Export of Scrap Metal & Removal of Import Duty on Solar Energy Products

The most recently announced Mid-Term Budget Statement announced by Minister of Finance on 14 July 2010 opened some opportunities for Zimbabwean SMEs in the field of international trade.

Export of Scrap Metal

As you may remember from my previous article ‘Passports for Export’, all scrap metal exports from Zimbabwe were banned starting 1 August 2004 in order to promote their use in the local production.

On 14 July 2010, in the Mid-Term Budget Statement, the Minister of Finance announced that, with effect from 1 August 2010, scrap metal generated as a by-product of the production process shall be exempted from the aforementioned export ban. However, export licences of such scrap metal shall still be required and these are issued by the relevant Ministry on a case by case basis.

SMEs who have access to such scrap metal can now have a better business opportunity to export the by-product scrap metal to their clients. The SMEs should approach Ministry of Mines for the export licence of such scrap metal.

Removal of Import Duty on Solar Energy Products

In support of investment in solar energy, on 14 July 2010, in the Mid-Term Budget Statement, the Minister of Finance announced the removal of import duty customs duty on solar panels, inverters, batteries, regulators, geysers, lanterns, water pumps & heaters and energy saving bulbs with effect from 1 August 2010.

Some Zimbabwean SMEs may fall through World Cup cracks

The glamour of the 2010 FIFA World Cup windfall for Zimbabwean SME businesses is likely to fall dramatically short of the expectations. Some SMEs, mostly those who export tourism services, may have borrowed some decent funds to renovate their accommodation, buy taxis and cars for hire, hoping tourists will flock the country and demand such services. From the onset, the Zimbabwean SMEs could have been aware that they would not benefit directly form the FIFA World Cup but hoping to cash in on some spill-over of FIFA world cup benefits. Now these spillovers may be too small for the kind of investments which could have been laid down. The fact is that many small businesses now stand to lose out as money spent on expansions and upgrades of hotels, lodges and restaurants may not be recouped during the month-long tournament Even in the hosting nation, South Africa, the hotel bookings are a little bit less than what was expected perhaps because the World Cup is coming in the wake of a global recession, among other reasons.

When faced with the reality of having sunk borrowed funds in anticipation of cashing in on World Cup spillovers, don’t despair. The first thing you need to do is to engage your Bank or the lender and explain the problem. Do not try to be elusive or difficult; rather engage the Bank management with constructive proposals to reschedule the repayment of the loan in line with what you may afford. The banking relationship has to be managed very well when your company is in financial distress.

Zimbabwean SMEs should not stay local

Exporting of goods and services gives Zimbabwean small businesses better chances to reach new markets and increase sales, as well as opening up to more than 99.9% of the world's consumers! The world's population is currently about 6.8 billion. Zimbabwe population of about 12 million is by far very negligible (approximately 0.18%) compared to the world population. Therefore, when one thinks of where the next significant group of customers is going to come from,  its likely to be coming from outside the territory of Zimbabwe. Inversely, it is more likely that the local customers are also increasingly not going to be loyal to local suppliers.

It may look a daunting and expensive to export goods and services, but it will actually help small businesses in both current and future economic downturns. Dealing with diversified foreign markets would assist the Zimbabwean SMEs to manage the risk associated with concentrating on local sales only. As a crucial stepping stone, Zimbabwean SMEs should perhaps start by serving the neighbouring foreign markets like Zambia, South Africa, Mozambique etc as these may tend to have less barriers in terms customer information availability, short distances involved, language and culture commonalities, as well as familiar regulations, bilateral and multilateral trade agreements.

Are you a Zimbabwean SMEs or micro-institution who has a product which you feel can do well in the foreign market? Feel free to network with trade facilitators (ZIMRA, ZimTrade, Commercial Banks, Ministry of International Trade etc) to find the best way to assess your export capability and initiate export of your product/s or engage a consultant to assist you in preparing to penetrate foreign markets, including getting that very first order you need to move the first shipment and assistance in export documentation. Call Dennis +263 772 948 419 for some support services.

Manage Quality of your Export Product

The most fundamental quality control principle which is true for any Zimbabwean company is that when the management gets committed to controlling a manufacturing process, the quality of that process starts to improve as well.

When quality problems on products manufactured in and exported from Zimbabwe arise, they often affect profitability of the exporting venture, affect brand image on the export market and results in lost sales and costly product returns. All exporters should be conscious of problems which can result from the quality of their export product. The awareness of such problems triggers commitment towards improving the quality of the export product. What is the starting point in implementing quality management for your export product/s?

SMEs may adopt the most traditional kind of quality control, which is performed on exports which is carrying out final random inspection before shipment. After finishing production and when the export product is ready for shipment, inspectors randomly inspect batches of products to check conformance to the specifications and requirements. This process is also applicable to those exporters who are not really into production of the products they export; those who simply buy locally or internationally and then sell into their export markets. The final inspection may assist in boosting the confidence in own product quality, though the sample may miss at least one defective product unit. Remember that if one product gets to export market it may result in the loss of future sales! Nonetheless, final random inspection remains an efficient way to significantly improve confidence level in the quality, but they have to be designed and operated with professionalism.

Other quality management measures the SME exporter may adopt include performing inspections during production cycle (in-process inspections), meaning that the inspections are done at the end of each production stage of a given product. Performed by all shop floor employees at the factory site and during the production cycle, in-process inspections minimise the reaction costs in case of non conformities as they may usually cover a 100 percent check. In-process inspections are also carried out when loading the product i.e. verifying product quantities and the sealing of the containers so that, at destination, the receiver is almost guaranteed that his shipment would be delivered unspoiled.

It is often advisable to get the services of a professional partner who has the capability and experience to help set-up and operate a simple or very complex quality management system for your export market in a cost efficient way. If such efforts are to receive credibility in export markets, they should earn certification under ISO Quality Management Principles e.g. ISO 9001:2008. The rationale for encouraging SMEs to earn such certification is that some export markets insist on dealing with certified suppliers for the sake of quality of their own products. Those SMEs who are keen to get assistance on setting up the quality management systems in Zimbabwe may get into touch with the webmaster of this blogsite, who can assist at very reasonable cost.

Zimbabwean SMEs are therefore advised that they should take export quality issues seriously. Defective goods or incorrect consignments to international customers are expensive to deal with, and often in losing market shares.

Why should Zimbabwean Companies participate in Trade Fairs?

Is it really worthy the effort to participate in international trade shows/fairs? Many SMEs would be forced to believe that participation is just an unjustifiable trip which has no predictable return. For business companies, it is different from consumers who go to trade fairs to ask, “How much it this and that?” as business companies have to participate in trade fairs to establish relationships which corporate buyers and distributors of own products. Its more of looking for opportunities to partner with business counterparts who assist in selling own products. There are many good reasons why SMEs should participate in trade shows - both domestic and international rather than relying on reputation and e-marketing like websites and emails.

1. Build Relationships with Corporate Buyers at the Trade Fairs.
   
   The best way to make lasting business contacts is to talk to the customer face-to-face, as it gives one the chance to make the right impression. Zimbabwean SMEs should participate in international trade fairs in order to establish new trade contacts for their exports. For this to happen, they have to make good presentations (not of false promises), exchanging business cards and even visiting some foreign business premises and representative trade attachés of Zimbabwean embassies. This can go a long way toward promoting own product overseas. If the market is really good, the SME representative might even make a sale right at the show.
   
   
2. Find out Distributors for Export Market.
   
   International distributors come to trade shows to find the best the world has to offer in terms of price and quality relationships. The SMEs should also build relationships with these international distributors, in order to reach out to some international buyers who may not have made it to the trade fair.. Smes representative should strive to talk with these distributors to find out what they need. It is a great way to get your product to customers in many countries worldwide. The SMEs representatives should not waste time moving from one stand to another admiring other products which are not in any way related to their own – this is not a tourist venture, its business search.
   
   
3. Trade Fairs are One-stop shop for Export Market.
   
   When A Zimbabwean SME goes to an international trade fair, one meets potential clients from, not only the country hosting the trade fair, but all over the world. Not even the wealthiest companies could afford to meet with so many potential clients from so many regions in a few days. If your company is targeting a particular region, there are several trade shows designed for regional markets, such as SADC or COMESA or Europe. This means that not every trade fair suits own requirement, so choices should be made on which one/s to take part in.
   
   
4. Trade Shows Provide a Platform for Market Research.
   
   This is one kind of market research which the Zimbabwean SME would do in-house and interface with real customers. By having a chance to talk to potential clients, the SME finds out what international distributors are looking for - and what their customers want. One may still find out that some of the preconceived notions about export markets are wrong, by learning from the market participants the special requirements and opportunities by region. Or, luckily one may find a niche market for a very specialized product that one happens to be uniquely qualified to produce.
   
   
5. Test your Product at Trade Fairs.
   
   Zimbabwean SMEs should always take their trade samples to the trade fairs- its imperative! When such same products are presented, overseas buyers can give their opinion on the spot. Such immediate feedback will create a chance to get reactions to sizes, colours, design, price, flavors and ingredients. Remember products may need to be customised to suit the target market, due to different tastes. Trade shows give Zimbabwean exhibitors the chance to observe their competition for their products and whether their products appeal to buyers.
   

It is therefore imperative for any serious new or old Zimbabwean exporter to consider participating in some international trade fairs. The participation should however be punctuated by good negotiating skills and good presentations, considering different cultural background, language, political and geographical differences. For a successful participation the right team has to be assembled for each trade fair. For the calendar of trade fairs which Zimbabwe exporters can participate in, kindly get in touch with ZimTrade or search their website http://www.zimtrade.co.zw/ for such opportunities.