As the economy continues to sink deeper and deeper into recession, most people are generally concerned about the state of affairs. Retailers are struggling, as is the banking, manufacturing, and food sectors. In fact, the whole economy. There seems to be a gradual loss of confidence and people are holding firmly onto the little money they have.
The uncertain economic outlook makes it very difficult for people to plan ahead and most are living from day to day. Economic activity has slowed sharply since 2013 and I expect growth to decline further in 2015 unless something is done to restore confidence. It seems like there is not enough focus on the economy. We need to work together to identify the bottlenecks and find ways to stimulate growth in Zimbabwe.
We need greater debate and discussion on a way forward. If not, we will continue to see more businesses shut down and greater unemployment. There is a shift away from the formal sector to the informal sector. An “informalisation” of our economy. The streets of Harare are already littered with informal traders trying simply to survive. Taxing the informal sector is not the solution. Informal traders can barely survive on their income given how competitive the landscape has become. We need to seek to reverse this process and create formal jobs for people working in the informal sector. We can’t all be entrepreneurs. According to the latest figures being released by the Zimbabwe National Statistics Agency (Zimstat), over the last 4 years over 227 000 workers have been retrenched. This number is likely to increase if nothing is done to reverse this trend.
Zimbabwe faces significant headwinds, a poor agricultural season, depressed commodity prices and a benign global economic outlook. In the first six weeks of trading, tobacco sales declined 22%. Both volume and prices have declined this year. We are being forced to import over 700 000 tonnes of maize. For a country so rich in agriculture it is a shame we are forced to import basic crops such as maize.
We need to revive our agricultural sector. We need to become productive again. The agricultural sector is the backbone of the economy. We need to become self sufficient in the production of basic agricultural commodities before we think about exporting. We need to restore confidence in the agricultural sector and develop a model to allow banks to lend money to small-scale communal farmers at concessionary rates. The banks have always argued that they cannot lend without security but how do we feed ourselves if we are not willing to support each other. Banks need to come together to find ways to support the communal farmers and the farmers need to establish cooperatives to work more closely with the banks.
Zimbabwe can ill afford going through another economic crisis so soon after the crisis of 2008. Some steps are being taken to restore confidence, such as:
Re-engagement with the multilateral agencies regarding our outstanding debt,Restoring confidence and stability in the financial sector,
Focus on supply side in terms of pricing.
These measures are sensible mid to long term policies. What Zimbabwe needs is urgent attention to the short term challenges facing the economy. Liquidity or the lack thereof is becoming a critical issue. Recent reports suggest that Government has recently failed to remit payments for SSB deductions which has implications for both the civil servants and the creditors. Civil servants will find it difficult to access credit while businesses risk collapse if payments are not made on a timely basis. Zimbabwe needs to focus on short term policies to restore confidence.
We need to create an enabling environment and make it easier for investors in Zimbabwe. First and foremost we need to relook at our Indigenisation policies.
Whilst there is nothing wrong with the principle of Indigenisation, I strongly believe that if implemented correctly, it has the ability to transform the country and uplift its people. However, most investors I talk to seem very reluctant to invest in Zimbabwe if they are unable to control their investment from day one.
We need a more flexible policy and need to perhaps consider a phased implementation of the programme from which the country can truly benefit in a symbiotic partnership with investors. Some changes were announced earlier this year where authority was given to line ministries to negotiate with investors.
Unfortunately, this fragments the key principle, creates greater confusion and exposes the policy to inconsistencies amongst ministries.
While we cannot have a one size fits all policy we need to simplify and implement the policy in a consistent manner. Perhaps we should look at sector thresholds and allow more time for compliance? Rome was not built in a day and neither will Zimbabwe benefit from its resources overnight. The confusion has led to inertia.
Investors are not willing to risk being the first. Investors have adopted a wait and see policy on Zimbabwe whilst Zimbabwe desperately needs investors.
Something has got to give and it won’t be the economy.