HomeBusiness DigestZim economy poised for rapid recovery

Zim democratic transition remains at risk –– ICG

Hart, who was quoted on the Great Indaba website said: “Zimbabwe is poised to become one of the biggest recovery stories on the continent.”

Hart argued that there was a solid infrastructure base, although there had been no capital expenditure for more than a decade.

“There is power, there is a road network and the education system has not collapsed, so skills are available. And while a great deal has broken down, there is significant institutional memory that will fast-track growth when the political landscape becomes less obstructive,” said Hart.

Since dollarisation, the economy has steadily recovered registering growth rates of 5,7% in 2009, 8,1% in 2010 and 9,3% in 2011. Some economists are pessimistic that the growth is not sustainable since the economy is recovering from a low base.

The economy is expected to grow by 9,4% in 2012. Finance minister, Tendai Biti said that the growth will mainly be driven by improved performance in  agriculture, mining, tourism and finance.

But the 2012 growth figure has been projected to end lower since the out-turn of the 2011/2012 agricultural season indicates a lower yield due to prolonged dry spells in some parts of the country.

Some economists also argue that the 9,4% projection is on the premise of firm international commodity prices and any significant fall will derail the projection, since mining was the biggest contributor to GDP.

But Hart argued that the rapid turn of the economy to real growth would be on the back of Zimbabwe having one of the largest reserves of platinum in the world and a wealth of other resources, including diamonds, gold, chrome, nickel and coal.

Hart suggests that investment in tourism, telecommunications, financial services, transport and retail would come in relatively quickly if the system stabilised.

However, Professor Tony Hawkins   has in the past two weeks said that optimism in the potential of the Zimbabwean  economy by Western capitals is misplaced since the country’s policies  will not change even if there is a change of government.

“The belief in Western capitals is that post-Mugabe Zimbabwe will be a very diffrent country. But the dynamics within Zimbabwe and the region have changed and whoever succeeds Mugabe is not going to reverse his policies on land and indigenisation,” said Hawkins.

Statistics from the Ministry of Finance show that during the first quarter  of 2012 declared exports shipments increased by 6,2% compared to the same period in 2011.

Mining remained the major contributor to total exports at 70,7% and the sector also registered significant growth in exports compared to the same period in 2011.

Tobacco,  the second major export earner, failed to maintain the 2011 momentum over the same period as exports registered a 42,57% decline in 2012 but  this has been attributed to the slow export shipment and not necessarily a decline in output.

“Indications on the ground show that the decline in tobacco exports over this period does not necessarily reflect decline in output, as there was a 20% increase in quantities sold compared to 2011,” according to the African Development Bank’s monthly report.

Statistics from the Tobacco Marketing Board indicate thatthe 2012 tobacco marketing season recorded a 25% increase in sales to total 55 million kilogrammes of flue cured tobacco on day 41 from the comparable period last year.

Manufacturing exports increased by more than 56% in comparison to the same period in 2011, but only constitute only 8% of total exports.

Given the huge gap that still exists, the key to resolving the negative trade balance can be argued to be generally hinged on the extent to which policy strategies can be formulated to incentivise value addition for exports.

But the full recovery of the economy has been impeded by the political environment which has seen the country reeling under a US$6,9 billion external debt. Biti indicated that the debt is expected to balloon to US$8 billion by end of 2012.

The fiscal out-turn for 2012 shows that cumulative government revenues for January and February amounted to US$483,3 million, against a target of US$549,5 million.

This implies a cumulative deficit of US$61,24 million, largely emanating from under-performance of diamond revenues where only US$5 million was accounted for against a fiscal contribution of US$41,5 million in the first two months.

Salary adjustments effected in January 2012, resulted in cumulative employment costs for the first two months of US$257,4 million, which translates to 53,3% of total revenues and 57,9% of total cumulative expenditures.

“This could further skew expenditures towards employment costs,” said the ADB.

Reginald Sherekete

THE economy is poised for a rapid recovery when the political landscape becomes more conducive for business activity, since the country has shown signs of resilience despite a constrained operating environment, says Christ Hart of Investment Solutions.
Hart, who was quoted on the Great Indaba website said: “Zimbabwe is poised to become one of the biggest recovery stories on the continent.”
Hart argued that there was a solid infrastructure base, although there had been no capital expenditure for more than a decade.
“There is power, there is a road network and the education system has not collapsed, so skills are available. And while a great deal has broken down, there is significant institutional memory that will fast-track growth when the political landscape becomes less obstructive,” said Hart.
Since dollarisation, the economy has steadily recovered registering growth rates of 5,7% in 2009, 8,1% in 2010 and 9,3% in 2011. Some economists are pessimistic that the growth is not sustainable since the economy is recovering from a low base.
The economy is expected to grow by 9,4% in 2012. Finance minister, Tendai Biti said that the growth will mainly be driven by improved performance in  agriculture, mining, tourism and finance.
But the 2012 growth figure has been projected to end lower since the out-turn of the 2011/2012 agricultural season indicates a lower yield due to prolonged dry spells in some parts of the country.
Some economists also argue that the 9,4% projection is on the premise of firm international commodity prices and any significant fall will derail the projection, since mining was the biggest contributor to GDP.
But Hart argued that the rapid turn of the economy to real growth would be on the back of Zimbabwe having one of the largest reserves of platinum in the world and a wealth of other resources, including diamonds, gold, chrome, nickel and coal.
Hart suggests that investment in tourism, telecommunications, financial services, transport and retail would come in relatively quickly if the system stabilised.
However, Professor Tony Hawkins   has in the past two weeks said that optimism in the potential of the Zimbabwean  economy by Western capitals is misplaced since the country’s policies  will not change even if there is a change of government.
“The belief in Western capitals is that post-Mugabe Zimbabwe will be a very diffrent country. But the dynamics within Zimbabwe and the region have changed and whoever succeeds Mugabe is not going to reverse his policies on land and indigenisation,” said Hawkins.
Statistics from the Ministry of Finance show that during the first quarter  of 2012 declared exports shipments increased by 6,2% compared to the same period in 2011.
Mining remained the major contributor to total exports at 70,7% and the sector also registered significant growth in exports compared to the same period in 2011.
Tobacco,  the second major export earner, failed to maintain the 2011 momentum over the same period as exports registered a 42,57% decline in 2012 but  this has been attributed to the slow export shipment and not necessarily a decline in output.
“Indications on the ground show that the decline in tobacco exports over this period does not necessarily reflect decline in output, as there was a 20% increase in quantities sold compared to 2011,” according to the African Development Bank’s monthly report.
Statistics from the Tobacco Marketing Board indicate thatthe 2012 tobacco marketing season recorded a 25% increase in sales to total 55 million kilogrammes of flue cured tobacco on day 41 from the comparable period last year.
Manufacturing exports increased by more than 56% in comparison to the same period in 2011, but only constitute only 8% of total exports.
Given the huge gap that still exists, the key to resolving the negative trade balance can be argued to be generally hinged on the extent to which policy strategies can be formulated to incentivise value addition for exports.
But the full recovery of the economy has been impeded by the political environment which has seen the country reeling under a US$6,9 billion external debt. Biti indicated that the debt is expected to balloon to US$8 billion by end of 2012.
The fiscal out-turn for 2012 shows that cumulative government revenues for January and February amounted to US$483,3 million, against a target of US$549,5 million.
This implies a cumulative deficit of US$61,24 million, largely emanating from under-performance of diamond revenues where only US$5 million was accounted for against a fiscal contribution of US$41,5 million in the first two months.
Salary adjustments effected in January 2012, resulted in cumulative employment costs for the first two months of US$257,4 million, which translates to 53,3% of total revenues and 57,9% of total cumulative expenditures.

The ballooning public sector wage bill has a crowding out effect on capital expenditures which are key to long term economic recovery.
The recent announcement by President, Robert Mugabe,apologising to civil servants for low salaries will exert more wage pressures on the fiscus since unions are expecting a review in June 2012 during the Mid-Term Fiscal Policy Review process.

“This could further skew expenditures towards employment costs,” said the ADB.

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