ZIMBABWE’S hope for a 5% annual economic growth buoyed by agricultural and mining sectors is fading away as the country’s decisive elections draw closer with analysts saying the target is unattainable.
Report by Hazel Ndebele
Despite the usual lack of policy stability and other challenges that have spilled into 2013 from previous years, the general elections, which are set for July 31, are a major setback for Zimbabwe’s economic performance, with visible signs of slowdown apparent across key sectors.
The mining sector has been affected by erratic power supplies, policy instability and capital constraints with gold production registering a 2,73% year-on-year decline to 1 081,93kg in April 2013 while small-scale producers’ contribution to total gold production declined by more than 25% between March and April 2013.
In agriculture, tobacco deliveries missed the Tobacco Industry Marketing Board’s 170 million kg target for 2013 to close the season at 160 million kg.
Economist Takunda Mugaga told the Zimbabwe Independent this week the country’s economic performance is expected to continue slowing down further from the Medium Term Plan’s average 7,1% annual target on account of reckless political statements being made by the executive.
“The economy will further sink with Mugabe’s mantra of pulling out of Sadc slowing trade movements between Zimbabwe and its trading partners,” he said.
“The targeted 5% economic growth is unattainable considering everything has come to a standstill and lines of credit are to dry up completely as we approach July 31. This is expected to continue beyond the next three months.”
Economist Eric Bloch also said: “I don’t think as a nation we will be able to attain 5% economic growth by the end of the year because after the elections, it will take time for the economy to improve in consideration of the liquidity crisis the country is in.”
“It is important for the economy to have free and fair elections. The business community is looking forward to the new government and policies which will boost economic recovery greatly needed and craved for by all Zimbabweans.”
He said banking sector deposits would further decrease due to fear of going back to the Zimbabwean dollar.
Bloch’s remarks follow similar remarks by the African Development Bank (AfDB)’s May 2013 Zimbabwe Monthly Economic Review that Zimbabwe’s economic slowdown is mainly a result of uncertainty around the process and outcome of elections with the current liquidity crunch being among the signs of stress.
According to the regional bank, broad money supply declined from 33,4% in March 2012 to 10,5% in March 2013 largely due to declining long-term deposits, after deposit maturities were withdrawn from the formal banking system instead of being rolled over.
“The withdrawal of long-term deposits may be attributed to factors that include uncertainty around the post-election business environment. On monthly basis, banking sector deposits have declined influenced by low average disposable incomes, individuals’ and corporates’ reduced capacity to save and weak confidence in the formal banking system,” AfDB said.
The latest AfDB report said Zimbabwe was in debt distress with arrears to most creditors continuing to accumulate.
The economic review notes that net credit to government has been increasing due to pre-election government spending such as funding for the referendum, elections and voter registration, among others. Net credit to government has increased from US$153,2 million in February this year to US$170,6 million and is most likely to increase again.
Figures released by the Zimbabwe National Statistics Agency two weeks ago indicate the country’s trade deficit will worsen to over US$3 billion by the end of this year after the balance of trade in the four months to April widened to US$1,6 billion as the country’s reliance on imported goods and services grew against declining exports.
Confederation of Zimbabwe Industries (CZI) president Charles Msipa said many businesses in the manufacturing sector are still in crisis or in intensive care due to the country’s suffering economy.
“Political stability is an essential pre-condition for an environment that fosters business and economic growth. As CZI, we are calling for peaceful and credible elections,” he said.
Analysts say the manufacturing sector desperately needs investment given its failure to embrace new low-cost production.