HomeBusiness DigestIndustrial output to decline in 2006 - economists

Industrial output to decline in 2006 – economists

Itai Mushekwe

LOW foreign direct investment threatens economic growth and will see the country’s industrial output plummeting further in the coming year, economists say.

Verdana, Arial, Helvetica, sans-serif”>Commentators attributed the poor investment to government’s skewed economic policies, which have scared investors. They also note that “serious political reforms need to be implemented as the political environment has a great influence on business as the two are interdependent and complement each other”.

Economist John Robertson said the relocation of conglomerates such as Coca-Cola to South Africa a few years ago are an sign that the country is not conducive for investors.

“This was a major blow,” he said “We’re losing jobs and investors. The message it sends to the world is painful and damaging as Zimbabwe is being depicted as an unsuitable investment destination and we’re paying a high price for that.”

Confederation of Zimbabwe Industries president Pattison Sithole declined to comment, saying they were in the processes of compiling a report on industry in terms of activity and levels of productivity.

“It’s difficult to make an assessment of where we are without proper research,” said Sithole. “We are in the process of compiling an industry assessment report expected to be out any time from now. So let’s wait for the report and then we can make conclusions based on its findings.”

A total of 33 firms, representing about a fifth of Zimbabwe’s export companies, closed down during the first half of the year due to the economic meltdown in the country.

According to a report done by the Export Processing Zones Authority, of the 33 firms 12 were agro-companies shut down after their farms were acquired during government’s botched land reform exercise.

This has deprived the economy of more than US$17,6 million.

Zimbabwe is suffering from its worst economic recession since independence in 1980. Once a vibrant economy driven by a robust agricultural base and low levels of unemployment, the country has been reduced from a breadbasket to a basket case.

It has the highest inflation rate in the world, which this week surged to 502% from 411% last month, representing a 91 percentage point increase. The government however remains adamant that the economy will get back on its feet soon.

Finance minister Herbert Murerwa in his 2006 national budget presentation recently projected economic growth of by between 2% and 3,5% next year in contrast to the International Monetary Fund’s forecast of minus 4,8% gross domestic product contraction.

President Robert Mugabe declared 2005 a year of investment, but as we draw to a close there is no meaningful foreign investments to talk of save for a few business agreements signed with China as part of government’s “Look East” policy.

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