THE projected 2,7% Gross Domestic Product (GDP) growth envisaged by Finance minister Patrick Chinamasa in his 2016 national budget statement driven by buoyant performance of the real sector — agriculture, manufacturing, mining and tourism — is wishful thinking considering that Zimbabwe’s resource-driven economy is under immense internal and external pressures.
Zimbabwe’s economy is struggling to emerge from a decade-long recession from 1999-2008, which saw GDP shrink by 45%, despite registering strong growth after the introduction of multi currencies in 2009.
Now government sees China, a traditional ally, as a healthy counterbalance to Western influence and a catalyst to spur growth.
Structural deficiencies such as run-down infrastructure and discord within government over foreign direct investment policy are seen as a bane to sustainable growth in the medium to long-term.
Presenting the US$4 billion national budget last week, Chinamasa projected a 2,7% growth of the economy on the back of the mining, tourism, construction and financial sectors. He also projected a 1,8% growth in agriculture, 1,6% growth in mining, 2,1% growth in manufacturing and 4% growth in tourism.
Chinamasa revised the growth rate from 3,2% in 2015 to 1,5%. It is also a marked decrease from the ambitious 6,1% growth he had projected for 2014 which he later whittled down to 3,1%.
This growth rate however is in stark contrast to what is obtaining on the ground. The mining sector, one of the key economic drivers on which the envisaged growth is predicated, is reeling from a number of challenges including falling global prices of minerals such as gold and platinum, power shortages as well as lack of investment in the sector due to the toxic indigenisation policy. The challenges in the sector makes it doubtful that the sector will contribute to economic growth, let alone register a 1,6% growth, experts said.
A 15% tax imposed on payments for accommodation and tourism services by foreign visitors, is hurting tourism with industry players claiming the tax makes them uncompetitive. A ban on the importation of sport-hunted elephant trophies from Zimbabwe for the 2014 hunting season in April by the United States government has also left a huge dent on the sector.
The ban means a massive loss of income for the sector which is still trying to find its feet after years of economic decline and the after-effects of travel warnings on the country by several source countries, including Japan, Germany and the US.
A 2,1% growth projection in the manufacturing sector is divorced from the plethora of challenges affecting the sector. The continued decline of industry’s capacity utilisation from 57,2% in 2011 to the current 34,3% epitomises the serious challenges faced by a sector hard hit by a debilitating liquidity crunch, obsolete equipment, incessant power cuts, company closures and massive job losses.
The agriculture sector, which forms the backbone of the country’s economy and is a vital cog in the growth of the economy, is in turmoil. A looming drought means government has to import 700 000 tonnes of maize, hence worsening its burgeoning import bill. Continued farm invasions and the failure by farmers to access loans due to stringent requirements and concerns over the unbankable 99-year leases are all ingredients that hamstring any growth in the agriculture sector.
The growth projections espoused by Chinamasa is a huge act of deception, according to economist John Robertson.
“The claimed growth is very deceptive and is likely to encourage businesses to make poor decisions,” Robertson said. “Growth in the economy is not going to happen. There will be shrinkage of the economy year-on-year. This is a serious attempt to mislead, which is wrong.”
He said low gold and platinum prices in mining and the high costs of goods and services in the tourism industry, in the face of depreciating currencies, which include the South African rand and the Zambian kwacha, militate against growth targets set by the Finance minister in his budget.
Robertson noted the dire state of the manufacturing sector, was made worse by power cuts and numerous company closures.
“The shrinkage of the economy is visible to everybody. I do not think anyone believes it (projected economic growth) to be true,” Robertson said.
Failure to address various economic fundamentals also present a major obstacle to the growth targets set by Chinamasa last week.
Sleaze in various state entities such as the National Railways of Zimbabwe, Air Zimbabwe and the Grain Marketing Board as documented in various audit and forensic reports remain largely unaddressed and still costs government millions of dollars in revenue and are major obstacles to any growth in the economy.
Lack of clarity over the indigenisation policy compelling foreign investors to sell at least 51% equity stakes to locals, still remains a major hindrance to substantive investment in the country.
Contrasting pronouncements on the policy has stalled economic growth and scuttled investment prospects. Although Chinamasa promised clarity from indigenisation minister Patrick Zhuwao before Christmas, it remains to be seen whether the measures to be announced by the minister will have the desired outcome of breathing life into the economy.
For Zimbabwe National Chamber of Commerce CEO and economist Takunda Mugaga, Chinamasa’s estimates are “ambitious”.
“The estimates by Chinamasa of 2,7% growth is ambitious,” Mugaga said. “There are a number of factors which are against the projection. If we look at the energy sector, it is struggling which means prolonged darkness. All the major drivers of the economy are in ugly shape.”
He said Chinamasa’s failure to stop the influx of cheap second-hand clothing into the county despite imposing a ban as well as his inability to curb the influx of various products, means the growth targets remains a pipedream.
Mugaga said the influx of second-hand clothing among other products is being driven by senior politicians who are supposed to help stop the influx that has crowded out local industry.
“There is need to address the rampant corruption by senior politicians. Even the installation of CCTVs at the border posts, which he announced during his budget (statement) will not help if this is not addressed,” Mugaga said.
He predicted that the country will register a 1% growth rate as a result in 2016.