Globalisation has been touted as an inevitable and unstoppable force destined to shape the future of economies forever, but three major developments that have engulfed the world, including the ongoing coronavirus pandemic, calls for countries to strive to be self-sufficient.
For the past two years, the United States under the leadership of President Donald Trump has been on a trade war path with China costing both economies billions of dollars.
Unfortunately, the trade war, does not only harm the main contenders, it also compromises the stability of the global economy and future growth.
Of particular concern is the reduction of import demand from China for commodities and intermediate inputs due to falling exports to the US.
Many emerging and frontier countries rely on thriving world trade to stimulate their economies, by exporting commodities and/or low-end manufacturing products and intermediate inputs to global supply chains.
Slowing world trade thus creates headwinds to many of these countries leaving their economies vulnerable when the global economy is not performing as it is now.
The coronavirus as well as the ongoing oil price wars further leaves global economies fragile with those that depend on China or on oil under severe strain.
The coronavirus pandemic could come as a major blow to Africa’s fragile economy with a United Nations Commission for Africa (UNECA) report projecting GDP growth rates could drop from 3,2 percent to 1,8 percent.
China is the world’s second-largest economy and leading trading nation, so economic fallout from COVID-19 threatens global growth.
The pandemic forced factory closures across China starting in January, with ripple effects throughout the global economy. Businesses are already dealing with lost revenue and disrupted supply chains due to China’s factory shut-downs.
China’s exports contracted by 17 percent in dollar terms in January and February, with the declines caused by “fewer working days, production suspension and strict traffic restrictions imposed after Covid-19 outbreak,” according to Swiss multinational investment bank UBS’s economists.
This contraction leaves countries that depend on China, directly or indirectly, in dire straits. The same has happened to countries that depend on global markets for survival.
Drop in demand for oil, a result of COVID-19 induced subdued activity as well as the oil price wars, which have resulted in oil prices plummet to an 18-year low, is a serious threat to the economies of oil exporting African countries.
Only countries that are closer to self-sufficiency are in a better position to withstand the hit while the rest such as Zimbabwe will face the full wrath of the impact.
Closed borders, although not across the globe yet, should provide Zimbabwe with an opportunity to review its use of resources.
Poor practices, which depress productivity, should not be tolerated and it is incumbent on each nation, Zimbabwe included, to use this opportunity to find the right balance between importing and local production.
Economist Dr Gift Mugano said the impact of COVID-19, for example, could be worse than the drought that left Zimbabwe food insecure from last year till now. Zimbabwe currently relies heavily on imported products spending billions of dollars to bring in food, and any disruption on trade could be devastating.
Dr Mugano said the country is failing to build its own currency reserves because of its huge appetite for imports even for products that it should be producing locally such as wheat, soya bean, maize, tissues.
“If the country is to be able to deal with exogenous shocks, it must have reserves in stock as a fall back, but Zimbabwe does not have any at the moment which leaves it vulnerable to external shocks such as COVID-19,” said Dr Mugano.
He said there must have a current account surplus and this can only be done if it boosts its local production.
He said a survey commission by the Zimbabwe Agricultural Society revealed that the country, despite having water bodies that can irrigate 2 million hectares was only doing 200 hectares.
“This country is spending US$2,2 billion on importing agricultural and manufactured products which naturally should be produced locally,” said Dr Mugano.
He said there is need to prioritise local production to cushion the country from global shocks.
Zimbabwe and Africa in general has lagged behind in developing intricate inter-state trade systems as evidenced by the quality of infrastructure such as roads, rail, shipping fleets and ports, according to Walter Mandeya, an analyst with Trigrams Investment.
“Dependence on western and eastern trade markets is going to hit us hard as those economies focus on minimising international trade for the duration of the coronavirus pandemic and possibly beyond if Brexit and Trumps’s “Americanism, not globalism” call is anything to go by.
“We believe that there is no better time than now for African leaders to start collaborating more intensely, starting on the response to the coronavirus pandemic, on trade and skills sharing and on cross border investments,” he said.
“It’s also important that as individual countries, we strive to be self-sufficient. Zimbabwe is endowed with almost everything and just need to formulate policies that encourage local production.
“While the African Continental Free Trade Area Agreement (AFTCA) calls on African countries to priorities trading among themselves it is in a way speaking to the need for countries to be self-sufficient if they are to survive developments such as trade wars and the current lock-down caused by coronavirus.”