23 January 2013

Zimbabwe: Time to Reclaim Our Position


DEBATE on the path Zimbabwe's economy will take continues to rage, with many expressing optimism that positive growth will be achieved, albeit at levels around 5 percent as opposed to the previously anticipated double-digit figures that should have been possible by now had the economy maintained the growth momentum attained in the three years post-dollarisation.

Issues such as the impending elections, the indigenisation policy, rains, the liquidity situation, international prices for minerals and global financial developments will have a large bearing on the outcome of Zimbabwe's economy.

The Ministry of Economic Planning and Investment Promotion is confident that the Medium Term Plan, expected to transform the economy sustainably, will meet some of its objectives although shortage of funds remain a huge impediment.

Last year, the US$9,3 billion programme was found wanting in terms of achieving its growth targets and other facets enshrined in the document.

The Confederation of Zimbabwe Industries is not very optimistic about the operating environment and what Zimbabwe can achieve this year.

CZI president Kumbirayi Katsande had this to say about prospects for the year:

"Fundamentally, for the manufacturing industry, the challenges that we faced last year will continue into the current year.

"With the issues of funding, electricity and liquidity, I'm am not quite sure that industry will be able to take advantage of the available opportunities.

"Basically, the challenges that dogged industry last year will persist this year.

"How the economy will perform this year will depend largely on the performance of the agriculture sector.

"It will be very critical that the sector performs well. If the agriculture sector performs then the economy might do well this year. I believe how the sector performs is going to be key and if it does, that will keep the economy going (as has been happening since the formation of the inclusive Government) assuming mining will continue growing as before. Some companies will be able to take advantage of opportunities in the export sector, but the majority will not be able to exploit those opportunities, so it is only a few companies that will do well.

But then as we talk about the growth of the economy, we have to look at the number of graduates coming from universities and colleges. Employment creation will be key. When you look at employment -- what is happening there is sad.

"Where are all the graduates who finish studies going? Often we talk about it, but little is done to address the problem (of unemployment). Surely, we have to talk about the numbers (with regards to employment creation) and do something about it.

"Generally, I think it is going to be a difficult year. What measures have been put in place for industry to cope with the challenges? If nothing (or little) has been done, then until we deal with these issues the economy will not do well."

Comesa Business Council secretary-general and former Zimbabwe National Chamber of Commerce president Mr Trust Chikohora shared his views with us:

"Zimbabwe is set for a referendum and elections in 2013. This is likely to dominate public opinion and investors are likely to wait and see how this process plays out. Credible elections with no violence will result in increased investor confidence and a significant decrease in the country risk profile of Zimbabwe.

"This scenario could boost Zimbabwe's economy in the second half of the year leading into 2014. The country would see increases in the levels of FDI and infrastructure development which would stimulate economic growth.

"However, the scenario where there are no credible elections would result in the economy sliding backwards. Inflation should remain contained below 5 percent in 2013 due to the liquidity crunch.

"Interest rates could drop a bit due to pressure from the RBZ and the Ministry of Finance.

"GDP growth is unlikely to exceed 5 percent with the economy overshadowed by politics in 2013.

"Key factors for the economy include indigenisation, which needs to be done in a manner that ensures that we remain competitive as an investment destination.

"Economic growth will require massive levels of FDI and local investment as well as lines of credit.

"We also need development finance and balance of payments support.

"Agriculture is central to the economy and we need to get the levels of productivity up to a scale where we can be regarded as a regional breadbasket again and coupling this with deliberate investment in agro-processing would result in significant sustainable economic growth. The country needs to optimise on mining output to take advantage of our vast mineral resources and again deliberately focus on value addition.

"Tourism will be boosted once we reduce the country risk factor and consequently improve the world's perception on Zimbabwe. I believe the above interventions with an enabling environment would result in double-digit economic growth in the medium to long term taking us to our rightful place as one of the leading economies in Africa.

European Union Head of Delegation to Zimbabwe Ambassador Aldo Dell'Ariccia also weighed in with his thoughts:

"We took note of the Budget presented by the Minister of Finance and we observe that, in general terms, Zimbabwe's economy is rather vulnerable to variations of the climate (which adversely affected the agriculture sector last year).

"In that sector, one of the most important in the country, will need to be assessed how the abundant rains that we are experiencing at present will affect the production and hence the growth in 2013.

"The reduction in trade between the 27 EU member states and Zimbabwe in 2012, when compared to 2011, is partly due to the reduced performance in the agricultural sector (other part is due to the slow-down of the economy in the EU).

"In this respect, Zimbabwe authorities should also envisage mechanisms to reduce the deficit in the trade balance that provokes a considerable current account deficit. One way of obtaining it could be increasing the value addition to exports (through further processing in-country), while at the same time diversifying the export basket and becoming more competitive, through the adoption of new technologies.

"All this, of course, needs fresh investments; however, there is the impression that domestic capital is there, but underutilised for development purposes.

"Another factor of unpredictability is the international prices of commodities exported by Zimbabwe, which will in turn depend on the international financial situation, and which could affect the growth perspectives for 2013. What can be stated, is that the political engagement in economic reforms, including proper banking supervision, equitable fiscal policy, and fight against corruption, will be essential to consolidate the credibility of Zimbabwe as a country worth receiving foreign direct investment.

"In this sense, any action that would ensure predictability and respect of international legislation and the rule of law, will be an important factor to attract the international development capitals that the country so badly needs (for instance, to rehabilitate the infrastructure and the power producing capacity).

The ongoing discussions with the IMF in view of establishing a Staff Monitored Programme (SMP) are another factor that could lead to increased confidence from the international community."

In God I Trust!

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