As Africa basks in the glow of renewed optimism at the prospects of economic ascendency, Zimbabwe’s recent economic growth and future prospects are clouded by the dark shadows of the tenuous foundations of this growth. The African Development Bank has forecasted Zimbabwe will grow by 5,5% in 2013 with the World Bank putting it at 6%. While ordinarily impressive this forecasted off a low base.
Opinion by Kevin Msipha
A number of key economic, social and political turnstiles will act as conditions precedent in the attainment of this expected growth. In 2012 multilateral institutions led by the IMF continued their cautious but positive reengagement with Zimbabwe. While technical assistance has now been approved, it would be an unhinged hope to expect the resumption of aid to the economy in 2013. In other words, Zimbabwe can expect further positive signaling without the capital support the economy needs badly.
With 2013 expected to be an election year and given the country’s history with elections, uncertainty abounds. Although government has relinquished its right to seignorage, it remains the biggest player on the economic landscape through the use of its fiscal and legislative monopoly.
While the constraints of the last four years will feature prominently as a function of any economic outcome, it is the impending elections that will dictate government economic reform agenda or rather lack of it. Like a bull on heat, political actors will be consumed by a single goal; ensuring ‘security of tenure’ for themselves.
The political rhetoric and rancor will increase with the consequence of giving business a reason to adopt a wait and see attitude, thus postponing key economic initiatives. It is difficult to see genuine economic programmes receiving priority in 2013 as the politicians spend more time on party activities to the detriment of their public service roles. The earlier the elections, the better for the economy as this will free a lot of energies and resources tied to this overhyped contest.
With everyone talking of a watershed election year, one can be forgiven for missing the hushed whisperings, discernable only to the attentive ear coming from the financial sector. The cocktail mix has the makings of a potent brew. Throw in empowerment regulations, new legislation governing the conduct and supervision of the sector, new capital requirements, interest price fixing, uhuru banking, poor lending practices and persistent tight monetary conditions and voila, you have an immutable mess. Against such a background, a financial crisis in 2013 is a distinct possibility. Will the era of the indigenous banks sign off in 2013? Will commercial banks meet the US$100m capital requirement deadline? Will foreign banks comply with indigenisation? What will the banking institutions new business model be, following the sum of parts disguised nationalisation by government? In 2013, in the absence of an exogenous solution, we are likely to learn just how bad the non-performing loans rate is.
The government expects agriculture to grow by 6,4%. Agriculture has deep linkages with the rest of the economy. It holds significant employment opportunities and can form the basis of sustainable competitive growth for the manufacturing sector. A scientific method of experiment and empirical observation in this sector would lay bare the reasons for the contrasting fortunes of tobacco and cotton crops when compared to the maize and wheat crops. The answer portends a host of lessons that could assist policy- makers in understanding what the ingredients of a successful agricultural sector are and herald a new era in the sector. All farmers small, medium and large, respond to economic incentives. Far from being tradition bound peasants, farmers have shown that they share a rationality that far outweighs differences in their social and ecological conditions. Suffice to say, with increased rainfall, financing and migration to crops that have minimal government interference, we shall see greater than expected growth in 2013.
World mineral prices are expected to remain steady as the world economy seeks a sustainable growth trajectory. Emerging economies will hold strong sway over the fortunes of the extractive industry. Increased technology in the extractive industry continues to reduce the downstream benefits available from the industry to the rest of the economy. As noted from a report by the World Bank, the mining sector ability to extricate the economy from its present predicament is limited. That said, a growth averaging 30% in the past four years, with the 2013 growth figure expected at around 17% cannot be bad, given the circumstances. Any expectations of diamond revenue coming to the rescue of a capital starved economy should have been soundly doused by now, despite proclamations by the Mines minister to the contrary. With the major mining companies having cleared preliminary empowerment legislation, expect some decent growth.
Manufacturing continues to be the bed-ridden ailing child of the economy as evidenced by the challenges faced by Suncrest, Karina Textiles and Cairns. The sector is expected to grow by a low 3% in 2013, despite its low base. Any resuscitation of the sector must occur with regard to the size of the market, the capability of suppliers, the costs of production, the distribution hurdles, the availability of technology, and the state of competition. Service companies will grow on the back of low comparative wages in the economy. That said, 2013 is unlikely to witness a notable upturn.
Other ancillary trends that could provide a positive fillip to the economy include the diaspora element, business groupings reorganisation, private equity or venture capital and the informal and formal sector.
Zimbabweans in the diaspora are returning home in increasing numbers. They carry skills that have been horned in a global setting and a work ethic that reminds one of the values of old.
- Kevin Msipha is a Finalist of the Chartered Financial Analyst (CFA) Programme.