There has been an update to this post, please see at the end
When Statutory Instrument SI 64 of 2016 notice was gazetted last month in June and the Zimbabwe Revenue Authority (ZIMRA) spiritedly began implementing it, I gave an in-depth opinion on how flawed and overall ill-advised the instrument was.
My opinion which I still stand-by, sought to interrogate a badly ignored dimension by both policy makers in Harare and general industry in the debate.
That dimension that I brought up is the effect the SI would have on Zimbabwe’s international trade commitments. You can have a look at that anchor opinion here.
Then, I did warn that sooner or later it would drive other countries into retaliating simply because the SI 64 of 2016 is against the known and accepted standards of multilateral trade.
Days later, the retaliation as I later wrote came from a constituency that I had over looked – cross boarder traders in Zimbabwe and small businesses across the boarder on the South African side in Musina.
There has been a further development.
Today, on a Sunday, the South African Department of Trade and Industry (dti) reportedly issued a statement as follows;
On behalf of the South African government, Minister of Trade and Industry Rob Davies has been engaging the Zimbabwean government bilaterally and through the SADC structures to find an amicable solution that is in accordance with Zimbabwe’s obligations of the SADC Protocol on Trade, while at the same time being sensitive to Zimbabwe’s industrial development and balance of payments challenges.
Clearly, the South African government is concerned and must be feeling the pressure from its own industry constituency including affected businesses in Musina.
To calm the violent protests that took place at the boarder, it is reasonable to conclude that the South African government must have seriously committed itself to taking things up with the Government of Zimbabwe as now is beginning to show.
The statement by the dti refers to the SADC Protocol on trade. A closer look at the said Protocol will show that it is largely a repetition of the World Trade Organisation (WTO) disciplines on multilateral international trade.
If Zimbabwe is being reminded of the provisions of this regional protocol on trade, they are being reminded of the WTO provisions on trade as well.
As noted in my original opinion, what Zimbabwe has done with SI 64 of 2016 fits safeguard measures which are done to protect local industries.
The WTO provisions require that affected trading partners be compensated for their losses.
In other words, South Africa has a right to demand compensation from Zimbabwe for its losses brought about by SI 64 of 2016.
Since monetary compensation is out of the question because of Zimbabwe’s financial position but more importantly due to the complex nature of arriving at a fair amount, compensation can be done by way of reduced tariffs applied on other imports coming from affected countries.
If Zimbabwe had say a 12% tariff on beef coming from South Africa, it would offer to reduce that tariff to say 6% to compensate South Africa for the restricted cheese under SI 64 of 2016, for example.
This would have to be negotiated with all trading partners affected by Zimbabwe’s safeguard measures as envisaged by SI 64 of 2016.
As one can see, this is very costly and government will loose a lot of revenue in the process over and above indirectly exposing other sectors to competition through reduced tariffs.
This is the case in WTO multilateral trade because the idea is to promote trade liberalization and not the other way around as advocated by the air surrounding SI 64 of 2016.
This also ensures that such measures are brief and only implemented when really needed and not carelessly.
International trade is taken for granted most of the time because its usually a silent system running in the background of daily life.
Many fail to realise that it is the source of prosperity for nations and few nations can absorb in perpetuity unfair trade practices and the resultant effects.
At some point they will be forced to take action, even as Donald Trump has promised to do.
Zimbabwe must not always resort to playing victim but must accept that it is for the most part the author of its own trade problems.
I will be closely interested in understanding what “amicable solution” South Africa will arrive at with Zimbabwe with a view to critically examine it.
This is just the beginning.
Update
When I wrote this opinion the dti had not updated their website with the full statement. As noted, I picked the developments through a credible South African online source. Now the full statement has been made available online by the dti.
It begins by saying
The Department of Trade & Industry (the dti) notes with concern the range of trade restrictive measures that the government of Zimbabwe has introduced. These measures include import bans, surcharges, increases in import duties, requirements for import permits and other forms of restrictions that have negative implications on intra-regional trade.
And adds that
The adverse impact on South African exporters cannot be underestimated and the dti continues to be responsive to affected exporters and to make representations to the government of Zimbabwe.