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New Year resolutions …

I WOULD like to wish you all a very Happy New Year and best wishes for 2015.

Ritesh Anand Column

Like many, I hope this will be a better year for Zimbabwe. I’m somewhat optimistic that the country will have a good year driven by the recovery in agriculture, mining and tourism sectors.

The foundations for a strong recovery are in place, what is now required is a pragmatic policy framework to promote trade and investment.

The period between Christmas and New Year is always a good time for reflection and introspection. It’s a time to reflect on key achievements over the past year while setting goals for the year ahead. 2014 was a tumultuous year for Zimbabwe, a period of slow growth and heightened risk in the financial sector.

Inflation remained low while the trade deficit has remained high. Sovereign debt remains high and unsustainable. The economy slowed significantly in 2014 as consumer and investor confidence waned.
Growth targets were revised downwards from 6,4% to 3,1% in 2014 and from 6% to 3,2% in 2015.

It’s imperative that government restores confidence in 2015 and creates an enabling environment for trade and investment.
Only then will Zimbabwe experience long-term sustainable economic growth and transformation.

Zimbabwe needs to target at least 6% growth per annum over the next 10 years for the benefits to be truly felt. The challenges facing the country in 2014 have not changed much. These include:

Negative perception;
Lack of confidence;
High risk aversion;
Lack of export competitiveness;
Lack of economies of scale;
Sluggish growth of the world economy;
High country risk — negative effects of sanctions.

The symptoms of the challenges are reflected in the economy in the form of declining growth, negative trade balance, external debt overhang, de-industrialisation, limited fiscal space, and high default rates (Non-Performing Loans).

The challenges facing the economy need to be addressed urgently if Zimbabwe is to grow in 2015 and beyond.

Perceptions are difficult to change and Zimbabwe needs to send the right signals to the international community in terms of attracting investment.

Zimbabwe is a safe and attractive place to do business. This message needs to be communicated effectively, jointly by government and the business community. I’m pleased to say that perceptions are changing gradually but much more can be done to market Zimbabwe more effectively.

Consumer and investor confidence is at an all time low — policies need to be put in place to restore confidence, especially among domestic investors. How can we expect international investors to invest in Zimbabwe when locals have been reluctant to do so?

Risk aversion is high in Zimbabwe given the uncertain environment and the high cost of doing business in Zimbabwe. While macro-economic conditions are stable, political and policy uncertainty remains high. Policy clarity, consistency and transparency are critical to restoring investor confidence and reducing risk aversion.

The strengthening of the US dollar against most currencies in 2014 had a negative impact on export competitiveness. We need to find ways to drive efficiency and create export incentives for domestic manufacturers. I expect the US dollar to continue to strengthen against most currencies in 2015, making exports less competitive.

Efficiency is driven by economies of scale. In order to achieve economies of scale Zimbabwe needs to invest significantly in modern equipment and technology. In the absence of domestic investment, Zimbabwe needs to find ways to attract foreign investment. Economies of scale can only be achieved through significant investment in new equipment and technology.

As previously discussed in my column, the global economic environment is showing signs of weakness. The Dow Jones index fell by over 4% this week while oil prices continue to decline further to less than US$50.

Global growth is likely to be weaker than anticipated and fund flows to Africa are expected to decline. Commodity dependent countries, especially Nigeria, are likely to suffer significantly from falling oil prices. Zimbabwe needs to ensure that it is well-positioned to attracted limited FDI flows to Africa.

Finally, sanctions continue to have a negative impact on trade and investment in Zimbabwe. The gradual relaxation of European sanctions is welcome, but much more needs to be done to restore relations with the international community.

Zimbabwe’s economy has the potential to grow at over 6% per annum.

Given its vast natural resources, strategic positioning in the region, and highly educated population, Zimbabwe is well-positioned to benefit from a change in perception.

Perceptions are gradually changing, but we need to do more to market Zimbabwe as a safe place to invest.

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