2016 Exporter Audit Records Marginal NTE Decline

Among the core functions of the Zambia Development Agency (ZDA) is the provision of evidence based policy advice to the central government through the Ministry of Commerce Trade and Industry as valuable input into formulation of sound economic policies.

The Agency is also mandated to collaborate with and inform the private sector of relevant market dynamics in both regional and international markets.

In order to meet these expectations, the ZDA annually conducts an exporter survey aimed at collecting data from exporting companies complimented with secondary data from key institutions like the Central Statistical Office (CSO), the Bank of Zambia and the Zambia Revenue Authority.

The Exporter Audit highlights the performance of the Non-Traditional Exports (NTEs) including assessing the prevailing opportunities, achievements and challenges.

For the year 2016, a total of 18 sub sectors were surveyed and these are Animal Products, Building Materials, Chemical and Pharmaceuticals, Electricity, Engineering, Floriculture, Gemstones and Handicrafts and Curios.

Others are Horticulture, Leather and Leather Products, Non-Metallic Minerals, Petroleum oils, Primary Agriculture, Processed and Refined Foods, Textiles and Garments, Other Manufacturers, as well as Wood and Wood products.

The survey reveals that in 2016, NTEs amounted to a total of US$ 1,846.75 million compared US$ 1,881.90 million recorded in 2015 representing a decline of 1.87 %.

However, other sectors recorded increased earnings compared to 2015. For example, engineering and Foundry sub-sector recorded the highest increase in earnings, growing by 43.96 % in 2016. Other growth was recorded in Building Materials, Other Manufacturers, Non-Metallic Minerals, Horticulture and Mining.

On the other hand some subsectors such as gemstone, Chemicals and Pharmaceuticals, Processed and Refined Foods and Primary Agriculture recorded a decline in 2016 compared to 2015 results.

The top ten (10) export products accounted for USD 906.37 million, representing 49% of total NTEs recorded in 2016.

The telephones for cellular networks or other wireless networks contributed the largest amount of USD 245.54 million followed by Maize, Bullion in semi manufactured forms, other mineral substances and copper wire accounting for 13%, 9%, 7% and 4% respectively.

According to the findings, the Democratic Republic of Congo (DRC) was Zambia’s largest destination for NTEs and earnings to that market amounted to USD 395.73 million. However, compared to the year 2015 earnings to DRC declined in 2016 by 31.15 %, from USD 574.76 million recorded in 2015. The DRC was followed by South Africa with total earnings amounting to USD 313.72 million.

Depreciation of the Kwacha against major convertible currencies has been cited as one of the major challenges that affected the performance of the NTEs in 2016.

Nonetheless, between January 2016 and December 2016, the Kwacha appreciated against the US Dollar by 12%, with a record low of K9.55 per US Dollar recorded in the month of August and the average exchange rate for the year depreciated to K10.23 per US Dollar from an average of K8.63 per US Dollar in 2015.

The volatilities in exchange rates significantly reduced thereby creating confidence in the money markets and also among investors. With continued stability in the money markets, we expect NTEs to improve in the first quarter of 2017.

Further, restrictive import regulations in target markets were rated as a very strong constraint at 36%, and strong at 28%. Exporters mainly reported Zimbabwe as the country imposing non-tariff barriers such as imposing inspections to goods in Zambia to assess if they are of export quality. The cost of inspection is passed on to the Zambia exporters thereby increasing export costs and making Zambian products uncompetitive.

In response the ZDA and Zambia Association of Manufacturers (ZAM) lodged these concerns to COMESA through the Ministry of Commerce Trade and Industry and feedback is being awaited.

The report also indicates that poor administration of VAT Rule No 18 has continued to be a major challenge to exporters in the Non Traditional Exports subsector regarding the time it takes to get VAT refunds.

Exporters further cited the high cost of borrowing as well as the relatively stringent collateral requirement which negatively affected exporters’ ability to acquire the operating capital as well as the much needed long term finance for machinery and technology upgrades. The report further suggests interventions for government to curb the declining nontraditional exports.

Regarding VAT Rule No 18, the report recommends a stakeholder’s consultative meeting in order to find lasting solutions to challenges with VAT refunds. Key stakeholders should include Ministry of Finance, Ministry of Commerce Trade and Industry, Zambia Revenue Authority, Zambia Development Agency and the Private sector.

It also proposes an increase in targeted trade missions and as well as trade fair activities in key regional markets such as Congo DR, South Africa, Zimbabwe, Malawi, Mozambique, Angola and Tanzania among other recommendations.