By Admire Mavolwane
IN the past three or four weeks one could somehow feel that something was definitely brewing, although it was difficult to put a finger on it. T
he atmosphere on its own was giving uncanny signals of some frantic behind the scenes activity.
All of a sudden the stock market came to life, gaining some 10,04% in the four days to last Thursday and the industrial index went for the Easter and Uhuru holidays in the comfort zone, the other side of 30 million points. Interest rates had softened as the deficit in the market money had declined significantly from a peak of $9 trillion to current levels of $2-$3 trillion.
One could somehow discern that the rebounding of the stock market was not only about the empirical, inverse relationship between shares and interest rates, but that there was more to it.
As is the norm during such breaks as the Easter/Independence day holidays, investors and other market watchers take time to reflect, exchanging notes and feed one another on the latest rumours. The direction of interest rates, whispers about big deals with Russia and new, grand plans dominated many such meetings.
We are already beginning to decipher the resolutions from these informal and private gatherings as some investors have started to aggressively take positions on the stock market. In the meantime, the 91-day treasury bill has not budged from the previous 525% and is showing no sign of doing so whilst the Reserve Bank is still to revise, or may not adjust, the overnight accommodation rate upwards — in line with the March inflation rate figure of 913,6% — from the current 750% per annum.
Notwithstanding the positive mood on the stock market, Zimbabwe is still visibly not well, economically, hence the running around that has been going on.
The data on the symptoms that has been coming out has not been encouraging. Those responsible for measuring the temperature have been ringing the alarm bells, with the Consumer Council of Zimbabwe publishing the results of its “family of six basket” survey which showed a month-on-month increase of 25%.
In absolute terms, a household now needs $35 million to get through the month. Last year, same time, a family of two adults and four minors needed only $2 123 121, which means the cost of living has gone up by 1 553% year-on-year.
The official monitor of price rises, the Central Statistical Office’s figures were, in the opinion of many, watered down with the month-on-month inflation rate of 19,8% and an annual rate of 913,6%. It does not matter, however, whether one uses the official figures or the independently evaluated ones, the fact remains that the patient is not well and neither is she improving. Her temperature is presently not showing any sign of stabilising, hence the trips abroad and state visits.
The patient also continues to lose weight and is getting more and more emaciated. In 2005, it is estimated that her health declined by 3,5% in real terms whilst the so-called experts from the International Monetary Fund (IMF) would argue that the weight loss was in the region of 6,5%. 2005 marked the eighth consecutive year in which the patient had succumbed to a number of exogenous and indigenous shocks, resulting in her wasting away.
Last December, the Ministry of Finance, based on a number of assumptions, was projecting that Zimbabwe would recover by between 2% and 3,5% this year. The assumptions included a 14,8% increase in crop harvests, 26% recovery in mineral production and an unquantified recovery in tourist arrivals.
Hope still springs eternal that some weight gain will be recorded this year, although the crop harvest is now estimated to improve by only 9%. The commencement of the tobacco selling season has been postponed a number of times, with players haggling over prices.
Contrary to its own pronouncement in the October 2005 monetary policy statement, the Reserve Bank has intervened with a support price and it is now hoped that auction floors will open this coming Monday. Total output, though, is estimated at an optimistic 55 million kilogrammes, some 25% lower than the 74 million kilogrammes achieved in the prior season. Quality problems are most likely to result in less than optimal foreign currency earnings.
Estimates for maize are not yet at hand, although the Minister of Agriculture recently announced a new producer price of $31,3 million per tonne. Cotton is, however, expected to show positive growth from 331 000 tonnes to roughly 350 000 tonnes. Figures for sugar and other important crops are not yet available, though, making it difficult to give an informed prognosis on total agriculture production and concomitantly the economy in general.
As indicated earlier, the premonition that things were happening in the background proved to be true with the official launch this Wednesday of a new “action-orientated and results-based” economic programme expected to stabilise the patient within the next six to nine
The new prescription, going by the name National Economic Development Priority Programme (NEDPP), will as its initial step work to raise US$2,5 billion within the next three months.
The programme will have its focus areas as economic stabilisation and inflation reduction; foreign currency mobilisation and use; and increased agriculture co-ordination with adequate supply of inputs and food security. The programme will also among other things seek to ensure enhanced savings and increased investment flows.
Seven task forces have been set up and will be responsible for different portfolios. They will be expected to adhere to strict deadlines.
As is the case with policies at national level and strategy documents at corporate level, it is the ability to follow through the letter and spirit of the blueprints that matter most. We have had a number of economic blueprints, too many to mention and most have either been abandoned mid-way or left to gather dust on the bookshelves.
Our view, however, is that this new remedy — NEDPP — should not only be administered immediately but also be applied with the same resoluteness and spirit as was exhibited in that very successful May/June 2005 operation. The medicine should then be given ample time and encouragement to work.