New hope for Zimbabwe economy

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By Netho Francisco

THE economy in 2013 failed to bear meaningful fruits as a result of a number of factors, the major ones being the continued existence of Western imposed economic sanctions and the Inclusive Government (GNU) whose tenure ended on July 31.
The GNU was characterised by a hotchpotch of disagreements between the involved parties mainly emanating from MDC-T that was not interested in unity of purpose that would unlock doors to economic prosperity.
MDC-T, which manned ministries that were key to the economy such as finance, economic planning and industry, would either not release funds meant to boost operations of various sectors or avail them late.
Economist Abisha Ushewokunze said the existence of the GNU was a stumbling block to economic recovery as the opposition party continued calling for embargos that were sabotaging most policies aimed at growing the country’s economy.
“Trade embargos, especially access to competitive markets was limiting and the opposition party did not join hands in calling for the lifting of these sanctions,” said Ushewokunze.
“However, the demise of the GNU witnessed the opening of new markets especially for our minerals such as diamonds, a move that can have a positive impact on our economy by generating more revenue.”
The United States and British sanctions against Zimbabwe hindered the much needed foreign direct investments (FDIs).
As a result of the embargoes, the country failed to access international capital desperately needed to revamp operations.
According to the Confederation of Zimbabwe Industries (CZI), the manufacturing sector has not realised new inflows of foreign direct investment in the last three years.
Most critical sectors of the economy that needed urgent attention such as manufacturing, mining, energy and agriculture, among others, have remained under- capitalised.
As such, the local manufacturing industry has struggled to produce at reasonable cost and to compete against imported products.
The manufacturing sector has remained in a crisis situation with capacity utilisation declining from an average of 57 percent in 2011 to 44 percent in 2012 and 39 percent in the third quarter of 2013.
According to the African Development Bank (AfDB) report released late 2013, trade deficit for the first half of this year remained higher at US$2,4 billion, an increase of about 53,6 percent compared to the same period 2012, reflecting a marginal decrease of 1 percent.
The AfDB observed that imports during the period 2013 were mostly dominated by fertiliser, which constituted about 17,2 percent, followed by fuel at about 16,7 percent.
Unprocessed mineral products as well as tobacco continued to dominate exports.
Money generated from local mining activities through royalties fell 40 percent below expectations to US$39 million.
Ushewokunze said the main reason for the negative performance of the country’s economy was loss of value in local minerals as they were sold in raw form.
“The mining sector which was expected to drive the economy in 2013 was heavily affected by the sale and export of non processed minerals,” he said.
“We need to add value to our minerals so that we can realise more value on our natural resource that can help the country generate more revenue to sustain the economy.
“The country is losing a lot by exporting raw materials whereas, the buyers are enjoying the huge stake of the value of our natural resources.”
Ushewokunze said the country must also focus on boosting the manufacturing sector to increase the availability of local products on the market and this would limit imports and helps to reduce the high trade deficit.
A mid-year report produced by the National Social Security Authority (NSSA) on Employer Closures indicated that more than 700 companies had closed shop in the 24- month period running to July this year.
Fiscal space for this year also remained severely constrained due to poor performance of revenue inflows against the background of rising recurrent expenditures and a shrinking tax base.
In its revenue performance report for 2013 third quarter, the Zimbabwe Revenue Authority reported that collections amounted to US$897, 3 million against a target of US$904,9 million, a negative variance of 1 percent.
Value added tax (VAT) on local sales dropped eight percent to US$154 million, while company tax tumbled three percent below target to US$102 million.
Meanwhile, since the adoption of the Look East Policy there has been a surge in investments specifically from China in recent years.
We have seen significant Chinese investment being channelled into public infrastructure such as the National Defence College, hospitals, Government offices, Harare City Council waterworks and recently the US$160 million airport project in Victoria Falls.
These investments can be significant catalysts for economic development through channels such as increase in employment, improvement in liquidity and real empowerment of the people.
However, the landslide victory of ZANU PF in the July 31 harmonised elections eliminated MDC-T from government, a situation that is expected to result in meaningful development.
The new government intends to grow the economy that suffered a major knock from the illegal sanctions over a decade by at least 9,9 percent in the next five years through value addition in different sectors.
These forecasts are contained in the economic blueprint, “Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset).”
Ushewokunze said he was optimistic that the Zim Asset would turn around the economy next year considering the commitment of ZANU PF in implementing the policy.
“We have had more than 11 economic blue prints over the past years but were not successfully implemented to boost the economy,” he said.
“However, the level of seriousness within the new government reflects that the Zim Asset will be fully implemented to change the lives of Zimbabwean through different vibrant economic strategies in the new blue print.”
The Zim Asset states that Government will mobilise local resources to liquidate the US$6,1 billion external debts.
According to the policy document, economy is expected to grow by 3, 4 percent in 2013, 6, 1 percent in 2014 and continue on an upward growth trajectory to 9, 9 percent by 2018.
The Zim Asset has identified four key priority sectors that included; food security and nutrition, social services and poverty reduction, infrastructure and utilities and value addition and beneficiation, banks on key drivers that are expected to facilitate the economic growth.
Value addition in various sectors among them mining, agriculture, infrastructure focusing on power generation, transport, tourism, information communication technology and enhanced support for small to medium enterprises, are some of the key drivers of the projected economic growth.
Rehabilitation, upgrading and development of key infrastructure and utilities comprising power generation, roads, rail, aviation and water are some of the target areas.
The policy document also says that Government will accelerate the re-engagement process with international financial institutions and creditors.
The blueprint is aligned to ZANU PF’s winning election manifesto, which promised to complete the indigenisation of more than 1 138 companies in 12 key sectors of the economy. This process was expected to unlock US$7, 3 billion worth of assets.

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