Identifying progress in the Zimbabwean economy

Some in Zimbabwe, seem to have lost the ability to recognise good news. Natural disasters and past hyper-inflation episodes have only served to buttress this phenomenon. When we hear or read about positive developments, we are immediately sceptical. Our bitter experience has taught us to be so.

Prof Mthuli Ncube

And so sometimes, when the sprouts of progress are springing up around us, we miss them. But is does not mean they are not there.

When we set off on our mission to transform the Zimbabwean economy, there was of course cynicism. While we always cautioned that this would be a long and bumpy journey, many saw it as yet another ambitious plan destined to fail.

The fact that this process involved painful measures, which caused real difficulty for millions of Zimbabweans, seemed to prove this cynicism right.

But fast forward three years and the environment is entirely different. The painful reforms we initiated in late 2018 are beginning to bear fruit.

Whether we see it or not, green shoots of hope and progress are shooting up all around us.

Take for example inflation. When we began the shift towards our own currency, the Zimbabwean Dollar, the inflation rate increased significantly.

While from an economic perspective, this was an inevitable and unavoidable step towards reform, it understandably caused concern at home and abroad.

Yet today, two years on, the inflation rate is being brought firmly under control. The auction system to supply foreign currency for priority imports that we put in place in August is working, and inflation is trending down.

In fact, month-on-month inflation for April was just 1.58 percent, the lowest figure since September 2018. Extrapolated over twelve months, this amounts to an annual inflation rate of around 20 percent, and if we continue along this trajectory, the RBZ’s target of an annual rate of 10 percent by the end of 2021 could be in reach.

This falling inflation is being complemented by increased government revenue, which rose by 5 percent year-on-year from the first quarter of 2020, leading to balanced budgets. Meanwhile the number of Zimbabwean made goods on our shelves has increased tenfold, while projections for economic growth for 2021 are extremely positive.

While we ourselves may be understandably slow to appreciate this progress, economists and external observers have been quick to identify our gains. Bloomberg, perhaps the world’s leading financial news outlet has written of the ‘sea change’ in the way the Zimbabwean economy and its prospects are seen, while leading economists have talked about the progress being made, suggesting that 2021 stands to be a year of significant growth.

The business community is also taking note. Following months of conversations with Zimbabwean businesses, the respected South African company Coronation Fund Managers noted how business confidence in Zimbabwe is at its ‘highest level in years’. This, in a large part is due to the ‘dramatic changes’ over the past year, the significance of which is underestimated.

This local business confidence has only grown with the welcome news that the European Investment Bank (EIB) has agreed a €15 million fund to support Zimbabwean businesses, the first time the bank has offered financing to Zimbabwean business in over two decades.

We are determined to leverage this increasing confidence in order to increase foreign investment, a key driver of our development agenda. To this end, I recently hosted the first ever Zimbabwe Global Investor Roadshow, designed to showcase our reforms and progress.

Through this, we are marketing Zimbabwe to the global business community as an attractive and competitive investment location.

Our message to investors — which has been extremely well received — emphasises our commitment to reform, impressive economic performance and positive outlook for 2021, as well as our huge gains in the influential World Bank Global Ease of Doing Business. As we point out to investors, Zimbabwe has risen 21 places in the rankings over the past three years, and 31 places over the past five, overtaking countries such as Ethiopia, Tanzania and Algeria.

The purpose of this article of course is not to claim that all is rosy. Far from it. At the onset of our reforms, we said the road would be long and bumpy, and so it is proving.

Millions of Zimbabweans still suffer from poverty and unemployment, and the fruits of change are not yet felt widely enough. And this is even before we take into account the effects of the global coronavirus pandemic, that (alongside its health effects) has wreaked economic havoc all over the world.

Yet despite all this, we are making progress and our reforms are working. Whether we dare to believe yet or not, Zimbabwe is changing before our eyes. Let us all keep working hard, be patient and trust in the process as the new Zimbabwe is built.

Prof Mthuli Ncube is the Minister of Finance and Economic Development. This article was first published by The Herald.

%d bloggers like this: