An assessment of the impact of Zimbabwe joining SACU using the WITS/SMART model

Abstract

Zimbabwe has been experiencing negative trade balances, with a widening gap being experienced with the Southern African Customs Union (SACU). Together with the recently expired South Africa-Zimbabwe bilateral agreement, it is imperative to examine the dynamics of the relationship between Zimbabwe and SACU. Although there is a myriad of literature that supports economic integration through a customs union, literature also suggests that it is not that simple. This study applies the WITS/SMART partial equilibrium model to assess the trade impact of such a policy move on Zimbabwe. This is in anattempt to seek solutions in line with the ZIMASSET economic blue print that is focusing on improving exports through increased regional integration. The results indicated that the net trade effect and consumer welfare gains are not significant and are outweighed by the revenue losses. The policy implications of the study are that based on revenues, trade flows and consumer welfare, it is not in the best interests of the government of Zimbabwe to pursue joining SACU.