16 January 2013

Zimbabwe: What's in the Cooking Pot


Zimbabwe's economy is expected to achieve a modest 6 percent growth this year, largely spearheaded by the mining sector. I refer to the target as modest because we all know that the potential to achieve even double-digit growth is there. We just need to do our mathematics right in terms of getting the economy going.

However, the tone for the year has to be set now so that we immediately apply our minds and energy to it. Every minute counts literally. Minister Biti's Budget gave us guidance and the monetary policy statement should also be coming out soon.

This week, I asked some players in the economy to give me their thoughts.

Award-winning businesswoman and Securico Security Services (Pvt) Ltd managing director Divine Ndhlukula presented her thoughts as follows:

"In the past 10 years, Zimbabwe's economy has gone through severe shocks. In particular 2012 was a very difficult year since the multi-currency system was adopted. This was mainly due to the liquidity crisis, policy inconsistency, lack of management skills, corruption and other social ills. The economic difficulties have catalysed the emergence of entrepreneurs who became a key stimulant to the private sector's survival.

"My view is that this country needs this new breed of entrepreneurs who are the key to unlocking the country's potential. They need to be supported. Risk taking needs to be encouraged and rewarded through an enabling environment, role modelling and showcasing success stories. Entrepreneurship should be taken seriously -- some people here often talk about 'zvechiIndigenous' in a disparaging manner. Our social values need a paradigm shift.

One key aspect for fostering an entrepreneurial culture is the removal of all barriers, particularly those created by Government or within its power to change, that block or discourage people's entrepreneurship. We have the Look East policy which can give us leverage to copy those Asian Tigers' models that can help in transforming our economy.

"While Zimbabwe has got very high per capita resources, it is not enough to boast about those natural resources. The zeal and knowledge has to be applied to beneficiate those resources into value-added products to accrue significant benefits for economic development for Zimbabwe.

"It is also not enough if that is not backed by strong management skills. Good managers/leaders make things happen and Zimbabwe needs more of them to achieve sustainable development and create jobs for our young people. Despite our companies flashing red, executives would still rather watch and continue getting huge remuneration perks which are disproportionate to the business.

"While there is debate on the indigenisation law, this could be achieved as there is meeting of minds in the area of procurement where consensus is to favour locals in particular where they have demonstrated the capacity to deliver. I agree with one Tapiwa Gomo who recently wrote about the need to have the two economic policies from the main political parties complement each other for the benefit of the nation. Corruption, unfortunately, is the cancer the country has failed to deal with.

"Graft exists in frightening proportions both in private and public sectors. Leaders in both private and public sector should have the moral courage to deal with it decisively as the cost of doing business is going to be too high and stifle investment.

"And, lastly, there has been a cry for more significant role in the country's economy by women. For women, in particular, that means overcoming the many real or perceived barriers to success that surround us."

Econometer Global Capital head of research Takunda Mugaga had this to say:

"2013 has just come and we are hoping for the best as a nation whilst at the same time fearing for the worst. The macro-economic environment will display a plethora of attributes presumably. In terms of GDP, we expect the economy to grow by at most 4 percent, inflation will remain within manageable levels possibly to close the year at 2,5 percent.

"Mining sector is expected to be the major driver of the economy due to its nature, this is an autonomous sector which is not expected to be disturbed that much due to depressed income levels as an upward rally in commodity prices on the international markets will be significant enough to address the yawning trade deficit Zimbabwe is currently experiencing.

"We do not expect the following to happen:

1. No strategy of substance to solve the US$10,7 billion external debt.

2. The Zimbabwe Stock Exchange will continue with its manualised or open cry state (no automation).

3. Central bank remain undercapitalised

4. Banking deposits will not rise significantly from the current US$3,5 billion.

"However, the agriculture sector will record a significant growth as compared to last year with its 13 percent contribution to GDP to rise above 17 percent, the inflow of proceeds from cash crops notably tobacco will ease the liquidity condition in the second quarter of 2013.

"Gross fixed capital formation will be slackening as our fiscal policy has a bias to revenue expenditure ahead of capital expenditure. This means the need to set up an infrastructure sovereign fund is quite high as one of the reasons for an undercapitalised manufacturing sector is to do with antiquated infrastructure which had raised the cost per unit of production in Zimbabwe hence promoting cheap imports mainly from Asia.

"The depressed income levels implies reduces aggregate demand thus the potential for inflation to rise is almost non-existent. It is also the year in which the elections are to be held possibly in the second half of 2013 and as usual this has a tendency of reducing business activity in Africa and Zimbabwe in particular."

A Harare-based economist, Gift Mugano, is optimist icabout the economy this year:

"I am very optimistic about the economic outlook. If you look at the expectations from the mining sector, a boom is anticipated. The mining sector, being a major foreign currency earner, the boom will translate into better economic outlook for the country. If you look at indigenisation, more than 200 foreign-owned companies have complied, including some of the major foreign firms.

"It means that these companies will commit to serious work because last year and the year before most companies were jittery. Looking at the compliance by big companies there will be no excuses by the companies for failing to implement expansion plans. Companies community empowerment schemes for people companies will also bring money into areas for projects and development.

"There also is the United Nations World Tourism Organisation General Assembly to be co-hosted by Zambia and Zimbabwe this year to support a better outlook. Tourism will also do well this year. The number of airlines coming to Zimbabwe you will see that confidence is high on the country. It is too early, but I am quite optimistic about the outlook. The major challenge to a better economic outlook is the issue of liquidity largely because of (shortage of) the US dollar that we use.

"The issue of mostly short-term credit is also another challenge. But the issue of tight liquidity can be managed by continuing to bring all the money in the nostro accounts back to Zimbabwe. Most mining companies still keep their money offshore.

Election is a challenge, but that is an issue for a short period and passes. Most important is the fact that after the election people know the Government that will be there for the next five years. What I am not sure about is the impact that agriculture will have on the economy and how the rains will affect the summer crop."

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