GOVERNMENT’s economic projections of an average of 6,6% GDP growth rate between this year and 2018 buoyed by agriculture and manufacturing is nothing but pie in the sky as macro-economic fundamentals and other indicators show otherwise.
By Hazel Ndebele
Zimbabwe’s economy is receding on the back of bearish trends on the world commodities market, a ravaging El Nino-induced drought that has left nearly a fifth of the population in need of food aid, declining manufacturing sector output and acute cash shortages.
Inflation remains in negative territory mainly because of the appreciating United States — the country’s main currency — and lower commodity prices. Besides Zimbabwe is saddled by debt and international reserves are low.
Despite showing signs of recovery between 2009 and 2013 after dollarisation and political stability anchored on the formation of a coalition government, the economy has been in the doldrums after shrinking by 50% between 1998 and 2008 when government embarked on the chaotic land reform exercise.
The chaotic land reform is blamed for the massive decline in agricultural output and resultant food insecurity and starvation.
In spite of this, government has now come up with ambitious growth targets which analysts and social commentators have discredited.
The economic growth targets are contained in the final draft of the interim poverty reduction strategy paper for the period 2016-2018. The policy thrust was crafted by the Ministry of Finance and Economic Development with input from stakeholders.
The agricultural sector, which forms the backbone of the country’s economy, is badly in need of funding. The sector has strong vertical and horizontal integrations with other key economic sectors.
Tasked with breathing life into the sector, indigenous farmers are struggling with stringent requirements to access farming loans amid serious concerns of security of tenure raised by financial institutions over the unbankable 99-year leases.
To revive the once vibrant agricultural sector, government is banking on funds amounting to US$5 billion it is seeking from China. However, it is not a clear-cut solution yet given uncertainty on whether the troubled Southern African nation will get the money in the face of evidence and history showing the country has been failing to repay its arrears and debts.
The country hopes that China will provide funds for contract farmers to grow tobacco, flowers, cotton, soya beans and produce beef, among other products. A looming drought means government has to import more than 700 000 tonnes of maize, hence worsening its burgeoning import bill.
Finance minister Patrick Chinamasa had initially forecast the economy to expand by 2,7% this year, but revised the growth target to 1,4% on account of falling commodity prices in the global markets and the negative impact of the drought. The revision shows that government is also aware that achieving economic growth is a Herculean task when most sectors are not performing.
“The strategy targets an average annual growth rate of 6,6% during the period 2016-2018, with 2017 and 2018 projected to grow by 9,5% and 8,9%, respectively,” reads the interim report of August 1.
The manufacturing sector, which recovered in 2010, has been recording low output due to limited concessionary funding to retool at a time competition from cheap imports has been intensifying. Limited investment in key economic sectors has been attributed to the country’s poor investment laws with critics citing the indigenisation and empowerment laws compelling foreign investors to sell controlling equity 51% stakes to locals as the elephant in the living room.
The manufacturing sector, which government has placed its hopes on, has since collapsed and will cost an arm and a leg to revive it. The sector is grappling with obsolete equipment, incessant power cuts, company closures and massive job losses. Furthermore, the continued decline of industry’s capacity utilisation from 57,2% in 2011 to the current 34,3% epitomises the serious challenges faced by a sector.
The country’s foreign direct investment (FDI) inflows tumbled from US$545 million in 2014 to US$421 million last year, which represents a 23% drop.
High levels of corruption as shown in the Auditor-General’s reports, among other bottle necks, have discouraged investment in the country. Moreover, failure by government to privatise parastatals, currently bleeding the fiscus, is proof that the projected economic growth within the next two years is just a fantasy.
The broke government’s Lima Plan, a move that would have seen the troubled country paying US$1,8 billion in arrears to preferred international financial institutions (IFIs) and access US$2 billion in new funding, is under threat as many are lobbying against it.
Another hamstring on economic growth is the crippled tourism sector. A ban on ivory imports and invasion of conservancies and endless roadblocks is hurting the sector. A 15% tax imposed on payments for accommodation and tourism services by foreign visitors has left a huge dent on the sector with industry players warning that the tax makes them uncompetitive.
A Zimbabwe Council for Tourism report reveals that due to the value-added tax imposed by government reveals that the country could have lost close to a staggering US$124 million in tourism revenue last year.
Economic analyst John Robertson said it was a pity that government thinks that funding from abroad will revive the economy.
“Government might be rejected by the Chinese because we have failed to remit in the past. It is a pity that we are banking on funding from abroad to revive the economy which was crippled by policies and the destruction of property rights,” said Robertson. “It is government’s mistaken thinking that the economy will grow by 6,6% and projections on recovery will not work. Already there is no growth taking place this year and this shows that government is not telling the truth, if it is not working now why should we believe that it will work next time?”
Economist and Buy Zimbabwe chairman Oswell Binha said government could be left with an egg on the face should the economy slides into recession, as analysts project.
“Zimbabwe under its current circumstances will never achieve any growth beyond 4%, the manifestation of inability to maximise on what we have as major drivers of the economy is affecting us,” Binha said.