FINANCE minister Tendai Biti’s forecast of a double digit economic growth this year is unrealistic for a country struggling to attract foreign direct investments and also facing political uncertainty, analysts said this week.
Economic commentators and analysts said it is highly unmlikely that the finance minister’s projections of between eight and 15% growth in the Gross Domestic Product (GDP) would be achieved given the political uncertainty and the likelihood of a violent election later in the year.
Violence is already on the increase in both rural areas and cities as Zanu PF and its nemesis MDC-T jostle for support.
A controversial “indigenisation policy” theme adopted by Zanu PF — criticised for being a systematic “expropriation” of foreign-owned companies — sends capital elsewhere despite Zimbabwe’s dire need for investment.
Saddled with a soaring external debt, now nearing US$10 billion, limited foreign direct investment averaging 5% of GDP, limited fiscal space and growing wage demands from the public service, Zimbabwe faces a herculean task in turning around its fragile economy.
But Zimbabwe’s political parties — Zanu PF and the two MDC formations — seem to be frantically fighting from different fronts. An early poll according to analysts could be inconclusive and further plunge the country into economic turmoil.
Recent pronouncements by Defence minister Emmerson Mnangagwa on foreign-owned companies, a thwarted invasion of lakeside properties last weekend and chaos at city council offices, according to analysts points to post election gloom and doom.
Biti however thinks otherwise.
He was quoted by wire services in South Africa last week saying a single digit growth this year is “conservative”, adding that economic growth could be as high as 15%.
Encouraged by the resurgence of the tobacco industry, emerging from a low base and surging mining industry output, the Finance minister believes Zimbabwe will shout hooray on December 31 if the economic environment remains generally peaceful. But the odds are there to defy.
“A unilateral unplanned election would basically be a bloodbath,” Biti said. “Capital will flee. I have to discount robust growth figures because of the fear of a violent election.”
Mnangagwa, Biti’s counterpart in the fragile coalition, is determined to toe the Zanu PF line on sanctions before Zimbabwe fully recovers.
He said government would soon summon business leaders running foreign-owned companies and make them announce their position on economic sanctions imposed by the United States and the European Union, which his party blames for the slow growth rate.
On the contrary, Vice-President Joice Mujuru, widely perceived as the Defence minister’s rival within Zanu PF politics, last December engaged business leaders in the capital in a bid to remove the party’s bad-boy tag.
In the meantime, local companies are struggling to operate profitably owing to limited access to lines of credit and a potentially paralysing energy crisis, worsening by the day.
“This statement is yet another nail in the investment coffin, for such threatened actions are a gargantuan deterrent to any investor,” writes economic commentator and columnist Eric Bloch, responding to Mnangagwa’s remarks.
“Those who apply the sanctions have no malice against Zimbabwe or its people, but only against oppressive, non-democratic policies of those who have abysmally and disastrously misruled Zimbabwe. Now to resort to expropriation of their companies is tantamount to piracy and theft.”
Zimbabwe National Chamber of Commerce research economist Kipson Gundani said although Zimbabwe could maintain an upward trend, 15% growth could be “over-optimistic”.
“Assuming that economic stability prevails—with or without elections, Zimbabwe could register up to 10% growth,” Gundani said.
“Mining, driven by an anticipated rise in mineral prices on the back of demand from China and India could be a key economic driver this year. Information Communication Technology sector could be second or third contributor to GDP competing with agriculture.”
He said a three-year moratorium on elections could help Zimbabwe on its recovery path.
Apart from the politics, Biti also sees the country’s run down infrastructure and loss-making parastatal inhibiting growth.
Ranga Makwata, an investment analyst contends that a double digit growth could be possible buoyed by mining and agriculture, should tranquility prevail. But he said 15% growth could be overambitious.
“I believe that it is possible to surpass the projected 9,3% (announced by Biti during last year’s budget presentation) because of an anticipated strong growth in mining and agriculture although a projection of 15% could be pushing the envelope much higher,” Makwata said. “It could be too optimistic given the high level of country risk.”
He said economic growth would be driven by “small investments” in mining which are attracting significant capital.