By Oscar Habeenzu | for Cabanga Magazine

It is off export economic benefit for South Africa to keep Zimbabwe under a confused drama-queen mode (DQ Mode). From 2008 to 2017, South Africa has earned net of US$22 billion in exports to Zimbabwe, over R330 billion in present day value.

In fact, it is very beneficial for Zambia, Mozambique, Botswana, and South Africa, to keep Zimbabwe in DQ Mode. DQ Mode is basically political ups and downs toward a democratic destination which is never achieved. The Southern African Development Community has fostered this drama queen mode due to various reasons that have manifested in these countries benefiting enormously from exports to Zimbabwe as individual countries. South Africa is the main benefactor, even to the extent of the KZN Province placing a huge billboard in one of Harare’s major roads, a sign that economic decline or not, Zimbabweans flock for holidays to KZN.

Zimbabwe has been under political drama queen mode since 2000 when the current main opposition party came into power. South Africa’s ANC has been at the centre stage to try keep things bearable between the ruling and opposition party. As this rolled out, the economics between the two has been creating a dependency of Zimbabwe to South Africa.

Whilst people politic about the Zimbabwean decline, let us divert our attention to economics, exports by South Africa to Zimbabwe. There is more to benefit for South Africa than any other country from the sanctions imposed on Zimbabwe by the United States of America, called the Zimbabwe Development and Economic Recovery (ZIDERA) Act (2011). Details of that later, but now, we look at trade between the two.

On November 20th, 2018, South Africa terminated the bilateral agreement between the two countries, leaving room for the complex import and export rules in play. South Africa and Zimbabwe had a bilateral agreement which had been operational since 1964 and they are both members of the Southern African Development Community (SADC) Free Trade Area (FTA).

“The 1964 bilateral Rhodesian trade Agreement was designed for specific conditions prevailing at the time of its conclusion. These conditions have ceased to apply. Zimbabwe has become independent, both parties have joined the SADC FTA and the WTO. Intra-SADC trade has to be conducted in terms of new rules of origin and other requirements as contained in the SADC trade Protocol on Trade. Discrimination in favour of Zimbabwean goods has become incompatible with the subsequent intra-SADC trade goods regime”, wrote TRALAC.org

Within the bilateral agreement, Zimbabwe enjoyed lenient import tariffs, this creating a situation where Zimbabwe relied heavily on South Africa for imports to the tune of R30 Billion (2017). The agreement however created concerns in that, seeing the benefits, South Africa was not owning up to certain conditions of the agreement, that would have saved Zimbabwe money further. Zimbabwe communicated their concerns that were then eventually responded by the termination of the agreement by South Africa in November 2018.

It makes economic sense for South Africa to terminate the agreement because South Africa can now make more than the usual R30 billion per year, that has been gradually on the growth trajectory since 2008. For example, moving tariffs of say Cooking Oil, the rate of duty under bilateral agreement to the Rate of duty under SADC FTA duty would be from 0% to 40%, and Zimbabwe relies heavily on South Africa for cooking oil.

In 2008, Zimbabwe imported US$1.71 billion from South Africa and exported US$753 million to the same. Fast forward to 2017, Zimbabwe imported US$2.09 billion from South Africa, exported US$170 million to the same.

The decade of 2008 to 2017 has seen South Africa earn US$22 billion from Zimbabwe, and one would have thought it made sense for Zimbabwe to join the rand as a base currency, but rather Zimbabwe choice the United States Dollar. The misuse of the dollar, and further political drama queening led the United States of America to look into Zimbabwe as an economy, and in 2011 resulted in ZIDERA.

The Zimbabwe Democracy and Economic Recovery Act (S. 494) is an act passed by the United States Congress which imposed economic sanctions on Zimbabwe, allegedly to provide for a transition to democracy and to promote economic recovery.

Some of the reasons that led to the institution of ZIDERA included the “exclusion to the people of Zimbabwe from the economic and democratic benefits laid out by program donors, including the United States, was because of “economic mismanagement, undemocratic practices, and the costly deployment of troops to the Democratic Republic of the Congo” by the Zimbabwean Government”.

Now, trickle down the impact of ZIDERA to simply imagining a country using a currency that is not supported by the country in question, whilst having a neighbour with a safer currency and economic condition wherein your citizens are flocking into for refuge.

The Zimbabwe economy is too proud to drop the US dollar and adopt the Rand at street level, yet the economy of Zimbabwe relies and relied 60% on South Africa. The cost of converting the Zimbabwean Dollar (Bond/RTGS) from USD to Rands can make one lose up to 35% of the value, all being avoidable by just joining the rand system. A conversation for another day.

However, the impact of ZIDERA led to Zimbabwe looking to South Africa by its households, as families sought cheaper means to support and feed their families. South Africa is feeding Zimbabwean households, as groceries cross the border in droves.

Zimbabwean leadership is no longer in control over the Zimbabwean economy as was the Planned Economic principles of old, as the country has now become a Market Economy, whose dictates are by South African products, transacted in Rands and US Dollars, yet accounted for in Bond Notes (ZWL).

According to Harvard, the economy of Zimbabwe has an Economic Complexity Index (ECI) of -0.812 making it the 95th most complex country. Zimbabwe exports 86 products with revealed comparative advantage (meaning that its share of global exports is larger than what would be expected from the size of its export economy and from the size of a product’s global market).

Of these products, Zimbabwe exports to South Africa things like gold, platinum, chrome, other metals, tobacco, cotton, granite, tea, clothing (men’s wear), wigs, soya beans, parts of rail locomotives, medicaments, essential oils, hair products, soap, plasticware, ceramics, cullet and glass, building stones, pepper, fruit juice, nuts, wood and flowers.

Whilst these exports are transacted via the central bank of Zimbabwe, the imports however are transacted via social media, reducing the country to a WhatsApp economy. There are over three million WhatsApp users in Zimbabwe, and a bulk of them are trading in importing products from South Africa for the local market.

The unofficial market has created a shadow economy that breeds corruption at grassroots level as most of the trade is done household to household and the tax paid in VAT and import tariffs is benefiting the South African government more than the Zimbabwean government.

Source: Wikipedia, US Congress, Tralac, Harvard University

https://www.tralac.org/blog/article/13711-termination-of-the-south-africa-zimbabwe-bilateral-trade-agreement-what-does-it-mean-for-south-africa-zimbabwe-trade.html#_ftnref2

https://en.wikipedia.org/wiki/Zimbabwe_Democracy_and_Economic_Recovery_Act_of_2001