Newsday | 5 May 2021

Dairibord cautious of AfCFTA

By Chiedza Kowo

DAIRIBORD Holdings Limited (DHL) has said although the African Continental Free Trade Area (AfCFTA) could unlock a string of spinoffs, significant threats to intra-African trade would also arise.

AfCFTA is a US$3,2 trillion trading bloc that came into force in January.

Zimbabwe’s biggest dairy producer reported a 12,5% volumes slowdown during the year ended December 31, 2020 after COVID-19-induced restrictions affected demand for milk across markets, just as Africa was fine-tuning the birth of the multi-country bloc.

AfCFTA has promised to prop up African economies by eliminating duty on 90% of goods originating from the 54 economies that have signed up.

This makes it a potentially good bloc for firms like DHL, which have long expressed an ambition to rule African markets.

It is the largest economic bloc worldwide in terms of the number of participating countries.

The United Nations Economic Commission for Africa has predicted that AfCFTA will raise intra-African trade by 15% to 25% or US$50 billion to US$70 billion by 2040 compared to an Africa without the bloc.

But last week, DHL said it would be treading with significant caution.

“The business is poised to capitalise on … economic drivers to sustain the growth momentum from the last quarter of 2020,” DHL board chairman Josphat Sachikonye said in a statement accompanying financial statements for the year ended December 31, 2020.

“Our strategy is founded on leveraging investment in brands, human capital, plant equipment as well as focusing on collaboration across the value chain to optimise business results. The African Continental Free Trade Area (AfCFTA) will increasingly form part of our operating environment, and will introduce both threats and opportunities in imports and exports. As a business, our focus remains strongly anchored on optimising efficiencies and competitiveness while developing good quality products,” he said.

“Raw milk intake declined by 6% largely caused by reduced yields at dairy farms due to stockfeed price increases. The country experienced a shortage of stockfeeds because of the droughts in preceding years. The beverages category declined by 18%, while the foods category which has the highest value and margins increased by 9% over 2019,” Sachikonye said.

However, the group saw its revenue rise by 5% to nearly $5,3 billion from, a 2019 comparative of $5 billion.

DHL posted a $76,6 million loss during the review period, from a $671 million profit previously.

It is the latest big firm to be cautious about the AfCFTA bloc.

Government has warned industries to brace for stiffer competition with Africa’s biggest manufacturers as the region does away with trade barriers.

In an assessment of AfCFTA recently, Industry and Commerce minister Sekai Nzenza told industrialists that opportunities will also be extensive.

But Zimbabwean firms said 53% of their manufacturing capacity, which was idle following a prolonged economic crisis, must measure up to high quality as competitively priced products that would land from African peers under a liberalised regime.

With the region’s highest inflation rate, Zimbabwe is one of the most expensive countries in the region.

Companies have always complained about high duty charges, fees and utility costs, which are passed on to consumers, making local products uncompetitive on the international markets.