SOUTH Africa, Zimbabwe’s major trading partner exporting over 70 percent of its products into the country, has lodged a formal complaint to government over import restrictions.
Zimbabwe has imposed duties on South African imports to protect local producers, violating trade agreements between the two countries.
There has been an upsurge of imports from South Africa since the rand started losing traction against the United States dollar this year.
The depreciation of the rand has made the landed prices of South African products lower than those produced in Zimbabwe, and consumers have switched to the imports, triggering an outcry from domestic manufacturers.
The complaint by South Africa, presented to Industry and Commerce Minister Mike Bimha during a recent conference of Southern African Development Community (SADC) Ministers of Trade in Botswana to review the region’s industrialisation policy, follows a raft of tax measures that have undermined competition by South African products on the local market.
In September last year MAQ, the South African producer of a washing powder that was popular in Zimbabwe, ceased exports to Harare after government introduced a 40 percent surtax charge without prior notice.
The review translated into a 30 percentage points increase on surtax from the previous charge of 10 percent.
The effect of the increase was to raise the price of South African washing powder brands in Zimbabwe, making them uncompetitive against domestic products, and possibly violating the SADC free trade agreement.
The SADC Protocol on Trade has established a free trade area for the 15 nation bloc, whose membership includes South Africa and Zimbabwe.
Bimha told a retailers conference in Harare last week that the South Africa trade minister had personally expressed his reservations against Zimbabwe’s protectionist measures during the meeting in Botswana.
He said he had defended the hikes.
But he said it was “within South Africa’s right to complain”.
“South Africa has complained that we have put in place protectionist policies,” he told an awards dinner organised by the Confederation of Zimbabwe Retailers.
“Our argument with South Africa was that our industry has gone through a bad patch and we want them to grow,” he added.
The minister warned the country’s productive sectors that government would only protect them until a certain period.
After that, they would have to fight it out with the more resourced South African firms offering cheaper and higher quality products.
“We cannot continue to protect you,” he said.
“Competition is here to stay. We will only protect you for a certain period. You must develop competitive measures instead of always lobbying. We cannot compete if we have low quality goods and high prices,” he added.
South Africa is Zimbabwe’s largest trading partner.
South Africa accounts for 65 percent of Zimbabwe’s US$7 billion annual import bill.
Zimbabwe has several trade agreements, and is part of countries expected to benefit from European Union (EU) and African Caribbean and Pacific Countries negotiations for reciprocal trade agreements, Economic Partnership Agreements.
In a report in 2011, the South Centre said that Zimbabwe would lose US$15,4 million in tariff revenue but would gain US$39,2 million in duties under an EU General Systems and Preferences (GSPs).
Under GSP, exporters from developing countries pay lower duties on some or all of what they sell to the EU.
This gives them vital access to EU markets contributing to the growth of their economies.
Some of the agreements have been violated and have courted controversy.
In June 2010, the German embassy in Harare wrote to the Zimbabwe government protesting against continued violation of an investment protection agreement between the two countries and warned this could harm further aid from Berlin.
The embassy acted after farm invaders moved onto three properties belonging to German citizens.
The letter to Foreign Affairs Minister Simbarashe Mumbengegwi identified the properties occupied by farm invaders as Makandi Tea and Coffee (Private) Limited, Border Timbers Limited both in Manicaland province and Forrester Estate (Private) Limited in Mashonaland Central.
“The German embassy notes with great concern that property rights of German nationals and their investments in Zimbabwe are being put under threat, in clear violation of international law,” said the letter.
“Despite repeated confirmations of high ranking representatives of the Zimbabwean government about its intention to honour the BIPPA (bilateral investment protection and promotion agreement) in full, the development on the ground so far shows insufficient commitment to follow up on its declarations.”
Follow us on Twitter on @FingazLive and on Facebook – The Financial Gazette