By Almot Maqolo.
HARARE – (News of The South) – Zimbabwe’s economic turmoil is likely to remain unresolved until the southern African nation manages to build confidence from its own people and get serious on improving production, a crises which experts say, requires political will.
The prices of basic commodities have been rising in the country over the past months as shortages of hard currency deepened. Zimbabwe dumped the multi-currency regime which was mainly dominated by the US Dollar in February 2019 but the economy has struggled over the last 11 months because of inflationary pressures in the market.
The Zimbabwe dollar which started trading at Z$2.50 against the US Dollar has now lost its value. Today it was trading at Z$17.53. This money lacks the backing of sufficient currency reserves or gold – the prerequisite of any stable unit, with economists nicknaming the electronic dollars, “zollars.”
While delivering his second State of the Nation Address (SONA) since winning 2018’s elections, President Emmerson Mnangagwa said his administration will continue to take “bold and decisive” steps to open up and grow the economy for the benefit of all our people.
Economist John Robertson said the government has lost its worry on production. This comes as products which used to be manufactured locally are now being imported forcing the already stressed economy to fork out millions of dollars to meet the requirements.
Capacity utilization for local industries is below 40%. Most factories have stopped working and the agriculture sector is performing below expectation.
“Mining is still working but in difficulties because of regulation and illegal activities from gold miners and that has done much damage to the environment and the production sectors,” he said. Average capacity utilization for the mining industry was around 70% in 2019, compared to 75% in 2018.
In the first 10 months of 2019 the country spent $3.9 billion on imports. “We are spending a very large amount of money to import things that we used to make and such is a very big mistake, spending on things we know can still make them for ourselves,” he said.
Previously, lack of investment was attributed to lack of investor confidence, largely emanating from government’s policy inconsistencies. However, the country has been trying to woo investors through its “Zimbabwe is open for business” mantra.
On the back of a small number of approved projects, Zimbabwe’s Foreign Direct Investment (FDI) inflows more than doubled to $745 million in 2018 from $349 million in 2017. “The government is not encouraging people to start businesses but they say they are. They are claiming that they offering good investment conditions are not good. Most other countries offer more favorable investment conditions and by so, investors are not coming to Zimbabwe so government is not actually attending to one of them.”
“There are still difficulties in investing, electricity as it is affecting factories, water, foreign currency to pay for machinery and none of them is being attended to even though each one of these problem were identified as problems many years ago. We know what’s wrong but we are not fixing what is wrong.”
Robertson said the economy is not looking good. “It looks like will be in for yet another year of difficulties because we are not attending to these difficulties and we are not fixing them.”
The country is still recovering from the shocks of cyclone Idai and El-Nino induced drought which characterised the 2018/19 cropping season resulting in crop failure, livestock and wildlife deaths.
Recently the country and other international organizations launched a revised humanitarian appeal amounting to US$331.5 million to address the humanitarian needs of 3.7 million people between the periods July 2019 to April 2020. This and among other issues has brought more pressure to the fiscus.
The World Bank (WB) and treasury are predicting an economic growth of 2.8% and 3% respectively. “I see no reason why we cannot achieve these targets,” said Economist and Reserve Bank of Zimbabwe board advisor Eddie Cross.
“We have to deal with the need to import up to 2 million tonnes of grain and oilseeds in the next 12 months. We need to maintain stability and fiscal targets and get on with the reform program already agreed.”
To add on economist Tony Hawkins said “Currency is slowing down inflation, stability needs confidence but people are do not have confidence in the current administration. Therefore they should liaise with the MDC for confidence sake.”
Zimbabwe requires at least 1.8 million tonnes of grain for both human and livestock consumption. According to the Economic Intelligence Unit (EIU), the country’s GDP will contract by 12.9% in 2020 as drought continues to weigh on agricultural output and energy production from hydropower and as the ongoing currency and liquidity crisis hampers economic activity across the country.
In 2021-24 growth is poised to record a steady increase as better weather conditions facilitate growth in agriculture and a return to domestic hydro-power production, allowing mining activity to pick up.
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