Recovery signals flashing

Editor’s Memo Faith Zaba

EVEN in the face of the deadly coronavirus, the year 2021 brings new opportunities for Zimbabwe and the world over. Government this week announced a vaccine roll-out plan, which will hopefully see most citizens getting vaccinated by year end. It is also expected that most of global populations would have been vaccinated by September, setting up robust head immunity against the virus.

Faith Zaba

Zimbabwe and the rest of the world’s ability to contain the spread of the virus through vaccination will see the resurgence of tourism and global trade.

According to the October 2020 International Monetary Fund estimates, the global economic rebound of approximately 5,2% is being envisioned, vis-à-vis a shrinkage of around 4,4% in 2020. It is, therefore, important that Zimbabwe locates itself within these cosmic forces.

Finance minister Mthuli Ncube projects a 7,4% growth in 2021, while economic researchers estimate a 4% increase. However, the key issue is to have sustained growth till 2030. There are several advantages for the taking by Zimbabwe. Government must identify a clear growth strategy that leverages off its mineral resources, educated population and their aspirations. Thanks to the good rains, agriculture will be integral to Zimbabwe’s economic recovery, though the State must get its ducks in a row, including an incentives plan to aid businesses’ recovery from the detrimental impact of Covid-19. Bailout for small-to-medium enterprises is essential.

With the world moving towards electric cars — while we have arguably one of the largest lithium deposits — a key component in battery-making — the country can seize this opportunity and negotiate a lucrative global contract to value-add lithium.

The mining sector is in disarray and shrouded in dodgy deals. Corruption should be decisively dealt with to stop illicit financial flows and smuggling of minerals. Signing into law the new Mines and Minerals Bill should be prioritised this year to curb opaque allocation of mining licences and improve transparency on minerals marketing. Similarly, joining the Extractive Industry Transparency Index (EITI) and formalising the work of artisanal and small-scale miners should be on the to-do list for 2021.

There is need to implement free market economy policies, including removing restrictions on the repatriation of dividends for foreign shareholders to boost foreign direct investment inflows. The country should as well embrace a managed free float exchange rate to enable the local market to stabilise. This will attract participation of individuals, local businesses and exporters, who are currently transacting on the parallel market.

Policy consistency is the trigger we desperately need to pull. On agriculture, government should remove the command style producer-pricing system and liberalise the agricultural commodities market, bringing buyers and sellers together without unnecessary government interference. Producer prices less than those on the market dent productivity, while those above market prices create arbitrage opportunities and corruption.

Government should provide bankable title deeds to A2 farmers, leases to A1 and small-holder farmers to crowd in private capital on land and ramp up food production.

In relation to fuel, government should reduce indirect taxes and levies paid on fuel and streamline the local taxation model to reduce production costs for local producers. It should cease quasi fiscal activities that are distorting fiscal performance. The debt and market instability caused by such operations far outweigh the benefits that come from the interventions.

On debt, there should be more transparency in debts government is contracting or accruing. Government should work towards debt relief from International Financial Institutions and the Paris Club. Without debt relief, the country will not attract meaningful financial inflows and investment.

To resuscitate the tourism industry, there is need for deliberate action by the sector to reduce destination costs for Zimbabwe’s tourist attractions post-Covid lockdowns. Similarly, manufacturers and other exporters need to coherently restrategise, lobby government on export-oriented policies and fully utilise bilateral trade relations and the African Continental Free Trade Area (AfCFTA) to grow exports into the African region.Exporters such as miners and tobacco merchants need to repatriate their foreign earnings (provided the exchange rate moves from the current soft peg).

In a new development, as we celebrate our silver jubilee this year, the Zimbabwe Independent this month launches a new monthly magazine that will take a deep dive into the country’s economic endeavours to move forward. The Special Report magazine, which is a must read, provides research and in-depth analysis on various sectors. It is part of the Big Debate Series we hold each month.