Zimbabwe’s Missed Opportunities in EU Trade Amid Debt Challenges

Economy John Brightwater September 20, 2024

Zimbabwe’s Missed Opportunities in EU Trade Amid Debt Challenges

Summary
Zimbabwe has not effectively capitalized on the significant export opportunities available to it through the EU’s Economic Partnership Agreement, which provides duty-free access to a market with a GDP of US$19 trillion. Currently, only around 200 firms are registered to export to the EU, with trade projected to increase significantly. The EU is also assisting Zimbabwe with its considerable debt issues, highlighting the need for better engagement and reform within the Zimbabwean economy.

Zimbabwe has not successfully harnessed the significant export opportunities available to it within the European Union (EU) market, which operates under a duty-free framework, offering valuable access to a region whose gross domestic product (GDP) is approximately US$19 trillion. This figure starkly contrasts with the much lower US$3.4 trillion GDP of the 55-member African Continental Free Trade Area. Jobst von Kirchmann, the EU ambassador to Zimbabwe, indicated in correspondence with the Zimbabwe Independent that there is potential for trade between Zimbabwe and Brussels to increase from around US$750 million last year to an impressive US$1 billion in the coming years. However, he noted that only about 200 Zimbabwean enterprises are currently tapping into the opportunities provided by the Economic Partnership Agreement (EPA) that has been in effect for a decade. Ambassador von Kirchmann’s comments raise concerns about the effectiveness of President Emmerson Mnangagwa’s engagement strategy aimed at improving relations with the EU, which has expressed frustration over the slow pace of economic reforms within Zimbabwe. According to the ambassador, EU exports to Zimbabwe amounted to US$340 million last year, leaving plenty of room for growth. He remarked, “In 2023, trade between Zimbabwe and the EU stood at €658 million, with Zimbabwe exporting €346 million worth of goods to the EU and importing €312 million. This resulted in a positive trade balance of €34 million in Zimbabwe’s favour.” Key exports from Zimbabwe to the EU include agricultural products such as sugar, blueberries, oranges, and mange-tout peas, alongside minerals; nevertheless, only a fraction of Zimbabwean firms (approximately 200) are registered to export to the EU. The EPA allows Zimbabwe duty-free and quota-free access to all 27 EU member states, presenting a considerable opportunity for growth, yet many businesses are not fully capitalizing on this agreement. Moreover, von Kirchmann emphasized that the EU is playing a role in assisting Zimbabwe with its US$21 billion debt. He pointed out that the EPA is designed to simplify customs procedures, reduce barriers, and align standards, which should facilitate Zimbabwean exports to the EU. By shifting focus from raw material exports toward value-added goods in agriculture and mining, local industries could attract more European investment. Additionally, the EU is actively involved in Zimbabwe’s debt resolution strategy, which is being led by the African Development Bank (AfDB). This initiative, introduced under President Mnangagwa’s administration last year, aims to address the country’s arrears issues that have impeded financing opportunities from institutions such as the International Monetary Fund for over two decades. “The EU, as part of the broader international community, has taken a proactive role in supporting Zimbabwe through the government-led arrears clearance and debt resolution process,” said von Kirchmann. Further financial obligations include Zimbabwe’s outstanding debts to the European Investment Bank (EIB), totaling US$427 million, of which US$417 million consists of arrears and penalties. The ambassador noted that there are no bilateral discussions ongoing concerning this debt, but the EIB is engaged in broader creditor negotiations under a collective agreement regarding arrears clearance. In conclusion, while there are substantial potential benefits for Zimbabwe within the EU market under the EPA, the current underutilization of these opportunities by local firms, coupled with broader economic challenges and a debt overhang, poses significant hurdles to realizing these prospects.

The article discusses Zimbabwe’s inability to fully leverage the Economic Partnership Agreement (EPA) with the European Union, which offers favorable trade conditions, including duty-free and quota-free access to EU markets. With the EU representing a crucial market with a vast GDP compared to the African Continental Free Trade Area, the article highlights the shortcomings in engagement strategies pursued by Zimbabwe’s government and the need for local businesses to take advantage of export opportunities available to them. Furthermore, it outlines the EU’s involvement in supporting Zimbabwe in addressing its substantial debt.

Zimbabwe stands at a pivotal crossroads regarding its trade relations with the EU, as significant opportunities exist under the Economic Partnership Agreement. The low number of firms engaging in exports to the EU raises concerns about the government’s effectiveness in promoting these opportunities. By addressing existing barriers and focusing on value-added exports, Zimbabwe has the potential to expand its trade benefits significantly. Additionally, the EU’s involvement in debt resolution further underscores the importance of fostering a stronger economic partnership.

Original Source: www.newsday.co.zw