The year 2014 has begun with mixed signals coming from across the global economy.
Editor’s Memo with Itai Masuku
On the upside, data emerging from the world’s biggest economy, the United States, provided some hope as jobs statistics and spending were on the rise.
In Europe, whose economy, as we all know, is the most linked to Africa and the developing formerly colonised world, signs are that there is significant growth, particularly in the United Kingdom whose economy is closely intertwined with ours.
Over in Asia, the main player and the world’s second largest economy, China, is still experiencing growth, but not at erstwhile rates, but still above 5% a year. In the world’s third largest economy, Japan, despite doubts on the success of charismatic Prime Minister’s Shinzo Abe’s brand of economics dubbed “Abenomics”, data from the country’s Bureaus of Economy, Trade and Industry show a moderately upward trend in manufacturing, spurred by the motor car industry.
The flip-side of the same world economic outlook is that the US is headed for another debt ceiling crisis, which threatens once again to bring with it all other world economies into its vortex.
In the EU, the bloc’s second largest economy France may not be doing so well and only this week president Francois Hollande announced tax and spending cuts in an effort to rekindle its economy.
The big scare from China, however, is a report in the slowdown of its manufacturing sector, which for decades has been rabidly consuming all imaginable mineral commodities, many of which Zimbabwe also produces. Further, China has since mid-2013 been in an increasing liquidity crisis which it has tried to subdue through market interventions. In addition, China’s debt level is reported to have risen by 70% as at end of 2013.
It is these threats from the US and China that pose the biggest menace to Zimbabwe’s fragile economy. If the US Congress does not approve the raising of its government’s borrowing levels this month, this means goodbye to the quantitative easing (QE) policy that had not only helped keep its industry afloat, but those of the other world economies. The QE policy contributed to the bull-run that US stocks experienced towards the end of the year.
As for the slowdown in Chinese demand, we have already seen the easing in commodity prices. This poses serious challenges for Zimbabwe, which, through its Look East policy, has increasingly looked to China as its major export destination, particularly for chrome and diamonds.
Zimbabwe’s mining index tumbled from 84,07 points as at January 31 2013 to 45,79 points by December 31 2013. Developments in this sector are so crucial as mining still remains the biggest hope for Zimbabwe.
The diamond sub-sector in particular needs special attention. It is ironic that as a country that now accounts for nearly a fifth of all the world’s diamond output, Zimbabwe only expects to receive a paltry US$100 million from diamond tax revenues in 2014.
That’s odd, considering that if one accounted for a fifth of the world’s sales of toothpicks this would translate into billions. Clearly, much more needs to be done in making this sector more transparent.
Apart from measures proposed in the budget, which depend on corruption-prone entities such as Zimbabwe Revenue Authority, the police, Zimbabwe Mining Development Corporation and the Minerals Marketing Corporation of Zimbabwe, it’s high time government adopted space-age mineral monitoring technologies now already employed by countries such as the Democratic Republic of Congo and Kenya.
As things stand, Zimbabwe can realistically pin its recovery on two sectors, mining and revitalised agriculture.