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COMESA, SADC FREE TRADE AREAS :– Opportunities for Zimbabweans in The Diaspora By Vonesai Hove

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Presentation on theme: "COMESA, SADC FREE TRADE AREAS :– Opportunities for Zimbabweans in The Diaspora By Vonesai Hove"— Presentation transcript:

1 COMESA, SADC FREE TRADE AREAS :– Opportunities for Zimbabweans in The Diaspora By Vonesai Hove

2 PART I- ECONOMY Short Term Economic Recovery Programme (STERP) Overview on performance of the Economy Sectoral Perfomamances- GAPS PART II- ZIMBABWE’S TRADE PERFOMANCE Major Regional Trading partners Trade Potential in the region PART III-REGIONAL INTEGRATION COMESA & SADC Free Trade Areas- Facilitating Zimbabwe’s economic recovery &growth through trade, Infrastructure development Opportunities in the FTAs SUMMARY PRESENTATION

3 In February 2009, Government put in place phase 1 of the Short term Economic Recover Programme (STERP) to address the economic woes and challenges facing the economy and work towards revival of the economy. Key goals of the short term stabilisation programme which would run from February – December 2009 were: To stabilise the macro and micro-economy, recover the levels of savings, investment and growth, and lay the basis of a more transformative mid term to long term economic programme that will turn Zimbabwe into a progressive developmental State Major Challenges facing the economy included : Unprecedented levels of hyper-inflation, massive devaluation of the currency, There had been an unsustainable period of negative growth Serious unemployment and loss of jobs, Massive de-industrialisation Low productive capacity and food shortages and Poor service delivery, STERP

4  STERP unveiled Against the backdrop of the worst economic recession in the world economy. The recession which started as world financial crisis slowed down growth in most major economies, leading to a revision of world growth in 2009 in which it was expected to decline to its lowest levels in 60 years.  Therefore, in developing STERP, Government was cautious to put realistic and pragmatic targets as it anticipated low international support as well as the pace of the turnaround in relations to the magnitude of the challenges. Overview

5 Stabilisation i. Implementation of a growth oriented recovery programme ii. Restoring the value of the local currency and guaranteeing its stability iii. Increasing capacity utilisation in all sectors of the economy and, hence, creation of jobs iv. Ensuring adequate availability of essential commodities such as food, fuel and electricity v. Rehabilitation of collapsed social, health and education sectors vi. Ensuring Adequate Water Supply STERP Priority Areas- Economic Stabilisation

6 The Key Priority Areas outlined to stabilise the economy set out in STERP are: i. Implementation of a growth oriented recovery programme ii. Restoring the value of the local currency and guaranteeing its stability iii. Increasing capacity utilisation in all sectors of the economy and, hence, creation of jobs iv. Ensuring adequate availability of essential commodities such as food, fuel and electricity v. Rehabilitation of collapsed social, health and education sectors vi. Ensuring Adequate Water Supply vii. STERP seeks to ensure household food security, targeting of women in their production and reproductive roles in order to eradicate poverty. viii. STERP seeks to ensure the de-marginalisation of women in Zimbabwe through specific and concrete gender mainstreaming policies and programmes in every sector covered by STERP. viii. These measures would be anchored on promoting production and increase capacity in key areas of the economy in particular agriculture, mining, manufacturing and tourism. In short STERP is a Capacity building Recovery programme that seeks to stabilise all the macro and micro-economic fundamentals. ix. A follow up programme is being implemented towards achievement of the set goals STERP DELIVERABLES

7  Objectives of Short Term Economic Recovery Plan (STERP II) are on course:  Macro Economic reforms creating economic stability  Inflation dropped from hyper inflation levels to single digit levels consistent with SADC and COMESA macro economic convergence targets.  Growth in real GDP increased from -14.8% in 2008 to 5.7% in 2009 and is estimated to increase to 8.1% in 2010  There is improved overall capacity utilisation thereby addressing supply of goods & services in the formal sector  The financial Sector has been resuscitated  There has been some improvement in Public sector delivery  However, export performance continues to lag behind in response to the low capacity utilisation. The country has recorded negative trade balances with its major regional partners ( Overview of Economic Performance

8  Measures being taken to improve production capacity  Government embarked on Fiscal consolidation through introduction of  Cash Budgets  Multiple currencies  Resource based Budgeting  Public Finance management Acts and  Tax reforms  Government strengthening Public Institutions through capacity building and enforcing accountability measures  Government also putting measures to strengthen social protection programmes Measures for Sustaining Macro –Economic Stabilisation

9 PART TWO- ECONOMIC PERFOMANCE

10 Real GDP Growth ( ) Real GDP Growth by Sector (%) Est.2011 Proj. Real GDP Agriculture, Hunting & Fishing Mining and Quarrying Manufacturing Electricity and Water Construction Finance and Insurance Real Estate Distribution, Hotels & Restaurants Transport & Communications Source: CSO; MoF

11  Real GDP growth from in 2008 to 5.7 in 2009  All sectors recorded positive growth in 2009  Sub sector Capacity utilisation increasing though at modest levels  Zimbabwe’s GDP growth at 4.7% in 2009 compares favourably with regional countries  Zimbabwe’s Trade balance remains in the negative in the last three years ( ) as she loses her leverage in exports to regional markets.  Zimbabwe’s trade balances with once her major export destinations ( Malawi, Mozambique, Zambia etc. in the negative INDICATORS

12 Industry% Contribution Agriculture15.5% Transport & Communications15.2 Manufacturing14.7 Tourism11.0 Mining4.9 Construction0.6 Real estate2.0 Finance & Insurance3.9 Other services4.3 Domestic Services1.8 Selected Sectors Contribution to GDP (2009)

13 Sector2009 Actual2010 est.2011Proj. Foodstuffs39%4245 Drinks, Tobacco & Beverages Textiles & Ginning2021 Clothing & Footwear Wood & Furniture Paper, Printing & Publishing4143 Chemical & Petroleum Products31 32 Non Metallic Mineral products21 23 Metals & Metal Products11109 Transport Equipment1614 Other manufactured goods Overall Growth Sub sector Capacity Utilisation

14 CountryGDP (US$b)GDP GrowthInflation Rate Zimbabwe Angola Botswana DRC Lesotho Malawi Mauritius % Mozambique % Namibia % Swaziland % Tanzania % Zambia South Africa % Source: Zimbabwe Budget Statement 2010 Economic Indicators for selected SADC Countries (2009)

15 YearTotal ExportsNo. Of Exported products Trade Balance Zimbabwe's Exports

16 Country *Botswana Lesotho *Malawi Mauritius *Mozambique Namibia South Africa Swaziland Zambia * Zimbabwe recorded surplus trade before 1995 Table Zimbabwe Exports to Region (Trade Balances- Major Trading partners)

17 1. Agriculture Contract Farming to support Agro processing Irrigation Rehabilitation Livestock Development and farming ( Small-scale dairy farming; rearing small animal stock, including poultry and piggery) 2. Manufacturing Targeted sectors for small – medium investment include: food processing, beverages, clothing and footwear, leather & Leather products, packaging, paper printing and publishing, Tourism, construction, services sector and huge investments in textile and ginning, fertiliser, pharmaceuticals, motor industries, chemical and petroleum products, non metallic mineral products, among others. 3. IT and Technology 4. Micro Financing to provide working capital to micro and small business ventures and manufacturing entities Potential Areas for Investment - Zimbabwe

18 Government to Create concessionary and attractive opportunities for DIASPORA participation in the development of the economy. Targeted engagement with Diaspora to maximise on potential and harness productive human and financial resources Engage agency to draw up strategic engagement policy directing remittances to developmental areas ( Investment in productive sectors) instead of just remittance. WAY FOWARD

19 PART THREE – REGIONAL INTEGRATION

20  Zimbabwe has entered into Bilateral Preferential Trading Arrangements with Botswana, Malawi, Namibia, South Africa  Under these agreements, Nationals can trade in goods meeting rules of origin free of customs duties.  Zimbabwe is a Member of the Southern African Development Community (SADC) and Common Market for Eastern and Southern African States (COMESA) Regional Economic Groupings  Southern African Development (SADC)- 15 Countries and  Common Market for Eastern & Southern African States (COMESA) has 19 Member states  Zimbabwe is also a Member of the Proposed Tripartite Free Trade Area of COMESA, EAC and SADC regional groupings Regional Integration

21  A free Trade Area is established when countries wish to bring together their economies but do not wish to integrate them  Tariffs on originating goods are eliminated  Unnecessary non- tariff barriers to trade are removed and eliminated between Member States  Goods are admitted in each other’s territory upon compliance of agreed rules of origin  Each Country maintains its own external tariff  There is greater degree of movement of capital among FTA Member to take advantage of economies of scale as the FTA is one market and supplier of goods meting the rules of origin  There are 4 FTAs in the Southern & Eastern African Region (COMESA, EAC, SADC, SACU) What is a Free Trade Area

22 1.Further liberalization of intra-regional trade in goods and services on the basis of fair, mutually equitable and beneficial trade arrangements, complemented by Protocols in other areas. 2. To ensure efficient production within the region reflecting the current and dynamic comparative advantages of its Members. 3. Contributing towards the improvement of the climate for domestic, cross-border and foreign investment. 4 Enhancement of economic development, diversification and industrialization of the Region. Key Objectives of FTA

23 Four Regional Groupings have attained their FTAs/Customs Unions : 1.Common Market for Eastern & Southern Africa (COMESA) (19 Member states) 2.Southern African Development Community (SADC ) FTA has 12 countries, namely, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. 3.Southern African Customs- (SACU)- 5 countries Botswana, Lesotho Namibia South Africa, Swaziland 4.East African Community (EAC) – 5 countries : Burundi, Kenya, Rwanda, Uganda and Tanzania 5.Proposed Tripartite Free Trade Area encompassing COMESA, EAC and SADC regional groupings Regional Groupings - FTAs

24 1.Further liberalization of intra-regional trade in goods and services on the basis of fair, mutually equitable and beneficial trade arrangements, complemented by Protocols in other areas. 2. To ensure efficient production within the region reflecting the current and dynamic comparative advantages of its Members. 3. Contributing towards the improvement of the climate for domestic, cross- border and foreign investment. 4 Enhancement of economic development, diversification and industrialization of the Region. SADC FREE TRADE AREA

25  Twenty six Member States of COMESA, (19) SADC, (15) EAC, (5)and SACU (5) are cooperating under the framework of their FTAs, and Customs Unions with the aim of integrating their economies through development of infrastructure, liberalisation of trade in goods ands services to improve the welfare of their people particularly women and youth  Under the proposed Tripartite arrangement of COMESA, EAC and SADC, Member States undertake to achieve ‘ An Integrated prosperous, and peaceful Africa by its own citizens and representing a dynamic force in the global Arena’ REGIONAL INTEGRATION – Tripartite FTA

26 Proposed Tripartite FTA

27  The Tripartite FTA refers to three Regional Economic Communities – COMESA, EAC & SADC  Tripartite FTA Membership Structures  COMESA FTA has 14 Member States; 8 also in SADC; 1 in SACU, and 4 also in EAC  SADC FTA has 12 Member States; 8 also in COMESA, 5 in SACU, 1 in EAC  SACU has 5 Member States, which are also Members of SADC; and 1 also in COMESA  EAC has 5 Member States ; 4 are also members of COMESA The Tripartite Free Trade Area

28

29  A recent growth trend in intra-REC trade has been witnessed  Sub-Saharan Africa has registered a considerably higher rate of growth in its intra-regional exports share over the period 1960 – 1962 (4.08%) and 2004 – 2006 (11.41%), representing growth of %  Expanded market of over  Potential for increasing intra-African trade in agricultural goods remains untapped, therefore, opportunities for investment in agro- industries Opportunities from Tripartite FTA

30 SADC has 12 Participating FTA countries 1.Botswana7.Seychelles 2.Lesotho8.South Africa 3.Malawi9. Swaziland 4.Mauritius10. Tanzania 5.Mozambique11.Zambia 6.Namibia12. Zimbabwe COMESA has 14 FTA participating Countries 1.Burundi 8. Malawi 2Comoros9.Mauritius 3. Djibouti,10. Rwanda 4 Egypt,11.Seychelles 5. Kenya, 12 Sudan 6Libya,13. Zambia 7.Madagascar14.Zimbabwe, Comesa and SADC FTA countries

31 PRODUCERS/EXPORTERSEXPORTERS/IMPORTERS Wider source of products for trading Expanded market for goods & Services Cross border activities increased from various trade facilitation instruments Non Tariff Barriers to trade eliminated Movement of persons facilitated Zero/reduced duties for inputs Identified NTBs removed Source cheaper raw materials qualifying under Rules of origin Source intermediate goods for further processing Reduced costs of production Wider market for qualifying goods and Services Trade Facilitation instruments FTA benefits to Business

32 Non Tariff Barriers to trade being eliminated (Online NTBs Monitoring Mechanism being implemented at Tripartite level Harmonisation & Simplification of Rules of Origin Enlarged market and supply of production inputs Bilateral Trading Arrangements within the FTA provides more preferences e.g. Access duty free raw materials goods (intermediate, finished) for production Opportunities From FTA

33  These are a set of agreed criteria used to establish degree of processing, and origin of goods produced within SADC Member States and are therefore entitled to tariff preference  Common Rules applicable to COMESA and SADC FTAs Wholly produced products made from materials obtained from within the region. 1.Cumulating rule – Goods produced using raw materials originating in the region are deemed originating from the Member State where final processing/Manufacturing took place 2.Sufficiently worked/processed-Must meet the following:-  Regional value content test (import content or value addition criteria  Change of tariff heading (HS Tariff classification)  Produced within the region and classifiable after processing. What Are Rules of Origin (RoO)

34 Women and Trade in the FTA?  Gender inequality is still a challenge in SADC; (Inequalities transcend trade sector)  Inequality manifests in Lack and Loss of economic and Development Opportunities  Women generally un aware of initiatives towards Regional Integration and benefits thereof due to unfavourable education levels, widening technological and digital divide etc.  Policy and regulatory frameworks established in COMESA, SADC and EAC treaties, protocol provisions on gender mainstreaming and Trade.  Trade facilitation instruments developed to benefit women e.g. simplified trade documentations, awareness campaigns  Specific targets to improve standard of living by women and youths embedded in Trade development programmes Regional Integration- Gender Mainstreaming

35 TRIPARTITE – 42OMILLION GDP= COMESA SADC SACU EAC MARKET POTENTIAL

36  Goods must meet Rules of origin  Wholly Originating goods ( Agricultural products, minerals, wood, live animals, Fresh water fish, Matemba; cotton based products;  Semi processed- Leather & leather products, cotton based, ginned wool, clothing (Safari, children's  Change of Tariff Heading- Manufactured products Qualifying Criteria for Preferential Treatment Tradable Goods under FTAs

37 Anchor in Zimbabwean economy Utilise existing capacity in manufacturing, services and agricultural processing, farming Bring in capital into sectors with regional trading potential ( Processed foods, drink and beverages; manufactured tobacco; leather & leather products, cotton based textiles & clothing; wood & furniture) Trade in services ( Finance, real estate, construction; Commercial transport & logistics; tourism) Micro financing to complement formal banking Joint Ventures ( refer to ZIA for potential sector: Regional base – Setup base in FTA countries and produce for local market manufacture for export into and outside region; trade in services e.g. consultancy; transport; tourism; construction ENTRY POINTS FOR DIASPORA

38 Government Commitment to  Support agriculture sector  Rehabilitation and maintenance of run down infrastructure for utilities ( Power, water, roads  Improving access to basic social services by the poor population including women and youths (education, health and social protection)  Favourable investment policies  Private /Public sector partnerships policy  Legal and regulatory framework at national level Enabling Environment

39  Agricultural Mechanisation  Finance New farming technologies  Refurbish Agricultural equipment and supply regional markets- (Zambia, Mozambique; South Africa )  Manufacture of agricultural implements for small farmers in the region  Manufacturing and processing- (leather products, steel fabrication, furniture, cotton based textiles & clothing, food processing, engineering; irrigation equipment, motor vehicle spares,  Value addition- agricultural produce and commodities, mining,  Agricultural products imported into region traded duty free include: tea, coffee, spices,cereals,fruit, seed, vegetables, tobacco Invest in What?

40 TRIPARTITE FREE TRADE AREA

41 Websites


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