Andrew
The African Continental Free Trade Area, whose trading started in January this year, is expected to open access to more markets than before.
Zimbabwean businesses will find that landing products and services in other African countries will be simplified as trade procedures will be harmonised, and unnecessary barriers to trade will be removed to allow growth of the country’s exports.
More than 1, 3 billion consumers in Africa from 55 countries with a combined gross domestic product (GDP) valued at US$3, 4 trillion will provide a lucrative market for Zimbabwean products and services across all sectors.
Apart from the African markets, President Mnangagwa’s Second Republic has been pursuing economic diplomacy, which is expected to unlock access to the rest of international markets across the world.
The National Development Strategy 1 launched last year notes that “the shift from traditional diplomacy to economic diplomacy has huge potential to improve the country’s image and strengthening cooperation with the international community, thus improving economic recovery growth prospects.”
Further to this, the Government is already implementing an array of Ease of Doing Export Business Reforms to enhance export competitiveness.
Here, several processes and regulations are being streamlined to assist existing and potential exporters gain market entry.
As more markets open, it will be important for local companies to come up with strategies that will improve their exports as no two markets are the same.
Existing and potential exporters will need to focus on markets that are sustainable and offer more profits, either in the region or beyond.
ZimTrade, the country’s trade development and promotion organisation, offers market research on behalf of the private sector, where key insights are unpacked, and market linkages are strengthened.
Currently, ZimTrade is conducting market research in Tanzania and the Democratic Republic of Congo and trade intelligence from these activities will help local companies form market penetration strategies.
Whilst ZimTrade offers such assistance, it is also important for local companies to understand key steps necessary to take when selecting an export market.
Conducting market research
Before venturing into any export market, it is important to begin by conducting market research, which can be either desk research, field research or a combination of both.
This will enable the potential exporter to understand several factors that can determine success or failure in export markets.
Objectives of the research should be clearly stated to enable the elimination of non-qualifying markets.
During this research, there are issues that should come out clearly, such as market size, the current volumes levels (quantities), value of sales and current imports of the product or service in the targeted market.
This information points out the market size and it will also reveal who are the suppliers (competitors) on the export market.
Before selecting a market, exporters should also understand the exchange controls of the intended export market as this will determine how they are paid.
Countries facing foreign currency challenges tend to have a strict exchange control regulation, which may delay foreign payments.
Commercial banks through their international banking divisions can assist with this information.
It is also critical to look at macroeconomic indicators of the intended export market.
Indicators such as GDP per capita, inflation rate and economic growth tend to affect business performance hence one should understand these aspects.
Issues of customs duty and value-added tax are some of the matters that the research should answer, as these will impact on the final pricing in the targeted market.
Potential exporters, as part of the research, should also look at issues such as political stability, language, and ease of doing business.
This may need the exporting business to put in place mitigation strategies and exit strategies before venturing into the market.
Further to this, culture and age demographics in the targeted market are important to ascertain consumption habits and local exporters need to have a comprehensive understanding of these so that they develop products and services that meet customer needs.
Understanding market requirements
The exporter should also be aware of the tariff and non-tariff barriers, and surcharges that are levied on the product under consideration.
Tariffs are essentially costing on top of production expenses that will affect the selling price.
Non-Tariff Barriers (NTB) are compliance issues which ultimately affect how your product will land in the export market.
Overlooking these issues may result in penalties and in some cases confiscation of your products.
Some products are regulated by health authorities and it is essential to check the regulations that affect the importation of your product and comply with such requirements.
There are efforts to standardise some of these regulations in the region. As such, if a product is registered locally, it will also be easier to register in foreign markets after conducting relevant tests.
Export markets are particular about packaging, labelling requirements and it is of paramount importance to check the kind of packaging and labelling required.
This may entail a change in your current packaging to meet the export packaging requirements.
There is also need to consider distribution options as this is also affected by geographic proximity and the nature of product to be transported.
Transport costs contribute a significant portion to the costing of a product and shipping and forwarding companies can assist in providing this critical information.
Would-be exporters should also check on trends in the use of the product targeted for export.
Dealing with competition and establishing partnerships
Whilst developing a market entry strategy, it is important understand the competition and this may require looking at their prices, quality, and any other competitive advantage they may possess.
Under this, there is need to study those who have been successful in exporting into that market and see how they were able to do it.
When undertaking this exercise, there is need to evaluate export readiness and come up with a Unique Selling Proposition (USP).
Establishing business relations with partners in the target market will also help overcome some challenges posed by competition.
Local companies can consider joint ventures, memorandum of agreements, partnerships, and cooperative agreement opportunities.
Before “jumping” into some of the partnerships, there is need to do a comprehensive due diligence on the would-be partners.
Using reliable sources
of information
The use of reliable sources of information when formulating a market penetration strategy cannot be overemphasised.
ZimTrade assists local companies, at no cost, with market insights in the form of market briefs, country focus and market pointers.
ZimTrade also hosts the Trade Information Portal, accessed through www.tradezimbabwe.com <http://www.tradezimbabwe.com> where local companies can access reliable market-related data, as well as take a free self-assessment market readiness checker.
On the Portal, local companies can access an Exporter’s Guide, which provides general guidelines to overcome some of the problems and difficulties associated with exporting.
It also contains basic ideas to help enterprises in planning and developing their export business on a viable and sustainable basis.
Potential exporters can also gather information on International Trade Centre (ITC) trade intelligence tools such as Trade Map, Standards Map, Market Access Map and Export Potential Map.
These trade intelligence tools can be accessed for free, and they provide reliable information on trade statistics, export potential, tariffs charged on various products and compliance regulations that needs to be adhered.
Other sources of information are foreign embassies in Zimbabwe, Zimbabwean embassies abroad, business member organisations, the Zimbabwe Revenue Authority, Shipping and Freight Companies, commercial banks and International organisations such as SADC and COMESA.
Allan Majuru is ZimTrade chief executive.
Online Reporter