Economic Revival Hinges on Sound Policies –– Analysts

THE most daunting challenge the Zimbabwean government will face this year is achieving the main objective of restoring economic stability and growth in a dollarised economy which had shrunk by 60% in a decade.

The immediate economic challenges facing the country are ensuring companies increase capacity utilisation, tackling corruption, paying external and local debts, increasing exports and overcoming foreign currency shortages.
Social challenges include inconsistent power and water supplies, poor infrastructure, and a deteriorating education and health system.
However, Zimbabwe appears to be recovering from the disaster the country had been facing over the last 10 years.
Economic analysts say prospects of opening new a business in Zimbabwe are better compared to previous years as the environment has improved.
“A lot of positive gains will be recorded this year,” economist Brains Muchemwa said. “Companies whose operations are not entirely based in Zimbabwe will fare better.”
Coronation Financial Services economic analyst Lance Mambondiani said “Zimbabwe’s banking institutions might not witness any foreign investment in future due to the unfavourable laws and procedures required by the Reserve Bank, Zimbabwe Investment Authority and the Zimbabwe Stock Exchange for listed banks”.
Analysts said loans to kick start business would be a major challenge this year. There was a complete freeze in credit markets as banks were unwilling to lend due to a high risk of default.
Write-offs constituted a huge chunk of the losses being reported. The cancer appeared to be a complete loss of confidence in the financial system.
Exiled businessman Gilbert Muponda told businessdigest that although the country’s economic performance was improving Zimbabwe was still a very high-risk investment destination.
“Apart from banks, look at Meikles Africa and Shabanie Mashaba Mines. All similar cases but treated differently. Laws are selectively applied so no foreign investor would want to come, moreso in the financial sector.”
In October last year Zimbabwe was ranked 143 out of 178 countries –– up from 153 achieved in 2008 –– in a 2009 World Bank report on Doing Business which looks at how regulatory environments influence the operations of business.
Zimbabwe also recorded the biggest jump of the 180 countries surveyed by Transparency International (TI) during the last quarter of 2009, being ranked as the 34th most corrupt nation from the number 14 it was positioned last year. TI however said Zimbabwe was still ranked in a worrying position due to the breakdown of formal procedures and structures at most institutions that are operating in a recovering economic environment.
Commenting on the survey TI chair Huguette Labelle said as the world economy began to register a tentative recovery and some nations continued to wrestle with ongoing conflict and insecurity, it was clear that no region of the world was immune to the perils of corruption.
“At a time when massive stimulus packages, fast-track disbursements of public funds and attempts to secure peace are being implemented around the world, it is essential to identify where corruption blocks good governance and accountability, in order to break its corrosive cycle,” said Labelle.
Independent economist John Robertson said Zimbabwe’s economic revival depends on policies that ensure that all major sectors of the economy start performing.
“More investment than aid is vital, to consolidate last year’s gains. This will only be possible if there are well-defined economic policies,” Roberston said.
According to the Confederation of Zimbabwe Industries, the manufacturing sector’s operation has improved to about 35%.
On the property market, dollarisation has brought about a sobering normality, whereby debt is real until it’s fully paid, and there won’t be implicit discounts associated with excessive inflation anymore.
The predictability of future incomes and costs imply therefore that in 2010, the mortgage market reincarnation will come sooner.
Property analyst Michael Russell told businessdigest on Tuesday that construction projects that had stalled will be rejuvenated and more importantly, new developments will come on stream.
“The only question that remains vague however is the when bit, as the rate of growth of the GDP, expected around 6 – 7% per annum for the next four years, will not be able to rejuvenate the mortgage market to desired levels as the majority of the working class may continue to fall outside the bracket that would be able to afford mortgages for much longer,” he said.
To access a 12-year Msasa Park mortgage of $50 000 at 10% assuming a loan to value payout of 80%, one would need to be earning a gross monthly salary of around US$4 000 to qualify.
Considering the income levels of the assumed middle class in Zimbabwe, and the projected growth rate of incomes, it will be 2014 when individuals earning around $600 per month today and growing at an average of 40% per annum will be able to afford mortgages for the humble Msasa Park houses.

 

Paul Nyakazeya

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