Services sector backbone of Zim economy: Report

THE services sector is increasingly becoming the biggest contributor to the country’s Gross Domestic Product (GDP) ahead of critical sectors such as agriculture and mining, according to a competitiveness report launched yesterday.

By Kudzai Kuwaza

The 2016 Zimbabwe National Competitiveness Report by the National Economic Consultative Forum (NECF) released in Harare revealed that the services sector is fast becoming the main driver of economic growth and employment.

“The services sector accounts for about 64% of Zimbabwe’s GDP and is increasingly becoming an important driver for growth and employment,” the report revealed. “Distribution, hotels and restaurants account for 14,8% of GDP while transport and communication account for 13,2%. Tourism is estimated to account for about 10% of Zimbabwean GDP and is important for generating foreign exchange. The financial sector accounts for 7% of GDP and is critical to the competitiveness of all other sectors of the economy.”

The contribution of the services sector to the country’s GDP is more than the 20% which the combined agriculture and mining sectors contribute, says the report. Agriculture, along with hunting and fishing, contributes only 12,7% to GDP.

The report revealed that the country’s Global Competiveness Index (GCI) slipped one notch from 124 to 125 in the period 2015/16 after having registered a notable improvement of seven ranks in the overall GCI ranking during the period 2013-2015, from 131 in 2013-2014 to 124 in 2014-2015.

“Zimbabwe is lagging behind other countries in all GCI pillars in terms of rank. The country ranked poorly in terms of goods market efficiency, labour market efficiency, infrastructure, business sophistication and innovation. The country needs to fast track various reforms for it to catch up with its comparators,” the report noted.

“Of special note is the fact that the country has some institutional, regulatory and legislative bottlenecks, which are also impinging on national competitiveness.

“There is a general perception that the regulatory burden in the country is still very high and too costly for business operations. Investor protection is also deemed to be weak and this may be discouraging foreign direct investment into the country.”

In terms of general competitiveness, the report notes that the economy continues to underperform, reflecting the underlying structural challenges, which have resulted in declining economic growth, low capacity utilisation and deflationary conditions.

With regard to the competitiveness of manufacturing, the report reveals that although the sector is one of the key drivers of economic growth, contributing about 24% to the country’s GDP at its peak in 2009, the sector’s current contribution to GDP has drastically declined to 13,1%.

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