Zim economy staggers along

HARARE - As Zimbabwe emerges from an election hangover, it seems all is gloom and doom for an economy only forecast to grow by a mere 3,4 percent this year.

According to former Finance minister Tendai Biti, a global slowdown in metal prices and non-performance of the agricultural sector were unfavourable for the local economy to achieve the initial 5 percent target.

The big question on everyone’s mind now is will Zimbabwe be able to meet the revised target?

“It is inevitable that in the immediate, short future, there will be no meaningful post-election recovery and improvement, but that the economy will remain relatively static,” economist Eric Bloch said.

He notes that critical policy pronouncements and an implementation commitment will have a significant bearing on the fortunes of the country.

“On the one hand, no growth can be achieved until there are substantial policy changes. And on the other hand, not only will such policies have to be implemented, but potential investors, businesses and the population in general will need time to become convinced that the policy changes are not only declarations of intent, but are actually and effectively implemented, on an on-going basis in contrast to being only temporary, deceptive, transition,” the economist said.

“If a Zanu PF government is to achieve confidence in it and in the business and general populace, it needs urgently to announce and vigorously implement diverse policies,” Bloch said.

He attributed the more than $1bn loss in value by the Zimbabwe Stock Exchange (ZSE) following the announcement of the election results to investor concerns on a possible prolonged dispute to its legitimacy and intense investor fears that Zanu PF will determinedly pursue economically-destructive policies.

Bloch also noted market concerns that the disharmony and divide between Zimbabwe and many other countries will not only continue, but will intensify, with consequential negative economic repercussions.

“As a result, very many investors, and especially foreign investors, deemed it prudent to disinvest rapidly, in order to minimise potential losses.  For like reasons, there were very few potential buyers, and hence prices fell rapidly. 

“As they did so, more and more investors became motivated to dispose of their investments as expeditiously as possible, further driving down prices,” Bloch said.

The ZSE is currently struggling to find direction with mixed trade mainly characterising its performance.

The respected Bulawayo-based economist touts the restoration of cordial relations with Western countries, and especially USA and those constituting the European Union, in pursuit of motivating Foreign Direct Investment (FDI).

Zimbabwe only managed to rake in a paltry $400 million in FDI’s last year, compared to neighbouring countries, Mozambique and South Africa which got $5bn and $4,6bn respectively according to the United Nations Conference on Trade and Development (Unctad) report of 2013.

Bloch said the downward revision of governmental expenditures, which as at March 22, according to government figures stood at $221,9m against the monthly target of $252,1m.

Of the amount, recurrent expenditure was at $206m while capital expenditure accounted for $6,3m, with employment costs for its 230 000 civil strong civil service, accounting for 75.4 percent at $155,3m.

According to the Finance ministry figures, government’s wage bill gobble nearly $2,6bn, which translates to 70 percent of the government’s total revenue collections.

He said modification of the land reform policies, including availability of rural, agricultural lands to persons of all races, tribes, and gender, conditional only upon the constructive and effective usage of the lands, and such lands being available as collateral security for the sourcing of working capital funding.

“Concurrently, there must be assuredly timeous availability of agricultural inputs, and de-control of pricing of agricultural produce, all prices being driven by market forces,” Bloch said.

The country’s agricultural sector, according to the International Institute for Sustainable Development, generated 18,5 percent of GDP and, at best, 40 percent of total export earnings through the export of tobacco, cotton and horticultural produce, among others; employed 66 percent of the country’s labour force and accounted for about 60 percent of all raw materials for the local industry.

He said an extensive revision of direct and indirect taxation legislation would also be important for the recovery of the economy.

“This will render it conducive to investment, facilitative of exports, devoid of negative impacts upon domestic manufacturing costs and become non-punitive to below the Poverty Datum Line (PDL) income earners.”

Bloch said the total, or partial privatisation of key parastatals and State enterprises including Zimbabwe Electricity Supply Authority Holdings (Zesa), National Railways of Zimbabwe (NRZ), Air Zimbabwe, and TelOne, would also be critical, following the enactment of the State Enterprises and Parastatals Management Bill and the State Enterprises Restructuring Agency Bill that were expected to
improve their efficiencies, thereby achieving their recapitalisation and access to state-of-the-art technologies, enabling critically necessary service delivery enhancement, greatly needed by industry, mining, agriculture, and other economic sectors,” he said.

Bloch said continued implementation of the indigenisation policy in its current form, where all foreign-owned firm are required to have locals holding a controlling 51 percent stake, would not be favourable.

“Pursuit of the currently prevailing indigenisation policies is economically disastrous, can only intensify the economic decline, and instead they must urgently be revised,” he said.

“Restoration of foreign investor confidence as to investment security, with especial regard to substantive and constructive revision of the Indigenisation and Economic Empowerment legislation and policies, to very considerable reinstatement of investor security confidence and genuine and extensive widespread national economic empowerment.”

Zanu PF in its 2013 election manifesto, had forecast its government will be able to create $7,3bn in value from 1 138 indigenised firms  across 14 key sectors of the economy.

It said the programme would create 2, 265 million jobs across key sectors, contribute to export earnings, food security and to government coffers, and drive the country’s average economic growth rate to nine percent by 2018 up from the current 4,4 percent, while unlocking $2tn into the economy.

Economist Vince Musewe concurred on the challenges posed by the election outcome and the indigenisation drive.

“Our politicians are not helping here and the reputational risk placed on Zimbabwe by our recent elections and the politically driven indigenisation crusade will continue to be an albatross upon our necks,” he said.

Musewe said funding would be critical to resuscitate, sectors identified as key to the recovery of the country.

“We must focus in reviving agriculture as this will trigger growth in upstream industries. We need a fresh approach that acknowledges the mistakes of the past in this sector. We must have accountability and further investment in our mining sector.

“These must be our engines of revival for the short to medium term. We can generate adequate money to then look at infrastructure rehabilitation which in itself is a huge opportunity to create jobs and also trigger our industrial revival.

“If we only focus on these for now we will begin to steer Zimbabwe in the right direction,” he said.

“But remember that these sectors need new money which means that we must see an attractive investment climate emerging first. Where will the money come from is the question on everyone’s mind right now.”

Comments (2)

Zimbabweans would like to urge the new government to sober up and and get on with the new manadate. We have gone through a period of madness where polarisation was the order of the day resulting in isolation by the international community. We need to get over that and go back to work. Government must provide a conducive working environment and business must produce enough to meet the country's consumption needs. Government must concentrate on governing while business concentrates on production. Government must mend all relationships with whoever matters - west or east. There are endless opportunities in Zimbabwe if we can get our act together. Everyone accepts our policies including the land reform and indiginisation. What people are worried about is the implementation and continuous shifting of goal posts. If we can sort that out then we will see a total change in attitude towards our country. We have witnessed a major shift in our revenue collection techniques and introduced new sources such as toll gates and traffic police fines, numerous regulation fees on operating businesses. These are not sources that will sustain an economy, we need to expand our revenue sources by resustating industry, expanding agriculture by allowing medium to large scale investors in the entire agricultural value chain, i.e. crop/livestock production, agro-processing and service provision to the sector. We need to do the same in mining which is the other economic driver. With policies in these two sectors properly set out, we should see a rebound of the economy. The stabilisation achieved during the past four years can improve and be sustained if we work on our supply side. We are currently propping other economies through the importation of products that would ordinarily be produced locally.

Timothy Thorton - 4 September 2013

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