Is Zim economy on the rebound?

BY PAISON TAZVIVINGA/VUSA NCUBE 

The greatest dichotomy faced by any meaningful assessment of economic performance is the multiplicity of stakeholders, typically with contradicting perceptions of “reality”.

These are chiefly the politicians and the general citizenry. It therefore becomes imperative to focus any such assessment on quantitative and objectively verifiable base data, to the greatest extent possible.

However, there is an inherent moral hazard in the collation of national statistics, the politics of statistics. This latter controversy is a discussion best deferred.

It would be imprudent to evaluate our economic trajectory without superimposing the backdrop of the recent devastating natural acts.

On March 15, 2019, President Emmerson Mnangagwa declared Cyclone Idai a state of disaster. This as the tropical depression had wreaked havoc on the eastern highlands, taking at least 340 lives, damaging infrastructure, displacing more than 50 000 people and uncompromisingly redirecting fiscal policy towards a disaster response.

A year later, almost to the day, Mnangagwa, on March 17, 2020 timely (with the clarity of hindsight) declared a national disaster with regards inarguably a once in a lifetime scale pandemic — coronavirus.

This pandemic caused lives to be lost, disrupted global supply chains, caused companies to fold, derailed tax collections and threw the world into expensive but unavoidable idleness — lockdowns.

We write in the past tense, but the foregoing conditions mostly persist. The world has not been the same since, cannot and shall never be. We speak of embracing the new normal characterised by remote working, social distancing and strict adherence to World Health Organisation hygiene protocols.

The negative ramifications of the said calamities on the economy cannot be discounted. This, notwithstanding, is the Zimbabwean economy on the rebound? We respond by tracking a few economic indicators.

Inflation, although still high, has declined significantly, according to Consumer Price Index statistics from the Reserve Bank of Zimbabwe (RBZ) website, annual and monthly inflation rates have declined from 676,4% and 26,6% in March 2020, to 240,6% and 2,3% respectively in March 2021. There was a spike in annual inflation from March 2020, peaking at 837,5% in July 2020, followed by a consistent decline thereafter.

The inaugural RBZ foreign exchange auction was held on June 23, 2020 with a weighted average bid of ZWL573,582 to US$1 and disbursing US$10 345 250,04. On August 6, 2020, the first SMEs foreign exchange auction was held.

This was subsequently synchronised with the main auction. On April 13, 2021, the 41st foreign exchange auction was held, disbursing US$32 924 083,03 at an average rate of ZWL84,4827 to US$1.

The local currency has depreciated 47,29% over the period at the auction. Volatility was experienced during the early days, however, of late the rate has been stable thus bringing stability in the business environment. The unofficial exchange rate, depending on sources, has depreciated some 30% from ZWL100 to ZWL130 to the greenback, with significant stretches of semi stability.

As Figure 1 reflects, government expenditure composition has changed with capital expenditure increasing in percentage terms from 8% 2016 to 36% in 2020.

This suggests the government’s desire to invest in infrastructure and capital projects, something which had long been sidelined. The relevance of infrastructure as an anchor for economic development cannot be overemphasised.

The launch of the Zimbabwe Investment Development Agency (Zida) (through an Act which was gazetted and came into force on February 7, 2020), is an encouraging development with regards to investment promotion.

The vision of the agency is to mobilise private capital to leap frog Zimbabwe to an upper-middle income economy by 2030. That the agency is managed by a competent and professional pool of individuals drawn from the private sector is reassuring. Prominent personalities constituting the leadership team includes board chairperson, Busisa Moyo (United Refineries chief executive); chief executive officer, Doug Munatsi (former BancABC chief executive); chief facilitator, Never Nyemudzo (former CBZ chief executive); chief investments officer, Tinotenda Kambasha (former Imara Edwards Securities executive director); chief finance officer, Duduzile Shinya (experienced chartered accountant); and senior projects director, Silibaziso Chizwina (seasoned civil engineer).

The country recorded surpluses on the current account in 2019 and 2020 of US$0,90 billion and US$1,10 billion respectively. Worryingly, however, food imports spiked 204% from US$194,3 million to US$591,6 million over the comparative period.

This is a reflection of the unsustainable impact of recent droughts on the fiscus. There is therefore a need to urgently implement drought mitigation strategies to ensure food security and self-sufficiency, in spite of the weather.

Imports of energy, raw materials, machinery and vehicles were also somewhat subdued in 2020 due to internationally-enforced Covid-19 travel restrictions to travel and production.

There was a decline in export receipts from gold, tobacco, chrome ore, manufactured goods and diamond, which was offset by a surge in platinum group metals receipts.

There is need for focussed sectoral support in the agriculture and mining space, as these have potential to improve the fortunes of the country through both export revenue, import substitution and employment creation.

In the past three years, as a percentage of gross domestic product, we have recorded a 5,99% deficit, 0,27% surplus and 0,50% budget deficit in 2020. The thrust is to create sizeable buffers to exogenous shocks and expand implementation of development projects from surpluses.

There has also been an undeniable general improvement in power availability. This is desirable for both production and connectivity.

However, the inability of municipalities to consistently and constantly supply water, against the backdrop of more than average rains is perturbing.

The public transport system in its current form is very inconvenient to commuters and poses a significant impediment to the punctuality culture synonymous with the nation. These are perhaps teething problems associated with the centralisation of the public transport system, and we trust that the system will smoothen the learning curve and operate at an optimal level in the near term.

On the industrial relations front, government, the single largest employer, is engaged in an ongoing conversation on salaries with its employees. The recurring threats of industrial action are not good for productivity and country risk perception, and we trust that consensus will be reached in the shortest possible time.

Employment prospects for recent graduates, even without official statistics, are quite bleak. The impact of coronavirus on the global economy has additionally reduced international prospects for local students. There is need for enterprise development initiatives to absorb this glut of skill.

The organisation of the future will be lean, and what we regard as small and medium enterprises may actually constitute the mainstay of the economy in the not so distant future. It is therefore ideal that intensive support to this critical sub sector of economic players is advanced.

The meteoric rise of economies previously in oblivion such as Rwanda and Singapore reveal that the economic trajectory of a nation hinges significantly on government policy coupled with the attitude and drive of its citizens. As we reflect on 41 years of self-rule, the question of Zimbabwe’s economy being on the rebound is best evidenced by the policies we promulgate and our attitude as citizens.

Ncube is a financial analyst and a keen student of the world. He may be reached on vusavellah@gmail.com. Tazvivinga is a development economist. He may be reached on ptazvy@gmail.com. These weekly New Perspectives articles are co-ordinated by Lovemore Kadenge, immediate past president of ZES. — kadenge.zes@gmail.com or mobile +263 772 382 852.