Economist Eddie Cross once said there has been a seismic shift in the state and prospects for Zimbabwe’s economy, as the new Government’s sound economic policies take root.
Widespread reforms since the Government assumed office in late 2017, have put the economy in a better condition while priming it for recovery and growth, economists have said.
Economist, Dr Godfrey Kanyenze said the Government had over the last three years abandoned a number of bad policies that turned the economy on its head, igniting runaway inflation, for more sound ones.
“In the First Republic, there were certain behavioural traits that had crept in; fiscal indiscipline had crept in, where the Government was going to the banking sector to borrow, even beyond the limits that are allowed.
“They were going to the central bank to use the overdraft facility and it was about three times over the limit to basically finance runaway expenditures at the expense of living within its means,” Dr Kanyenze said.
While the future now looks promising, with a number of key economic fundamentals falling in place, the prospects have been brightened by the expected bumper crop harvest this season.
And among the bright spots this year, despite the long shadow of the Covid-19, is manufacturing. Industrialists say with the right policies and support, capacity utilisation will reach 61 percent, from 47 percent in 2020.
Manufacturing saw record growth last year, despite the impact of Covid-19 global pandemic, with output climbing 23 percent, driven by stronger domestic procurement.
Prospects for growth look brighter, Zimbabwe’s Treasury said recently, in light of prevailing macroeconomic and deepening economic stability and good harvest this past season.
A look at the performance of a majority of listed industrial firms shows evidence of growth, Confederation of Zimbabwe Industries (CZI) chief executive officer (CEO), Sekai Kuvarika said on Friday.
“You can look at first quarter results of listed companies and their outlook for the year. It shows what (positive things) the listed companies are saying. The other thing is the results of our first quarter survey.
“Although the average capacity utilisation is 47 percent, if you go sub-sector by sub-sector, others have very high levels of average capacity utilisation. Output volumes have also gone up,” Mrs Kuvarika added.
The industrial firms’ lobby group is also on record saying among companies that were sampled for the first quarter survey; about US$23 million had been deployed in capital projects, which projects activity elsewhere.
Although Mrs Kuvarika could not immediately provide numbers, she said findings from the sample taken for the 2021 first quarter performance survey, showed good numbers for new jobs created.
While the sample was small, the CZI CEO said, there was a strong possibility that it also reflected trends across the entire manufacturing sector, with regards to job creation.
CZI has also noted in its first quarter economic review the growing number of construction or new establishments, which will further drive growth of manufacturing and the wider economy.
Finance and Economic Development Minister Professor Mthuli Ncube, has already projected in his 2021 national budget the economy will expand by 7,4 percent, after it contracted by an estimated 10 percent in 2020. By the time of Covid-19 outbreak, Zimbabwe was already in contraction mode after slowing down 6 percent in 2019 due to the impact of the devastating Cyclone Idai and drought that hit the country and regions beyond.
The international monetary fund (IMF), despite its often very conservative forecasts, projects the country’s economy will expand by 3,1 percent amid the growing economic stability and expected good harvest.
Key fundamentals support the positive vibe and sentiments around Zimbabwe’s now apparently recovering economy. These include falling inflation, exchange rate stability, strong budget and export performance.
Minister Ncube said earlier this month that the country’s inflation rates, which accelerated at the beginning of the switch back to local currency, were rapidly dropping and being brought under control.
The annual rate at its wildest peaked at 231 million during the hyper inflationary era in 2008. Since dollarisation, Zimbabwe’s inflation rates had trended low until rising to post 2009 high of 557 percent last year.
“The auction system to supply foreign currency for priority imports that we put in June 2020 is working and inflation is trending down,” Professor Ncube said in an article he wrote for The Herald earlier this month.
He said monthly inflation, which last year reached 300 percent, had come down to 1.58 percent as of April. He said the Reserve Bank of Zimbabwe (RBZ’s) annualised target of 10 percent by December, was attainable.
The exchange rate, pegged at $2,5/US$ in February last year, has stabilised around $84/US$1. Budget surpluses are now a common phenomenon while resource to RBZ overdraft window has since been curtailed.
The central bank is on record saying US$1,4 billion has been allocated to importers on the weekly auction floor since June 2020 and the bulk has gone towards key imports for industry like equipment and raw materials.
Minister Ncube says that the bulk of products now found on Zimbabwe’s supermarket shelves were being manufactured locally, (previously over 60 percent were imports), and suggested local production had increased 10 fold.
“While we 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, has written about “sea change in the way the Zimbabwean economy and its prospects are seen while leading economists talked about progress being made,” he said.
The finance chief added that the current year stands to be a year of significant growth, and as mentioned earlier, the domestic industry expects average capacity utilisation to reach 61 percent from 47 percent in 2020.
Even respected South African company, Coronation Fund Managers, have noted the seismic shift and recently indicated that business confidence in Zimbabwe was highest in years, possibly in over a decade and half.
But the minister said he was not lost to the reality, as he said from the outset that reforms will come with a lot of pain and sacrifice, that life remains hard for many citizens amid high joblessness and extreme poverty. – Sunday Mail
