No. 168, June.
WB 2010: “Note on foreign trade reporting in Zimbabwe: surprisingly decent quality of import statistics,” World Bank, mimeo, April 2010.
WB 2009: Global Economic Prospects 2009, World Bank, Washington D.C.
WEF 2009: Global Competitiveness Report, 2008‐09, Michael E. Porter and Klaus Schwab, eds., The World Economic Forum, Geneva, Switzerland.
Wood, A., and K. Jordan, 2000, “Why Does Zimbabwe Export Manufactures and Uganda Not? Econometrics Meets History,” Journal of Development Studies, Vol. 37, Number 2.
Zimplats 2010: Zimplats Holdings Limited Annual Report 2010, Harare, 2010; accessed on October 23, 2010, available at http://www.zimplats.com/pdf/Ar2010.pdf
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Appendix Tables
Appendix Table 1: Imports according to various sources in selected years over 1994‐2008 (in US$
millions and percent) .................................................................................................................................. 90
Appendix Table 2: Mirror imports in percent of official imports: totals and in trade with Zimbabwe in
2000‐08 ....................................................................................................................................................... 91
Appendix Table 3: Exports in official and mirror statistics in 2001‐02 and 2004‐08 (in millions of US
dollars and percent) .................................................................................................................................... 94
Appendix Table 4: Exports in percent of mirror exports in total trade and bilateral trade with Zimbabwe
of Zimbabwe’s major export markets in 2000‐ 08 ...................................................................................... 95
Appendix Table 5: Difference between official and mirror statistics in percent in 2002‐08 ...................... 96
Appendix Table 6: Directions of imports according to official and partners’ imports statistics in 2000‐08
(in percent) .................................................................................................................................................. 97
Appendix Table 7: Trading across borders against overall ease of doing business in Zimbabwe and other
comparator countries in 2010 .................................................................................................................... 99
Appendix Table 8: Formal cost of foreign trading in Zimbabwe and selected SADC countries in 2010 (in
days and US dollars) .................................................................................................................................. 100
Appendix Table 9: Policy and infrastructure‐induced costs of trading across borders in Zimbabwe and its
neighbors in 2010 (in days and US dollars) ............................................................................................... 101
Appendix Table 10: Elements of the cost of cross border trading in Zimbabwe as compared with Malawi
in 2010 ...................................................................................................................................................... 101
Appendix Table 11: Fiscal and administrative burden of paying taxes and contributions in Zimbabwe and
neighboring countries in 2010 .................................................................................................................. 104
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Appendix 1: Note on foreign trade reporting in Zimbabwe INTRODUCTION
The objectives of this note is to perform a standard assessment of foreign trade statistics based on the
data collected by the Customs administration and those collected by Zimbabwe’s trading partners’
statistics (mirror trade statistics). This note shows that Zimbabwe’s authorities have been up to the task
monitoring and reporting across border imports flows while exports have been rather sloppily caught in
respective national statistics.
This finding is quite surprising considering high levels of the incidence of corruption and low level of the
quality of economic governance as perceived by foreign investors and analysts. Countries ranked low in
surveys of Transparency International or the World Bank’s quality of governance usually hugely under‐
report both exports and imports. A decent degree of congruence of official imports/exports and
partners’ exports (mirror imports/mirror exports) to Zimbabwe suggest that smuggling and tax or duty
evasion at the border is rather limited with one caveat. The portion of trade going through unofficial
channels would neither be recorded in a country of origin nor in an importing country. We have no
estimates of this unofficial trade.
The following two observations concerning the use of national trade statistics in analytical work can be
derived from this analysis: First, official imports statistics do not raise any substantive concerns that
would make their use inappropriate. Second, as for analysis of export performance especially in the
2000s, mirror statistics provide much better approximation of developments in the real world.
For these reasons, mirror statistics provide better insights into composition and dynamics of Zimbabwe’s
trade. Furthermore, the quality of foreign trade reporting of Zimbabwe’s major trading partners—SACU
and the EU—is as good as it can get.
MIRROR STATISTICS: CONCEPTUAL REMARKS
Mirror statistics, i.e., those derived from statistics of foreign trading partners, provide a useful check on
the quality of foreign trade statistics of a country. Since most countries, except for the US,59 report
exports as FOB (free on board) and imports as CIF (cost, insurance, freight), a perfect match between
officially reported imports and imports derived from partners’ exports, thereafter referred to as mirror
imports, is not possible, as it would imply that freight and insurance are costless. Therefore, one would
expect that the value of official imports should be significantly larger (smaller) than that of mirror
imports (exports). For landlocked countries with imports concentrated in bulky primary commodities,
the difference may be huge amounting even to 50‐60 percent. But there are other reasons contributing
to the impossibility of a perfect match between country’s official statistics and mirror statistics.
59 Total exports in the United States are valued free alongside, or FAS. FAS figures provide valuation of exports at the port of exportation and thus exclude charges for loading onto the vessel, the transportation itself, insurance, unloading, and foreign transportation. FAS is similar to FOB valuation of exports (see J.M. Donnelly, U.S.‐World Merchandise Trade Data: 1948‐2006, CRS Report for Congress, Washington D.C, February, 2007, available at http://fpc.state.gov/documents/organization/81946.pdf.
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Officially disclosed import data may differ from imports into a country derived from partners’ exports
for various reasons related, among others, to differences in conventions (including or not including cost
of delivery), smuggling, under‐invoicing or misclassification, differences in exchange rates, extra‐
budgetary arrangements for collecting customs revenues.60 Other source of differences relate to the fact
that exports tend to be less thoroughly monitored than imports for fiscal reasons and that there are
inherent difficulties in identifying re‐export or entrepôt activity. Re‐exports by small traders, in
particular, may be difficult to capture in official statistics. Last but not least, the quality of statistical
services of some trading partner may be lacking; not to mention that some of them may choose not to
publish foreign trade data.
These caveats, however, completely lose their relevance if mirror imports systematically exceed the
officially reported data. This is usually a strong indication of convoluted regulations governing access to
domestic markets leading illegal activities such as smuggling, reverse discrimination or preferential
margins (differences between MFN applied tariff rates and preferential tariff rates) implied by free trade
agreements, misclassification of goods and under‐invoicing of imports, albeit with a caveat. Liberal
arrangements for imports for personal use may also lead to under‐reporting as customs simply do not
register them. Furthermore, some governments use customs to collect revenue, which, although
controlled by central authorities, is not part of the official state budget. Whatever the immediate
reasons are behind negative discrepancies between official imports and mirror ones, they always
indicate dramatic departures from the best international practice.
Assuming that most trading partners disclose their foreign trade statistics (submit them to the UN
COMTRADE database), the total value of their exports to a country (also referred to as mirror imports)
should be lower than the total value of a country’s reported imports (from these countries) by an
equivalent of CIF. Ideally official imports (OM) should exceed mirror imports (MM) by transportation
cost or OM = MM + CIF. The discrepancies between OM and MM (mirror trade gaps) provide
information about the quality of foreign trade statistics collected by Customs. There are two cases:
If the value MM > OM or the ratio of MM/OM*100 > 100, the difference (or the ratio) between the value of mirror imports and official imports, defined as a mirror trade gap, amounts to the minimum value of imports that go unreported into a country. It points to illegal activities at the border: under‐valuation of imports to evade payments of duties and other charges or simply smuggling operations.
If the value MM < OM and the ratio is lower than 100 by at least, as a rule of thumb, 10 percent, than there is no systemic problem at the Custom, The ratio is more than 10 percent lower for OECD economies as well as, among others, China and India.
Similar criterion can be used to assess the quality of exports statistics: official exports (XO) should be
lower than the value of reported imports or mirror exports (XM) by the value of CIF. Here, however, one
of the sources of discrepancies may be unrelated to the quality of monitoring goods outflows from a
60 For a detailed analysis of mirror trade statistics, see Zarubin, G and Bartlomiej Kaminski, “The Limits of Mirror Statistics of Foreign Trade” in M. Belkindas and O. Ivanova, eds., Foreign Trade Statistics in the USSR and Successor States, Studies of Economies in Transition 18, The World Bank, Washington DC, 1995.
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country: this may simply reflect underreporting in partner countries. For this and other reasons,61
mirror export statistics do not provide as strong indication of the quality of reporting of exports as an
analysis of imports data does.
These stipulations notwithstanding, under‐reporting of exports is relatively common in many developing
countries. By the same token, an assessment of the extent to which official statistics do not capture
them is important for foreign trade performance analysis.
In addition to the COMTRADE database, another source of statistics on foreign trade is the IMF DOT
(direction of trade) database. These statistics rely on both national reporting and reconciliation of them
against statistics available from other countries. In consequence, the final data are closely aligned, albeit
not identical as not all countries report foreign trade data to the UN, with mirror statistics that can be
derived from the COMTRADE database.
IMPORTS: IMPRESSIVE ACCURACY
The statistics shown below compare imports totals drawn from statistics Zimbabwe reported to UN
COMTRADE with corresponding mirror imports, i.e., exports to Zimbabwe reported by Zimbabwe’s
trading partners, on the one hand, import statistics published in the most recent Direction of Trade
Annual with those derived from export statistics of countries exporting to Zimbabwe. The picture that
emerges from this statistics is that there is no systemic problem with the quality of official import
statistics as deviations do not point to positive trade gaps consistent over time, although there are some
indications of under‐reporting in recent years.
The differences between official and IMF statistics do point to any systematic problems with official
reporting. The discrepancies between the IMF and COMTRADE import totals have been moving from
positive to negative territory. Their total over 1999‐2008 amounted to US$90 million suggesting that
differences have tended to offset each other over time. By the IMF statistics benchmark, imports appear
to have been under‐reported only in 1996‐97, 2006, and 2008 (Appendix Table 1). But they were ‘over‐
reported’ in 2002‐04 and 2007.
Turning to mirror import statistics, i.e., based on exports into Zimbabwe reported by countries to the
UN, and set against the IMF data the pattern appears to be consistent with adequate trade reporting.
Since imports in the IMF statistics include CIF, one would expect they would be 10‐20 percent higher
than mirror FOB imports reported in the UN COMTRADE. But except in 2005, 2006 and 2007 when IMF
imports were either 20 percent above mirror imports (in 2006 or 6 percent in 2005 and 2007, the
difference was much in other years. The average for 2001‐08 was 32 percent indicating that mirror
imports were under‐reported. What explains this gap? We shall return to this question once Zimbabwe’s
official imports are tested against mirror imports.
61 Conversely, official exports should be lower than their respective imports, i.e., mirror exports, reported in partners’ statistics. However, since governments have no fiscal stake in exports, as most countries do not levy charges on them, customs services are not vitally interested in verification of exports invoices and precisely reporting them. They are relevant only for economic analysis but do not shed light on the quality of border controls of an exporting country.
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Appendix Figure 1: Imports into Zimbabwe in current prices according to various sources in 1990‐2008 (in millions of US dollars)
Source: IMF DOT and UN COMTRADE databases and Central Statistical Office, Harare, for 2000 and 2003 when no data were reported to the UN
In fact, more pertinent to our analysis is an assessment of mirror trade gaps between official imports
and mirror imports derived from the UN COMTRADE statistics. Surprisingly for a country at a low level of
the GDP per capita, official imports have consistently exceeded the values of mirror imports indicating a
rather impressive absence of positive trade gaps associated with under‐reporting. Trade gap was
negative in every year over 1992‐2008, although it has been declining since 2004. The reasons for its
contraction are not clear.
Appendix Table 1: Imports according to various sources in selected years over 1994‐2008 (in US$ millions and percent)
1994 1995 1996 1997 1999 2001 2002 2004 2005 2006 2007 2008
(IMF) 2,241 2,726 4,124 3,278 2,127 1,718 2,326 2,153 2,072 2,812 2,681 3,457
(UN) 2,241 2,659 2,813 3,092 2,126 1,715 2,467 2,204 2,072 2,577 3,442 2,832
Difference 1 ‐68 ‐1,310 ‐186 ‐1 ‐3 141 51 1 ‐236 761 ‐625
Difference (in percent) 0 ‐3 ‐47 ‐6 0 0 6 2 0 ‐9 22 ‐27
Mirror (UN MM) 1,486 2,220 2,290 2,146 1,651 1,160 1,227 1,702 1,954 2,348 2,526 2,680
Difference: IMF‐UN MM 755 507 1,833 1,132 476 558 1,099 451 117 465 155 777
Difference IMF vs. UN
MM in percent 51 23 80 53 29 48 90 27 6 20 6 29
UN Ratio: MM to MO 66 83 81 69 78 68 50 77 94 91 73 95
Notes: (IMF) – imports data derived from the IMF DOT; UN stands for exports reported to the COMTRADE database; MM – mirror imports (exports to Zimbabwe reported by its trading partners; Source: IMF DOT and UN COMTRADE databases.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1990 1991 1992 1993 1994 1995 1996 1997 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Mirror imports
Official imports
IMF imports
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One possible explanation is the improvement in the quality of statistics of trading partners that has led
to the extension of coverage of Zimbabwe‐directed exports.62 However, a closer look at the origins of
imports suggests that this would be an unlikely explanation as reliable reporters (EU‐27, South African
Customs Union, US, China, Mozambique and Zambia) accounted on average in 2004‐08 for 76 percent of
total official imports and 91 percent of Zimbabwe’s total mirror imports (Appendix Table 2).
Appendix Table 2: Mirror imports in percent of official imports: totals and in trade with Zimbabwe in 2000‐08
Average
2000 2001 2002 2003 2004 2005 2006 2007 2008 2004‐08
SACU total 80 83 79 81 77 89 91 85 85 85
SACU ZWE N/AV 83 57 N/AV 84 324 121 80 96 141
Zambia total 117 83 98 57 58 58 118 67 64 73
Zambia ZWE 114 74 N/AV 120 97 118 74 103 102 114
Mozambique total 95 85 86 97 93 81 93 77 92 87
Mozambique ZWE N/AV 41 120 N/AV 67 22 38 59 100 57
EU 27 total 85 83 81 82 80 84 83 82 84 83
EU 27 ZWE N/AV 102 41 N/AV 95 106 80 69 88 87
China total 61 62 65 69 71 74 76 79 83 77
China ZWE 91 88 88 88 84 85 86 83 79 83
USA total 96 97 96 96 97 99 101 101 103 100
USA ZWE N/AV 65 57 N/AV 114 152 20 85 82 91
Memorandum: .
Share of the above in ZWE
total imports N/AV 71 80 N/AV 76 45 86 82 92 76
Share of the above in ZWE
mirror imports 96 92 91 89 90 94 92 88 93 91
Mirror imports in % of ZWE
imports from the above N/AV 126 65 N/AV 96 87 58 68 103 86
Notes: ZWE stands for Zimbabwe; N/AV—not available; SACU (Southern African Customs Union) includes the following states: Botswana, Lesotho, Namibia, South Africa and Swaziland. Source: Derived from data in UN COMTRADE database.
The quality of their statistics does not leave much to be desired as the data tabulated in Appendix Table
2 show at least in terms of their respective total world imports. The ratios of mirror imports to official
imports for total trade are stable and below 100. The United States is an exception mainly because of
unique practice of not including CIF in total values of imports. So is Zambia but only in two years—2000
and 2006. But the values of this ratio often exceed 100 percent in trade with Zimbabwe indicating
Zimbabwe’s under‐reporting of imports.
Except for trade with SACU, other discrepancies can be explained by reporting in different years than in
exporter countries or rather commonplace technical issues always distorting trade statistics.63 SACU’s
62 Note that while there are often strong incentives to under‐report and under‐value the value of imports, there are rarely any incentives to distort exports data. Hence, even in countries where there is significant under‐reporting of imports, export statistics tend to have better coverage. 63 As convincingly demonstrated in an empirical study of trade statistics worldwide, no full conformity can be achieved even with statistics of highly developed countries. See Jerzy Rozanski and Alexander Yeats (1994). ‘On the
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Zimbabwe‐oriented exports of US$1.4 billion in 2005 and US$1.7 billion in 2006 exceeded Zimbabwe’s
official imports from SACU by US$935 million and US$300 million in these years. Since in other years
there were no under‐ or over‐reporting, it is not clear what triggered these differences. Other cases can
be easily explained: for instance, imports from the US were underreported to the tune of US$6 million
and US$15 million in 2004 and 2005 in Zimbabwe’s statistics but in 2006 the value of these imports was
“over‐reported” by almost US$200 million. On the other hand, a seesaw pattern of the values of trade
gaps with Zambia reflects technical issues related to timing and currency conversions rather than to
systemic weaknesses in border controls.
Another possible explanation of the significant increase in the ratio of mirror imports to official imports
since 2005 may have something to do with the contraction of transportation costs of imports due to the
increased share of neighboring countries in total imports. Indeed, the shift in geographical patterns of
imports towards neighboring countries, which has been most likely accompanied by the decline in
transportation costs, has been huge. The share of Zimbabwe’s adjacent countries—Botswana,
Mozambique, South Africa, and Zambia—significantly increased from an average of 43 percent in 1995‐
99 to 63 percent in 2006‐07 and surged to 75 percent in 2008. Simultaneously, the share of the EU fell
from an average of around 23 percent in 1995‐99 to an average of 8 percent in 2004‐08.64 It is obvious
that the cost of transport from neighbors is a fraction of the cost of bringing the same goods from
Western Europe.
It appears that the bulk of exports recorded in respective countries of origin have been also caught and
reported by Zimbabwe’s customs administration. Although the ratio of mirror imports to official imports
has been moving towards the value of 100 percent, it has never exceeded this level. There is one
exception: the value of mirror imports in trade with neighbors (SACU plus Mozambique and Zambia) and
other major trading partners identified in Appendix Table 2 (EU‐27, China, and USA) exceeded that of
official imports in 2008 indicating underreporting. However, there may be some other indications of
some imports not reported but the quantities involved remain very low.
Overall, the conclusion relevant for the use of official import statistics is that they provide surprisingly
good information about actual flows except for some years, which can be easily identified. In contrast to
trade statistics in many developing countries, there are no indications of imports moving across borders
without being reported to the authorities including statistical services.
EXPORTS: PUZZLING OVER‐REPORTING IN THE 2000S
Against the background of a good coverage of imports’ reporting in Zimbabwe’s official statistics, data
on exports strike one as rather sloppy and greatly inaccurate especially over the last decade. Figure 2
presents the time profiles of exports in terms of value as reported in official statistics, the IMF DOT
database and the UN COMTRADE database as derived from world imports from Zimbabwe, i.e.,
Zimbabwe’s mirror exports. In contrast to mirror exports, which have been characterized by low
dispersion along the long‐term trend, IMF and official exports data have displayed strong volatility since
(in) accuracy of economic observations: An assessment of trends in the reliability of international trade statistics’, Journal of Development Economics, 44(1), pp.103‐130. 64 Based on data reported by Zimbabwe to the UN COMTRADE database.
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2000. In 1990‐99, three export statistics were moving in tandem: an average difference between the
IMF and official data was one percent and that between the latter and mirror statistics amounted to 5
percent. In 2000‐08, the IMF estimates and official data have been moving at different rates and in
opposite directions: according to one set exports were falling and according to the other they were
raising in all years except in 2000‐01 and 2008. While the average rate of growth of IMF exports of 6.9
percent in 1991‐1997 was the same as that of official exports and both below the average of 10 percent
for mirror exports,65 in 2000‐08, IMF and official exports grew at different rates with the IMF data
yielding an average rate of growth of 18 percent and the official data an average rate of 32 percent.
While mirror data also displayed volatility, the average rate of growth of 2 percent was dramatically
lower than for other statistics.66
Appendix Figure 2: Exports in terms of value according to various sources in 1990‐2008 (in millions of US dollars)
Source: IMF DOT and UN COMTRADE databases.
However, the most surprising is an enormous surge in official exports in 2006 not reflected in other
statistics: the value of exports of US$6.5 billion reported in 2006 is clearly out of line begging an
explanation.67 While this would go beyond the format of this note, let us note that this is a statistical
fantasy as exports would amount to 173 percent of the GDP, which was US$3.7 billion in 2006,68 up from
41 percent in 2005 and trade surplus of US$3,851 million would amount to 103 percent of the GDP. That
would be the only time that the balance of trade in goods had surplus over 1990‐2008. Furthermore,
Zimbabwe’s exports to Zambia would be an equivalent of 47 percent of their total imports up from 4
percent a year earlier in 2005.
65 Since no official data on exports in 1998 are available, it is impossible to calculate growth rates in 1998 and 1999. 66 Coefficient of variation (ratio of standard deviation to the average) was high: 4.2 for the official data and 4.0 for the IMF statistics. The value of coefficient of variation of mirror exports was also high but at 3.8 significantly smaller than for the IMF and official data. 67 As African countries tend to under‐report exports (see Francis Ng and Alexander Yeats, “Kenya: Export prospects and problems,” Africa Region: Working Paper Series No. 90, World Bank, Washington DC, October 2005), this is rather an unusual development. 68 GDP in current dollars extracted from the World Bank WDI database.
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1990
1991
1992
1993
1994
1995
1996
1997
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
EXPORTS OFFICIAL
IMF EXPORTS
MIRROR EXPORTS
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Some further insights can be derived from the data tabulated in Appendix Table 3 comparing 1994 to
2008 export totals drawn from statistics that Zimbabwe reported to UN COMTRADE with corresponding
export statistics in the IMF DOT database, on the one hand, and partner’s data on imports from
Zimbabwe, i.e., mirror exports. As noted above, the IMF data present four different pictures depending
on the period: rather precise reporting in 1992‐99; huge under‐reporting in 2000‐01; over‐reporting in
2002‐07; and under‐reporting in 2008. In 1992‐99 exports reported by Zimbabwe to UN COMTRADE
were almost fully in line with the IMF DOT statistics running on average at 98 percent of the IMF’s
estimates. In 2000‐01 this ratio dropped to 59 percent and 54 percent with the total aggregate under‐
reported exports amounting to US$2.4 billion. The 2002‐07 witnessed a switch in the opposing direction:
exports were hugely over‐reported especially in 2006 by US$5.5 billion or 6.8 times the value of exports
estimated in the IMF DOT statistics. The value of official exports increased in 2006 almost five‐fold over
its level in 2005 (Appendix Table 3). In 2007, official exports were around 30 percent above the IMF’s
estimate. In 2008, the pendulum went in the opposite direction: as the value of IMF exports increased
almost three times and official exports fell to 51 percent of its level in 2007, the value of non‐reported
exports reached US$701 million or 71 percent of the IMF’s DOT estimate.
Appendix Table 3: Exports in official and mirror statistics in 2001‐02 and 2004‐08 (in millions of US dollars and percent)
1994 1995 1996 1997 1999 2000 2001 2002 2004 2005 2006 2007 2008
Exports IMF 1,971 1,901 2,242 2,146 1,908 3,283 2,222 2,009 1,769 1,395 941 2,506 2,400
Exports UN (XO) 1,967 1,846 2,122 2,128 1,887 1,925 1,207 2,327 1,926 1,394 6,427 3,308 1,694
Difference: IMF‐UN ‐4 ‐55 ‐120 ‐18 ‐20 ‐1,358 ‐1,015 318 158 ‐1 5,487 803 ‐706
UN in % of IMF 100 97 95 99 99 59 54 116 109 100 683 132 71
Mirror exports UN
(XM) 1,607 1,712 1,986 2,095 1,778 1,855 1,809 1,728 1,924 1,974 2,227 2,414 2,222
Difference: XO – XM 361 134 136 32 109 70 ‐602 599 2 ‐581 4,201 895 ‐528
Official exports in %
of mirror exports 122 108 107 102 106 104 67 135 100 71 289 137 76
Source: Derived from trade statistics reported to the UN COMTRADE and IMF DOT databases. No official exports data available for 2003.
Before turning to an examination of the data on mirror exports against official exports, the point to be
borne in mind is that, as noted earlier, mirror exports should be higher than exports reported by
Zimbabwe by the cost of transport and insurance since imports include CIF. It is generally assumed that
this adds about 10 percent of the value of shipments. For a landlocked country, the cost of
transportation may be even higher. Except for 2001, 2005 and 2008, official exports exceeded mirror
exports: the difference, however, varied rather significantly especially in the 2000s. There was huge
underreporting of exports in 2005 and 2008 and enormous over‐reporting in 2006.
Since distortions in mirror export statistics heavily depend on the quality of statistical reporting in
partner countries, their examination shed some extra light on their reliability in assessing official data.
The reliability of mirror export data is larger if official exports are 10‐15 percentage points below mirror
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exports. By this measure, mirror data appear to reflect adequately exports data of SACU and
Mozambique but not of Zambia and the EU (Appendix Table 4).69
Appendix Table 4: Exports in percent of mirror exports in total trade and bilateral trade with Zimbabwe of Zimbabwe’s major export markets in 2000‐ 08
Average
2000 2001 2002 2003 2004 2005 2006 2007 2008 2004‐08
SACU total 84 76 68 79 78 80 79 79 76 79
SACU ZWE 143 62 192 N/AV 126 108 186 158 106 137
Zambia total 140 146 128 128 103 72 136 131 155 120
Zambia ZWE 121 12 222 N/AV 58 70 938 111 65 249
Mozambique total 95 85 86 97 93 81 93 77 92 87
Mozambique ZWE 511 43 465 N/AV 205 252 1,519 3,468 271 1,143
EU 27 total 101 103 106 106 108 108 108 108 112 109
EU 27 ZWE 59 74 87 . 73 47 310 103 79 122
Memorandum:
share of the above in
official exports 49 58 59 N/AV 59 70 77 78 81 73
share of the above in
mirror exports 58 59 59 63 62 61 66 66 64 64
Source: Derived from trade statistics reported to the UN COMTRADE.
But the quality of reporting looks different in their trade with Zimbabwe. Zimbabwe has tended to over‐
report its exports to all its major trading partners with the exception of the EU in 2000‐05 and 2008 and
pervasive corruption in these countries cannot explain it. The extent of over‐reporting was particularly
high in trade with Zambia in 2006 and Mozambique in 2000 and 2001‐2008 with sky‐high levels having
been reached in 2006‐07. Zimbabwe’s exports to Mozambique were 35 times higher than its imports
from Zimbabwe in 2007.
In all, the quality of exports statistics significantly deteriorated in the 2000s. Mirror exports were around
US$0.6 billion higher than official exports in 2005 and 2008 but US$4.2 billion and US$0.9 billion lower in
2006 and 2007 respectively. While under‐reporting of imports by its trading partners may be responsible
for some portion of Zimbabwe’s ‘excess exports,’ the differences between IMF and mirror statistics
suggest this has not been a significant factor. .
OFFICIAL AND MIRROR STATISTICS: IMPLICATIONS FOR DYNAMICS
While both sets of statistics capture similar overall trends in the development of Zimbabwe’s trade in
2000s, there are differences in pace of scope of reported change over 2002‐08. Several observations can
be derived from Appendix Table 5 comparing official data with corresponding data reported in statistics
of Zimbabwe’s trading partners. First, geographical concentration of imports is lower according to
official than mirror imports statistics, albeit two sets have been converging. Official statistics appear to
have been consistently understating imports from SACU, Zambia, and the European Union. But the gap
69 Since the EU is unlikely to under‐report exports, this rather suggests that products imported from the EU enter illegally or are subject of under‐invoicing in some countries. The same cannot be said about Zambia: one suspects that exports have been under‐reported.
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significantly declined by 2008 (see Appendix Table 5). The average shares of imports from these partners
over 2002‐08 were significantly lower than their respective shares in total mirror imports: for instance,
the share of SACU in Zimbabwe’s total imports was 55 percent and 66 percent in mirror imports but in
2008 both were very close to each other (70 percent and 71 percent).
Appendix Table 5: Difference between official and mirror statistics in percent in 2002‐08
Imports Exports
Shares Average, 2002‐08 2008 Average, 2002‐08 2008
SACU, of which ‐27.0 ‐1.8 15.9 28.4
South Africa ‐19.3 ‐1.5 14.2 18.9
Botswana ‐53.2 ‐5.9 35.5 77.6
Mozambique 36.5 ‐5.2 82.7 71.9
Zambia ‐23.4 ‐9.3 23.9 ‐16.0
EU‐27 ‐5.2 7.4 ‐16.6 3.6
Value of trade Average, 2002‐08 2008 Average, 2002‐08 2008
World 23.5 5.4 21.7 ‐31.7
SACU, of which 3.7 3.6 26.1 4.0
South Africa 10.4 4.0 24.5 ‐6.8
Botswana ‐9.4 ‐0.2 54.5 70.6
Mozambique 54.5 0.4 89.7 63.1
Zambia 10.4 ‐3.5 62.9 ‐52.7
EU‐27 23.9 12.4 6.3 ‐27.0
Dynamic
Least Square
Growth, 2001‐08
Avg. growth
rates 2004‐08
Least Square
Growth, 2001‐08
Avg. growth
rates 2004‐08
World ‐56.0 ‐74.0 58.0 87.4
SACU, of which ‐20.3 63.6 33.0 ‐21.8
South Africa ‐29.2 61.9 17.8 ‐91.1
Botswana 39.2 40.4 102.8 104.2
Mozambique ‐8.9 77.1 84.5 92.9
Zambia 3.9 ‐49.4 96.3 98.1
EU‐27 136.2 74.5 742.3 106.8
Source: Derived from trade statistics reported to the UN COMTRADE by Zimbabwe and its foreign trading partners.
So were their respective rates of growth. Total mirror imports grew much faster than official imports
with the largest discrepancy for imports from the EU: according to the official data they fell at a LSG rate
of minus one percent, whereas mirror statistics pointed to a modest growth of 0.3 percent. The only
exceptions were Botswana and Zambia, as official statistics indicated stronger growth.
Second, official data tend to over‐report exports. In consequence, the difference between respective
growth rates amounts to 58 percent for LSG rate (10.4 percent versus 4.4 percent) and to 87 percent for
an average annual growth rate (a whopping 44 percent against 5.5 percent for mirror exports). The
discrepancy between shares of respective countries and regional groupings has remained very high. For
instance, the share of SACU in officially reported exports was 52 percent and in total mirror exports was
37 percent in 2009. Much larger shares of Zimbabwe’s two neighboring countries, Mozambique and
Zambia, in Zimbabwe’s official exports than their corresponding shares raise suspicion that both of them
under‐report imports from Zimbabwe for tax evasion reasons. Surprisingly, given its high quality of
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governance, the same may apply to Botswana with the official average share of 4.1 percent in 2002‐08
almost 55 percent higher than in mirror exports.
Appendix Table 6: Directions of imports according to official and partners’ imports statistics in 2000‐08 (in percent)
2001 2002 2004 2005 2006 2007 2008 Index 2008
Direction of imports according to official statistics Aver.2001‐02=100
SACU, of which 49.7 54.9 57.1 20.1 54.1 56.7 70.0 134
South Africa 46.8 52.6 52.6 15.0 45.5 44.6 62.1 125
Botswana 2.0 1.9 4.0 5.0 8.2 11.9 7.6 392
Mozambique 5.2 1.9 2.3 9.9 7.7 3.6 2.9 81
Zambia 0.8 0.9 3.4 3.7 1.8 3.2 2.2 259
Malawi 0.2 0.1 0.4 0.1 0.7 5.0 0.9 601
EU‐27, of which 11.6 17.0 9.0 7.1 9.0 8.7 7.7 54
United Kingdom 3.2 4.9 3.8 1.7 3.6 3.1 2.4 59
Rest of the world 29.9 19.0 22.1 52.9 10.7 12.7 6.4 26
Memorandum:
Neighboring countries 54.8 57.3 62.3 33.6 63.2 63.3 74.8 133
Direction of imports according to mirror statistics
SACU, of which 60.9 62.5 62.5 69.2 72.1 62.1 71.3 116
South Africa 54.6 56.4 54.6 59.4 45.4 47.3 63.0 113
Botswana 5.7 6.0 7.6 9.4 10.8 14.7 8.0 137
Mozambique 3.2 4.6 2.0 2.4 3.2 2.9 3.0 78
Zambia 1.4 1.3 5.2 3.8 2.3 3.2 2.4 178
Malawi 0.7 0.5 0.5 0.6 0.9 5.2 0.8 142
EU‐27, of which 17.3 14.1 11.1 8.0 7.8 8.1 7.2 45
United Kingdom 4.5 4.2 2.8 2.1 1.5 1.8 1.4 33
Rest of the world 14.9 11.5 9.3 7.6 21.6 5.7 4.6 35
Memorandum:
Neighboring countries 64.9 68.3 69.5 75.0 61.7 68.1 76.5 115
Notes: Neighboring countries include Botswana, Mozambique, South Africa and Zambia Source: Derived from trade statistics reported to the UN COMTRADE by Zimbabwe and its foreign trading partners.
Yet, all these differences notwithstanding, the general picture emerging from both sets of statistics has
one common feature in common: there has been a rather dramatic reorientation of exports towards
neighboring countries as well as in imports, although not to the same extent. Their share in official
exports increased from 25 percent in 2000 to 58 percent in 2008 while that in mirror exports from 18
percent to 42 percent over the same period (Appendix Table 6). The respective shares for imports are 55
percent and 75 percent for official imports and 65 percent and 76 percent for mirror imports.
CONCLUSION
Foreign trade statistics of Zimbabwe do not display biases typical for a developing country. There has
not been systematic bias of under‐reporting imports usually indicating evasion of border charges
through either smuggling, misclassification of imported goods, and under‐invoicing. Neither has been
any tendency to under‐report exports. If anything, exports reporting has been biased in favor of over‐
reporting them.
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In fact, the puzzle is why exports were so overstated in national statistics in 2006. The direction of
exports changed dramatically albeit only for a year with the share of Zambia in total exports rising to 26
percent up from 6 percent a year before and that of South Africa falling from 42 percent in 2005 to 17
percent. It seems that hyperinflation rendered the task of converting local exports invoices particularly
challenging. Whatever, the reason, this clearly excludes official exports data for 2006 and 2007 from any
discussion of long term foreign trade performance of Zimbabwe.
In all, for practical reasons, mirror statistics provide better insights into composition and dynamics of
Zimbabwe’s trade. Furthermore, the quality of foreign trade reporting of Zimbabwe’s major trading
partners—SACU and the EU—is as good as it can get.
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Appendix 2: Note on geography and policyinduced costs of trading across borders Zimbabwe scores low in the World Bank’s Cost of Doing Business comparative surveys seeking to assess formal barriers to conducting business activities by assessing conditions in following areas: starting business, labor market flexibility, registering property, contract enforcement, bankruptcy, protection of investors, foreign trade, and getting credit.70 Zimbabwe was ranked 160th out of 1983 countries and has been among thirty or so countries with the highest hassle cost of doing business related to regulations. In trading across borders, Zimbabwe was ranked 167th or 11 ranks below the average for its neighbors (Appendix Table 6).
Appendix Table 7: Trading across borders against overall ease of doing business in Zimbabwe and other comparator countries in 2010
Ease of Doing Business Trading Across Borders Difference between (a) and (b)
(a) (b) (c)
Botswana 45 150 ‐105
Mozambique 135 136 ‐1
South Africa 34 148 ‐114
Zambia 90 157 ‐67
Zimbabwe 159 167 ‐8
Memorandum:
Malawi 132 172 ‐40
Mauritius 17 19 ‐2
Namibia 66 151 ‐85
Rwanda 67 170 ‐103
Source: data downloaded from http://www.doingbusiness.org/
Although the deviation of 11 ranks from the average of comparators’ rankings in trading across borders is relatively low compared to other dimensions of formal cost of doing business, this is not the result of transparency and simplicity of Zimbabwe’s foreign trade regime but it is due to high transaction cost of foreign trading in other countries of the region. All of them score in “trading across borders” well below their average score across all dimensions of the formal cost of doing business with the difference at single‐digit level only for Mozambique, Zimbabwe, and Mauritius. Yet, Zimbabwe’s rank in trading across borders is the lowest among comparators, which are not demanding at all in terms of transaction costs associated with foreign trade activities (Appendix Table 6).
Zimbabwe’s low ranking in terms of exploiting opportunities offered by foreign trade‐led economic development stems not from its geographical location but self‐inflicted policy‐induced costs. A closer examination of the components of the transaction cost of completing export or import operation corroborates this observation. Appendix Table 7 presents data on formal costs of trading in Zimbabwe set against some of its SADC partners ranked according to the cost of importing. Zimbabwe had the third highest cost to import and to export in the world after Chad and Central African Republic. While it would be tempting to associate high costs with transportation costs exacerbated by the lack of direct access to cheaper maritime transport, ‘land‐lockedness’ is only part of an explanation.
70 Each area has several different indicators estimated by local professionals dealing with issues related to each of these areas that have been surveyed in respective countries in both large cities and rural areas. The Cost of Doing Business’ advantage over surveying firms is obvious. Professionals deal with respective issues on a day‐to‐day basis, whereas firms confront the issues only to the extent that the issues directly affect them. The former have an overall view, whereas the latter do not.
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Appendix Table 8: Formal cost of foreign trading in Zimbabwe and selected SADC countries in 2010 (in days and US dollars)
Rank world Country
Documents to export (number)
Time to export (days)
Cost to export (US$ per container)
Documents to import (number)
Time to import (days)
Cost to import (US$ per container)
3 Zimbabwe 7 53 3,280 9 73 5,101
4 Rwanda 9 38 3,275 9 35 5,070
13 Zambia 6 53 2,664 9 64 3,335
14 Botswana 6 30 2,810 9 41 3,264
26 Malawi 11 41 1,713 10 51 2,570
47 Namibia 11 29 1,686 9 24 1,813
49 South Africa 8 30 1,531 9 35 1,807
69 Mozambique 7 23 1,100 10 30 1,475
70 Tanzania 5 24 1,262 7 31 1,475
170 Mauritius 5 14 737 6 14 689
Memorandum: average and two countries with highest transportation cost in the world
Average (excluding Zimbabwe) 8 31 1,864 9 36 2,389
Zimbabwe in % of average 93 169 176 104 202 214
1 Chad 6 75 5,497 10 100 6,150 2
Central African Republic 9 54 5,491 17 62 5,554
Note: Inland transportation cost is based on 20-ft container FCL of general cargo that is valued at US$20,000 Source: Based on data in Doing Business 2010: Reforming through Difficult Times, World Bank, Washington D.C. 2010
Geography alone cannot explain much higher costs incurred by Zimbabwe’s traders. Note that Botswana, Malawi, Rwanda and Zambia are also land‐locked, yet their costs of both imports and exports are lower, albeit the difference is hardly significant for Rwanda. Zambia’s exporters paid 20 percent less, Botswana’s 14 percent, and Malawi’s 48 percent, whereas importers paid 35 percent less in Zambia, 36 percent less in Botswana and 50 percent less in Malawi. Note also that both exporters and importers from Zimbabwe needed significantly more time (about twice as much as compared with the average for selected SADC countries listed in Appendix Table 7) to complete both export and import transactions.
Transport is not the only component determining the number of days and amounts spent per container of foreign shipments.71 The breakdown of components identified to produce time and cost estimates allows distinguishing between the policy‐induced or procedural aspects and the infrastructural‐related, although there is an overlap between the two (Appendix Table 8). The latter reflects the fact that poor organization of, for instance, handling operations can dramatically raise the cost even though the port is up‐to‐date in terms of technology and facilities. Costs and times involved stem from bureaucratic procedures in place and, on the other hand, from infrastructural bottlenecks. While not much can be done in a short time perspective about weakly developed infrastructure contributing to high costs through high transportation cost (inland transportation), bureaucratically induced barriers can be easily addressed provided there is political will to do so.
Bureaucratic procedures consume more time than dealing with infrastructure‐imposed or technical constraints while the latter account for most of the total transaction cost incurred by exporters and importers alike (Appendix Table 8). Meeting bureaucratic requirements accounts for the bulk of the time needed to complete both export and import transactions: between 53 percent (Botswana) and 65 percent (Mozambique) of the total time needed to complete a standardized export transaction, and
71 See Simeon Djankov, Caroline Freund and Cong S. Pham. 2008. “Trading on Time.” Review of Economics and Statistics, November.
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between 49 percent (Botswana) and 77 percent (Mozambique). Inland transportation and cargo handling at ports account for between 60 percent (Mozambique) and 91 percent (Botswana) of total export transaction costs and between 47 percent (Mozambique) and 85 percent (Zambia and Zimbabwe) of the total import transaction cost.
Appendix Table 9: Policy and infrastructure‐induced costs of trading across borders in Zimbabwe and its neighbors in 2010 (in days and US dollars)
Zimbabwe Zambia Botswana Mozambique South Africa
Nature of Export Procedures Duration (days)
US$ Cost
Duration (days)
US$ Cost
Duration (days)
US$ Cost
Duration (days)
US$ Cost
Duration (days)
US$ Cost
Procedures: Documents preparation and customs/technical clearance 32 480 39 316 16 260 15 435 19 347 Infrastructure: Ports and terminal handling and inland transportation 21 2,800 14 2,348 14 2,550 8 665 11 1,184
Totals: 53 3,280 53 2,664 30 2,810 23 1,100 30 1,531
Nature of Import Procedures Duration (days)
US$ Cost
Duration (days)
US$ Cost
Duration (days)
US$ Cost
Duration (days)
US$ Cost
Duration (days)
US$ Cost
Documents preparation and customs/technical clearance 46 752 37 486 20 515 23 775 18 472 Infrastructure: Ports and terminal handling and inland transportation 27 4,349 27 2,849 21 2,749 7 700 17 1,335
Totals: 73 5,101 64 3,335 41 3,264 30 1,475 35 1,807
Source: Derived from data available at http://www.doingbusiness.org/ExploreEconomies/?economyid=172 accessed on June 2, 2010
Appendix Table 10: Elements of the cost of cross border trading in Zimbabwe as compared with Malawi in 2010
Zimbabwe Malawi Memo: Malawi in % of Zimbabwe
Nature of Export Procedures Duration (days)
US$ Cost
Duration (days)
US$ Cost
Duration (days)
US$ Cost
Procedures: Documents preparation and customs/technical clearance 32 480 27 473 84 99 Infrastructure: Ports and terminal handling and inland transportation 21 2,800 14 1,240 67 44
Totals: 53 3,280 41 1,713 77 52
Nature of Import Procedures Duration (days)
US$ Cost
Duration (days)
US$ Cost
Duration (days)
US$ Cost
Documents preparation and customs/technical clearance 46 752 28 430 61 57 Infrastructure: Ports and terminal handling and inland transportation 27 4,349 23 2,140 85 49
Totals: 73 5,101 51 2,570 70 50
Note: Inland transportation cost is based on 20-ft container FCL of general cargo that is valued at US$20,000 Source: Based on data in Doing Business 2010: Reforming through Difficult Times, World Bank, Washington D.C. 2010.
Zimbabwe, however, beats each neighbor across all discussed dimensions of foreign trade transaction costs in both dollar and time terms except for Zambia where it takes more time to prepare documents necessary for exports, albeit not for imports.
Lower infrastructure‐related costs in Zambia than in Zimbabwe raise suspicion that they are under‐stated for the latter. But this does not seem to be the case, as shipments from Zambia can go directly to
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ports in Mozambique by‐passing Zimbabwe. Furthermore, the cost of delivering shipments and getting them ready for shipping by sea for Malawi’s firms is much lower than for firms in Zimbabwe: the cost of ports and terminal handling and inland transportation is US$1,240 for Malawi as compared with US$2,800 and for imports it is US$2,140 against US$4,349. In all, foreign trade transaction costs of Malawi firms are roughly half of what their Zimbabwean counterparts have to pay (Appendix Table 9 above).
The above discussion provides empirical illustration of the fact that geography and infrastructure is not a barrier to foreign trade of Zimbabwe. Governance is the major impediment and the main reason why Zimbabwean economy has failed to exploit opportunities offered by plugging into global markets.
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Appendix 3: Taxation as the most binding formal constraint to do business in Zimbabwe In terms of formal ease of doing business, Zimbabwe has the most hostile regulatory environment as compared to its neighbors, albeit its positive score on enforcement of contract is an encouraging sign for easiness of improvement. Excluding mining, had decisions by foreign investors been made solely on the basis of hassle cost of conducting business operation, Zimbabwe’s neighbors would have attracted capital well before their attention would have turned to Zimbabwe. Legal environment for doing business in Zimbabwe imposes much larger burden on firms to comply with regulations than in neighboring countries. Zimbabwe ranked 159th in overall ease of doing business among 183 countries surveyed by the World Bank’s cost of doing business in 2010.72 Its rank was well below rankings of its neighbors—Botswana was ranked 45th, Mozambique 135th, South Africa 34th, and Zambia was ranked 90th. Zimbabwe’s ranking in ten dimensions of doing business (starting business, labor market flexibility, registering property, contract enforcement, bankruptcy, paying taxes, licenses needed to build a warehouse, foreign trade, and protection of investors) is better than the average ranking of its neighbors only in registering property (11 ranks higher) and enforcing property (17) (See Figure 9). Since enforcing contracts cannot be improved with the stroke of a pen, Zimbabwe’s better ranking (78th) than any of its neighbors seems to be encouraging.
Appendix Figure 3: Formal ease of doing business in Zimbabwe as compared to its neighbors in 2010
Source: data downloaded from http://www.doingbusiness.org/
Among the dimensions of formal cost of doing business covered in the World Bank’s 2010 survey, the most binding constraint to investment, foreign and domestic alike is taxation regime. The critical weakness of Zimbabwe’s formal business climate viewed through the lenses of Zimbabwe’s ranking in the context of its neighbors is taxation. Zimbabwe’s 130th rank, although better than its overall rank in ease of doing business of 159, is well below ranks of its neighbors of which the worst performer,
72 Information collected are not based on survey of firms but provided by local professionals dealing with issues related to these areas that are surveyed in respective countries in both large cities and rural areas. They shed light on procedures, laws, and regulations and say nothing about informal constraints such as corruption or predatory administration. For instance, the absence of barriers in starting or closing business may be offset by corruption.
‐100
‐80
‐60
‐40
‐20
0
20
40
Difference: neighbors' average minus Zimbabwe rankings
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Mozambique, was ranked 97th. As can be seen from Appendix Table 10 summarizing information for Zimbabwe and neighboring countries on the total number of payments per year, the time it takes to prepare, file, and pay (or withhold) the corporate income tax, the value added tax and social security contributions (in hours per year), and the total tax rate, which measures the amount of taxes and mandatory contributions payable by the business in the second year of operation, expressed as a share of commercial profits, Zimbabwe’s businesses face the highest burden across the three above dimensions.
Appendix Table 11: Fiscal and administrative burden of paying taxes and contributions in Zimbabwe and neighboring countries in 2010
Total number of
payments per year Time (days)
Total tax rate (% profit)
Memorandum: Rank in Paying Taxes
Botswana 19 140 17 18
Mozambique 37 230 34 97
South Africa 9 200 30 23
Zambia 37 132 16 36
Zimbabwe 51 270 39 130
Zimbabwe in % of average 200 154 161 299
Source: Derived from data in http://www.doingbusiness.org/ExploreTopics/PayingTaxes/Details.aspx?economyid=27
Zimbabwe’s medium‐sized domestic companies face the highest tax burden and the most demanding administrative requirements to comply with tax regulations against its competitors in neighboring countries, which discourages foreign and domestic investment as well as undercut their ability to compete in neighboring markets. They have to spend 54 percent more time fulfilling tax and mandatory contributions requirements than on average their counterparts in neighboring countries; they have to make twice as many payments per year; and the total tax rate of 39 percent is 61 percent higher than on average in neighboring countries.
All other things equal, foreign investor already committed to investing in the region would put Zimbabwe at the bottom of its preferential list. Furthermore, many domestic entrepreneurs will either refrain from establishing business or enter the informal sector.
It might be tempting to dismiss Zimbabwe’s much higher regulatory hassle cost of doing business than in neighboring countries on the ground that real ease of doing business may be lower. Indeed, formal ease may not be the same as the real ease: for instance, the rankings assign the same weight to each area and corresponding indicators of doing business putting a country with a low number of procedures higher in the ranking despite a very long time needed to complete these procedures. Furthermore, a country may have low tax rates and simple rules of compliance and still informal cost of compliance with a tax code may be huge due to predatory and corrupt administration. On the other hand, the higher tax and compliance burden may be offset by virtual absence or low informal cost of compliance.
But this does not seem to be the case as these two stipulations do not fully apply to Zimbabwe: First, Zimbabwe has both complex procedures and long times. Second, considering a very high incidence of corruption, Zimbabwean businesses face both high taxes and significant informal costs, albeit with a caveat. Informal payments may lower taxes paid. This however automatically excludes higher quality foreign investments and encourages the development of informal sector. Hence, there are no reasons to argue that real conditions of doing business are better than formal ones.
With taxation regime looming over other dimensions of formal cost of doing business in Zimbabwe as the most binding constraint, tax reform is critical to increase foreign and domestic investments. This, however, will not be enough to trigger FDI inflows, as other constraints are even more binding. The
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Indigenization and Economic Empowerment Act towers them all. The bill, which was signed in 2007 and became law on 17 April 2008, has ever since been poisoning investment climate, in spite of the fact that no regulations on its implementation were announced as of August 2010. The bill requires a 51 percent ownership of all companies operated in Zimbabwe by formerly ‘disadvantaged’ citizens of Zimbabwe. Albeit not yet having been implemented, the ensuing uncertainty over property rights erects a huge barrier to FDI inflows. It also suppresses investments in domestic firms with ownership not meeting the ‘disadvantaged person’ criterion and may even encourage some to transfer profits abroad rather than investing them domestically.
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Statistical Annex
Annex Tables
Annex Table 1: Values of Transparency International’s corruption perception indices for Zimbabwe and
its comparators in 1998, 2002, 2007 and 2008 ........................................................................................ 107
Annex Table 2: Revenue from international tourism per arrival in Zimbabwe and Zambia in 1996‐2008 (in
US dollars and millions of dollars) ............................................................................................................. 107
Annex Table 3: Change triggered by change in export prices and exported quantities in 2000‐08 (in
percent) ..................................................................................................................................................... 108
Annex Table 4: Top twenty four‐digit SITC exports in “peak years” of 1997 and 2007 and in 2008 (in
millions of US dollars and percent) ........................................................................................................... 109
Annex Table 5: Top twenty four‐digit SITC exports in ‘trough’ years of 1994 and 2002 (in millions of US
dollars and percent) .................................................................................................................................. 110
Annex Table 6: Exports of iron and steel products in 1994, 1997, 2002‐08 (in millions of current US
dollars) ...................................................................................................................................................... 111
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Annex Table 1: Values of Transparency International’s corruption perception indices for Zimbabwe and its comparators in 1998, 2002, 2007 and 2008
1998 2002 2007 2008 2009 Index 2008 1998=100
Botswana 6.1 6.4 5.4 5.8 5.6 95 Malawi 4.1 2.9 2.7 2.8 3.3 68 Mauritius 5.0 4.5 4.7 5.5 5.4 110Mozambique (a) 3.5 2.7 2.7 2.8 2.5 80 Namibia 5.3 5.7 4.5 4.5 4.5 85 South Africa 5.2 4.8 5.1 4.9 4.7 94 Tanzania 1.9 2.7 3.2 3.0 2.6 158Zambia 3.5 2.6 2.6 2.8 3.0 80 Zimbabwe 4.2 2.7 2.1 1.8 2.2 43
Memorandum:
Average (b) 4.3 4.0 3.9 4.0 3.8 93 Zimbabwe in % of average 97 67 54 45 59 46 Botswana in % of average 141 159 140 145 149 102
Rwanda (c) n/a n/a 2.8 3.0 3.3 n/a Notes: (a) value of CPI in 1999 and 2003, as no data are available for 1998 and 2005; (b) the average includes Botswana and excludes Zimbabwe; (c) classified first in 2005 with a score of 2.6 Source: Extracted from data in the website of Transparency International.
Annex Table 2: Revenue from international tourism per arrival in Zimbabwe and Zambia in 1996‐2008 (in US dollars and millions of dollars)
Zimbabwe 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Receipts (current US$ millions) 232 205 158 202 125 81 76 61 194 99 338 365 .. Receipts (current US$) per arrival 145 153 76 90 64 37 37 27 105 64 148 146 …
Zambia 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Receipts (current US$ millions) .. 29 40 53 133 80 64 88 92 98 110 138 146 Receipts (current US$) per arrival … 85 110 131 291 163 113 213 179 146 145 154 180
Zimbabwe in terms of Zambia
Receipts … 707% 395% 381% 94% 101% 119% 69% 211% 101% 307% 264% …Receipts per arrival … 180% 68% 68% 22% 22% 33% 13% 59% 43% 102% 95% …
Sources: World Bank WDI database.
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Annex Table 3: Change triggered by change in export prices and exported quantities in 2000‐08 (in percent)
A. Price effect: percent difference between exports in base year expressed in prices in 2000‐01 and value of exports in a base year (in percent)
Quantities in P2000 P2001 P2002 P2003 P2004 P2005 P2006 P2007 P2008
in 2000 0 ‐1 30 48 26 40 40 53 77
in 2001 ‐1 0 30 45 24 38 37 47 75
in 2002 ‐22 ‐24 0 12 ‐2 7 5 15 34
in 2003 ‐31 ‐34 ‐12 0 ‐13 ‐4 ‐5 7 22
in 2004 0 ‐2 25 43 0 32 45 55 86
in 2005 ‐26 ‐30 ‐6 9 ‐11 0 0 10 33
in 2006 ‐25 ‐27 ‐3 12 ‐12 0 0 9 31
in 2007 ‐27 ‐30 ‐7 6 ‐17 ‐6 ‐7 0 20
in 2008 ‐36 ‐37 ‐17 ‐6 ‐30 ‐20 ‐22 ‐19 0
B. Quantity effect: percent difference between value of exports of a base volume in successive years over a base year (in percent)
Export prices Q2000 Q2001 Q2002 Q2003 Q2004 Q2005 Q2006 Q2007 Q2008
in 2000 0 11 7 ‐5 ‐9 ‐10 ‐20 ‐27 ‐28 in 2001 ‐12 0 ‐6 ‐19 ‐22 ‐23 ‐31 ‐37 ‐37 in 2002 ‐6 6 0 ‐12 ‐15 ‐16 ‐25 ‐32 ‐33 in 2003 7 19 12 0 ‐1 ‐3 ‐14 ‐22 ‐23 in 2004 13 25 21 7 0 ‐2 ‐16 ‐25 ‐29 in 2005 14 27 21 8 3 0 ‐13 ‐23 ‐27 in 2006 32 44 36 23 21 15 0 ‐13 ‐18 in 2007 52 64 58 46 41 34 15 0 ‐10 in 2008 58 75 65 49 53 45 25 8 0
Source: Own calculations based on the data provided by Reserve Bank of Zimbabwe.
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Annex Table 4: Top twenty four‐digit SITC exports in “peak years” of 1997 and 2007 and in 2008 (in millions of US dollars and percent)
SITC Products 1997 Share (%) SITC Product Rev. 3 2007
Share (%) SITC Product Rev. 3 2008
Share (%)
1212 Tobacco stripped/stemmed
534 25.7 6831 Nickel/alloys unwrought
537 22.6 6715 Other ferro alloys 301 14.2
6715 Other ferro alloys 217 10.4 1212 Tobacco stripped/stemmed
266 11.2 1212 Tobacco stripped/stemmed
273 12.9
2631 Raw cotton, excl linters
150 7.2 2841 Nickel ores/concentrates
224 9.4 2842 Nickel mattes/sinters/++
245 11.5
1211 Tobacco, not stripped
133 6.4 2842 Nickel mattes/sinters/++
213 8.9 2841 Nickel ores/concentrates
234 11.0
6831 Nickel/alloys unwrought
117 5.6 6715 Other ferro alloys 207 8.7 6831 Nickel/alloys unwrought
219 10.3
0449 Maize ex sweet corn
65 3.1 2631 Raw cotton, excl linters
115 4.8 2631 Raw cotton,excl linters
117 5.5
2784 Asbestos 60 2.9 6821 Copper refined/unrefined
51 2.2 0611 Raw sugars 58 2.7
2927 Cut flowers/foliage
58 2.8 2731 Quarried stone slabs
38 1.6 6612 Portland etc cements
34 1.6
9710 Gold non‐monetary ex ore
56 2.7 6612 Portland etc cements
38 1.6 2731 Quarried stone slabs
33 1.6
0711 Coffee, not roasted
37 1.8 0611 Raw sugars 34 1.4 2927 Cut flowers/foliage
30 1.4
0611 Raw sugars 36 1.7 2927 Cut flowers/foliage
34 1.4 2831 Copper ores/concentrates
23 1.1
0111 Beef, fresh/chilled 31 1.5 0571 Citrus fruit fresh/dried
31 1.3 6821 Copper refined/unrefined
21 1.0
8973 Precious metal jewellery
26 1.3 1223 Manufactured tobacco nes
28 1.2 1223 Manufactured tobacco nes
21 1.0
1213 Tobacco refuse 24 1.2 2831 Copper ores/concentrates
27 1.1 0571 Citrus fruit fresh/dried
19 0.9
0545 Vegetables nes,frsh/chld
23 1.1 2784 Asbestos 24 1.0 2892 Prec.metal waste/scrap
17 0.8
3250 Coke/semi‐coke/retort c
23 1.1 6672 Diamonds unset 23 1.0 2119 Hide/skin nes/waste
16 0.7
8414 Men/boy trouser/etc woven
19 0.9 0251 Eggs in shell 21 0.9 6672 Diamonds unset 16 0.7
7924 Aircrft nes over 15000kg
17 0.8 0612 Cane/beet sugar nes
20 0.8 2482 Softwood,simply worked
15 0.7
6522 Woven unb cotton fab nes
17 0.8 2482 Softwood,simply worked
18 0.7 0612 Cane/beet sugar nes
15 0.7
0571 Citrus fruit fresh/dried
16 0.8 1211 Tobacco,not stripped
14 0.6 3250 Coke/semi‐coke/retort c
15 0.7
Total above 1,660 79.9 1,962 82.4 1,721 81.0 Top three 901 43.4 1,027 43.2 818 38.5Top ten 1,463 70.4 1,757 73.8 1,566 73.8
Source: Own calculations based on partners’ data reported to the UN COMTRADE database.
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Annex Table 5: Top twenty four‐digit SITC exports in ‘trough’ years of 1994 and 2002 (in millions of US dollars and percent)
SITC Product Rev. 3 1994 Share (%) SITC Product Rev. 3 2002 Share (%)
1212 Tobacco stripped/stemmed 337 21.3 1212 Tobacco stripped/stemmed 550 32.1
6831 Nickel/alloys unwrought 105 6.6 6715 Other ferro alloys 108 6.3
6715 Other ferro alloys 105 6.6 2631 Raw cotton,excl linters 93 5.4
0611 Raw sugars 92 5.8 6831 Nickel/alloys unwrought 79 4.6
1211 Tobacco, not stripped 71 4.5 2927 Cut flowers/foliage 67 3.9
2631 Raw cotton ,excl linters 68 4.3 2841 Nickel ores/concentrates 54 3.2
0449 Maize ex sweet corn nes 55 3.5 1211 Tobacco,not stripped 53 3.1
2784 Asbestos 52 3.3 0611 Raw sugars 42 2.4
2927 Cut flowers/foliage 37 2.3 2784 Asbestos 33 1.9
0111 Beef, fresh/chilled 35 2.2 8973 Precious metal jewellery 27 1.6
6522 Woven unb cotton fab nes 27 1.7 0571 Citrus fruit fresh/dried 25 1.4
8414 Men/boy trouser/etc wovn 22 1.4 1213 Tobacco refuse 24 1.4
6513 Cotton yarn nes 22 1.4 0545 Vegetables nes,frsh/chld 19 1.1
1213 Tobacco refuse 20 1.2 8414 Men/boy trouser/etc woven 18 1.1
0112 Beef, frozen 18 1.2 2882 Non‐fer metal waste nes 18 1.0
6114 Bovine/equine leathr nes 16 1.0 2731 Quarried stone slabs 15 0.9
8973 Precious metal jewellery 14 0.9 0741 Tea 15 0.9
0545 Vegetables nes,frsh/chld 14 0.9 6513 Cotton yarn nes 14 0.8
2482 Softwood,simply worked 13 0.8 0751 Peppers dried/crush/grnd 13 0.8
6821 Copper refined/unrefined 12 0.8 6612 Portland etc cements 13 0.8
TOTAL ABOVE 1,135 71.6 TOTAL ABOVE 1,283 74.9
Top three 546 34.5 Top three 751 43.9
Top ten 957 60.4 Top ten 1,107 64.7
Source: Own calculations based on partners’ data reported to the UN COMTRADE database.
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Annex Table 6: Exports of iron and steel products in 1994, 1997, 2002‐08 (in millions of current US dollars)
SITC 1994 1997 2002 2003 2004 2005 2006 2007 2008
6715 Other ferro alloys 105 217 108 118 173 202 191 207 301
6724 Ingot/primary iron/steel 0.10 0.01 6.99 0.74 3.71 2.39 0.24 0.02 0.05
6726 Semi‐fin iron/steel<.25%c 4.35 2.45 0.15 0.16 0.57 2.12 0.49 0.00 0.00
6727 Semi‐finished iron/steel. >.25%c 0.01 0.00 3.76 8.45 15.30 1.57 0.42 0.00 0.00
6728 Semi‐finish alloy steel 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04
6731 Flat rolled steel‐1 0.98 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6732 Flat rolled steel‐2 1.69 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.22
6733 Cold rolled steel‐3 0.44 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6734 Colled rolled steel‐4 2.24 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6735 Flat rolled steel nes 0.13 0.08 0.07 0.01 0.05 0.16 0.00 0.04 0.01
6741 Zinc coated/plated steel 1.00 0.04 0.31 0.28 0.27 0.07 0.03 0.06 0.07
6742 Tin plated/coated steel 0.47 0.03 0.05 0.16 0.02 0.00 0.00 0.04 0.03
6743 Steel paint/plastic cover 0.07 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.00
6744 Coated steel plate w>600 0.02 0.03 0.25 0.04 0.02 0.00 0.13 0.01 0.00
6745 Coated/platd steel w<600 0.65 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6751 Flat silicon‐elect steel 0.00 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00
6752 Flat high‐speed steel 0.00 0.00 0.05 0.00 0.00 0.00 0.00 0.00 0.00
6753 Hot rolled stnless steel 0.00 0.04 0.00 0.02 0.00 0.00 0.04 0.04 0.00
6754 Hot‐rolled alloy steel 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00
6755 Cold‐rol stainless steel 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
6757 Flat roll alloy stl nes 0.00 0.09 0.05 0.05 0.02 0.00 0.04 0.12 0.01
6761 Hot‐r coil bar/rod iron/steel 1.77 0.21 0.34 1.31 1.21 0.98 1.09 0.90 0.35
6762 Hot‐form steel bar/rod nes 1.73 0.07 0.01 0.09 0.01 0.02 0.20 0.30 0.34
6763 Cold‐form air/steel bar nes 0.15 0.10 0.02 0.02 0.26 0.03 0.00 0.25 0.04
6764 Iron/steel bars nes 0.87 0.16 0.05 0.12 0.18 0.03 0.05 0.07 0.97
6768 Iron/steel angle/shape/sect 1.50 0.75 0.98 1.82 6.14 4.63 6.45 3.68 3.35
6770 Iron/steel railway materials 0.09 0.03 0.00 0.04 0.02 0.02 0.10 0.17 0.00
6781 Iron/non‐alloy steel wire 0.65 1.37 4.22 8.07 7.13 3.07 0.91 0.73 0.40
6782 Wire, stainless/alloy steel 0.00 0.28 0.05 0.09 0.05 0.04 0.00 0.01 0.00
6791 Iron/steel tube seamless 0.35 0.06 0.12 0.08 0.01 0.15 20.54 0.01 0.00
6793 Seamed pipe/tube d>406.4 0.13 0.02 0.00 0.00 0.00 0.03 0.00 0.02 0.00
6794 Seamed tubes/pipes nes 1.27 1.09 1.89 4.92 3.28 1.91 0.62 0.32 0.09
6795 Iron/steel pipe fittings 0.30 0.05 0.19 0.34 0.24 0.28 0.08 0.04 0.17
TOTAL ABOVE 125 224 127 145 211 219 223 214 307
Memorandum:
Share of ferro alloys (SITC. 6715) in percent 83 97 85 82 82 92 86 97 98
RCA of ferro alloys (SITC. 6715) 29 46 38 34 32 35 34 28 37
Number of exports above US1 million exports 8 4 5 6 7 7 4 2 2
Source: Own calculations based on partners’ data reported to the UN COMTRADE database.