Overborder traders should look into credit insurance

THE BIG downturn in Zimbabwean imports - thanks to its currency crisis - started about the second week of December, according to Alwyn Nel, m.d. of Kingfisher Freight - one of the major overborder cargo transporters.
We did keep moving cargoes, but these current riots have almost put a stop to this as well, he said. To a large extent - with the exchange rate going down - the landed cost of the products is that much higher. In addition to the higher cost, there's an associated higher value to declare for Customs' purposes, and, therefore, a higher duty as well.All of which has seriously turned-off the buyers of these goods. Everybody's just boycotting the higher prices - especially for white goods and luxury items; and industrial raw materials, components and machinery, Nel said. This cut-back on investment in capital goods also means that this trouble will have a longer-term effect - as future production capacities are being reduced.
Nel also notes that tobacco exports from Zimbabwe - its major foreign income producer - have also died down this year. In a lot of cases this is due to farmers just not having planted crops - with the land issue being the deterrent.
For Malawi, Nel sees the country's troubles continually being compounded by short-term government thinking.With the never-ending shortage of foreign exchange, the Malawian authorities have been having an on-going assault on import quotas - with these being now down to about 25% of before, according to Nel's estimates.
This cut-back is obviously also affecting critical imports like fertiliser, he said. This type of situation has a knock-on effect - in the case of fertiliser, reducing export quantities in a basically agro-export economy. This in turn reduces the forex income.....and so the circle continues.
Both Zimbabwe and Malawi, Nel sees as having a rather naive attitude towards forward cover - a vital element in ensuring that your imports bills avoid the problems of a rapidly declining local currency.
The importers tend to view forward cover only for inter-continental orders, he said. They ignore the need for the same on exports from SA and other sources in the region. Nel feels that, although credit insurance has its cost, it might be a worthwhile idea in a country with a dicky economy.