HARARE – The Confederation of Zimbabwe Industries (CZI) has warned of tough competition revenue losses across sectors when the Economic Partnership Agreement (EPA) with the European Union (EU) comes into effect.
Signed in 2009, the EPA will come into effect in 2022.
CZI, which represents Zimbabwe’s main industries has written to its members preparing them for hard knocks as the mega trade deal involving six other African economies could derail an industrialisation strategy being pursued by government, with well-resourced EU firms dominating the landscape.
The result of the liberalisation of the Zimbabwean market to EU products would be dire in many ways, CZI said.
“Given the reliance of developing countries on tariff revenues, the tariff dismantlement will result in significant revenue shortfalls,” said CZI.
“The shortfalls, while not unexpected, will pose serious fiscal adjustment for the country (revenue and welfare losses still need to be quantified). Thus, the EPA, if no appropriate measures are put in place to forestall the macroeconomic imbalances that are likely to result from falling revenues, could possibly undermine developmental objectives of the country, through reduction in public expenditures in critical areas such as health and education,” the paper noted.
Other parties to the EU deal are Comoros, Madagascar, Mauritius, Eritrea and Zambia, which saw the interim pact signed in 2009 as a stepping stone towards a full EPA.
Parties to the trade agreement agreed to liberalise more than 80 percent of their imports from the EU on a reciprocal basis.
Zimbabwe has excluded products of animal origin, cereals, beverages, paper, plastic and rubber, textiles and clothing, footwear, glass and ceramics, consumer electronic and vehicles from tariff liberalisation.
Zimbabwe has ratified the interim EPA in order to give it domestic effect.
In 2016, Zimbabwe promulgated Statutory Instrument 117 of 2016, which provided for market access of goods originating from the EU.
The tariff phase down of the liberalisation process is being implemented in three phases.
“EPAs are supposed to facilitate the free trade agenda between the EU and Africa, as the EU will offer Africa duty and quota-free access to EU markets and Africa will similarly concede its market to EU exports (reciprocity). Thus, if not handled properly, the Economic Partnership Agreements can be a threat to the industrialisation strategy of African countries, as aggregate benefits will not be equitably distributed among the trading partners due to different levels of economic development,” the paper said.
CZI said Zimbabwe must explore new ways of preventing a slowdown in revenues in the aftermath of the deal.
“Government should thrive to put in place policies that promote local industry production and to a certain extent protection, and formalisation of the informal sector could help government widen its tax base,” said CZI.
“It is important to estimate fiscal revenue loss from elimination of trade tariffs on imports from EU based on current imports and projected growth of imports in the next five years predicated on IMF/WB projected economic growth for Zimbabwe. Industry need to invest more into value addition processes, and gradually move away from primary and/or extractive sectors and low-technology processes in order to compete with increased competition that is due to come from EU products,” the paper noted.
It said domestic firms must enhance production efficiencies to improve quality and prices of products.
“While products of animal origin – meats of bovine, swine, goats, sheep, poultry, fish, dairy – cereal, textiles, footwear, etc are exempted, there is need to ensure that the exemption is comprehensive to also include processed products from products of animal origins eg milk is a product of animal origin but cheese, yoghurt, powdered milk are derived products, canned products of animal origins etc, it said.
CZI said Zimbabwe must ascertain which specific domestic industries would be severely exposed and vulnerable to unfair import competition with EU products landing duty free in Zimbabwe.