adminKudzanai Gerede
The country’s economic landscape for 2015 was marred with an array of contrasting fortunes as the economy remained subdued by volatile internal and external forces. The country’s key sectors were not immune to external market forces unfolding on the global arena which made up for a generally low economic performance in the local economy.
The poor rainfall from the previous season had a negative bearing on the country’s agriculture sector and the prolonged dry spell currently prevailing have worsened the already dire situation. The harsh effects of the dry water bodies were more pronounced in the energy sector, which is largely anchored on hydro powered electricity as the country’s largest hydro power generation site, Kariba power station resorted to massive load shedding as water levels had reached their lowest point.
Power cuts, which characterised the entire year, had serious consequences on the productivity levels across all sectors of the economy as it translated to inefficiency and low production output on the industrial index. The use of generators as alternative source of energy rendered the cost of production too high and consequently making locally manufactured goods expensive.
With the global economy having shrunk due to a decline in global trade in the first quarter, and China, the biggest consumer of metals slowing down on its mineral uptake this has led to low commodity prices and Zimbabwe’s extractive sector heavily suffered.
The liquidity constraints continued to thwart production in all sectors of the economy as the financial sector struggled to remain sustainable resulting in the closure of several banks such as Metbank and Afrasia early this year.
Jobs cuts rose drastically following the landmark Constitution Court ruling which allowed employers to dismiss employees on 3 months’ notice. With many companies already struggling to remain afloat, the ruling left massive casualties for both the firms and the jobless. The informal sector ballooned leaving the short-staffed firms to operate below maximum capacity utilisation levels.
The Confederation of Zimbabwe Industries (CZI) released the 2015 Manufacturing Survey highlighting that the country’s industries were facing serious pressure from imports resulting in the low production and closure of most firms this year. It showed that the local manufacturing sector capacity utilisation had declined by 2,2 percent to 34,3 percent.
The country’s manufacturing sector suffered the heaviest blow as issues of competitiveness continued to haunt the sector compounded by the appreciation of the adopted US dollar against other rival currencies making the cost of production high and incompetent against the foreign manufactured goods flooding the country’s market.
It is on the basis of this harsh economic narrative that the World Bank in June lowered the country’s growth projection from 3,2 percent as earlier cited to 1,5 percent as foreign direct investment to stimulate the economy remained elusive in the first half of the year.
Bad cooperate governance had often been factored among the major causes of company closures and massive losses for big corporate in the country. In June, the Auditor General’s Office released a report titled, Appropriation Accounts and Miscellaneous Funds for the previous year aimed at investigating government accounts. In the report massive irregularities and gross misappropriation of State funds by ministries and State enterprises were exposed.
Of the 27 ministries audited, 13 ministries accounts had figures that failed to reconcile in figures in sub-paymaster general accounts and public finance management system.
Reacting to the exposé Minister Chinamasa highlighted the need to setup an inquiry into the shenanigans in government departments and enterprises and warned that poor corporate governance would cost the country much needed capital inflows.
“We should setup a unit within the Ministry of Finance and Economic Development to look into the matter. Investment tends to shy if massive irregularities such as this highlighted become synonymous with the country,” he stated.
The second half of the year saw several positive pointers in the country’s economic trajectory in as far as sourcing for FDI to finance the country’s economic blueprint ZimAsset was concerned despite having to battle with yet another albatross to its economic revival, the debt trap.
The country’s capacity to access concessionary borrowing from external financiers has for the past fifteen years been held at ransom by its failure to settle its debt with IMF, World Bank and AFDB as the total debt is now hovering at around US$ 10 billion.
In October, Finance and Economic Planning Minister, Patrick Chinamasa made the breakthrough in Lima, Peru when he presented the country’s debt clearance strategy convincing multilateral financiers.
Zimbabwe will use its Special Drawing Rights (SDR) allocation to pay the IMF debt. The SDR is a facility set up by IMF to help member countries shore up their reserves after the global financial crisis of 2008. It also intends to use the bridge loan to repay the AFDB and the World Bank’s International Development Association (IDA), A World Bank arm which helps the world’s poor by providing loans and grants for programmes that boost economic growth, reduce inequalities and improve people’s living conditions.
The AFDB promised US$ 601 million grant for the country to clear its debt to the bank once the AFDB board approved of it.
The clearance of the debt by April 2016 is likely to open fresh capital into the distressed economy.
Prior to the acceptance of the debt clearance strategy by the international community, government played a crucial role in luring the Nigerian business tycoon Aliko Dangote into the country on a fact finding mission on key areas for investment. Africa’s richest man secured operation licences in three projects of cement, mining and energy.
Minister of Transport and Infrastructural Development, Obert Mpofu described the investment interests by the US$ 21,1 billion worth Nigerian as welcoming at a time when the country was in dire need for the capital inflows and also possessed the natural the natural resources to feed into the investment he was looking at.
“This is one investment that has created a lot of anxiety and excitement. The beauty about this is that we have all the ingredients for cement manufacturing, for instance we have limestone deposits in Kanyemba in some parts of Midlands and other areas,” he said.
The high profile visit by the Nigerian billionaire paved way for an even more prominent and historic moment for the country as the Chinese President Mr Xi Jinping flew into the country with a massive business delegation keen on investing into the country.
Mr Xi’s visit saw 12 mega deals worth US$ 4 billion being signed in various sectors of the economy.
Notable in the mega deals were the Chinese government’s pledge to construct a new Parliament Building in Mt Hampden on the outskirts of the capital City and NatPham warehouse, the Export-Import Bank of China to provide concessionary funding for the engineering procurement and construction of the Hwange 7 and 8, and the TelOne Backbone Network and Broadband Access Project.
These mega deals are expected to spur the country’s economy as the special economic sectors such as the energy, mining and infrastructure development are likely lay the foundation for economic transformation.
This was also embraced in Minister Chinamasa’s 2016 National budget which economists described as a pro-productive budget.
In his budget, the Minister prioritised economic growth buoyed by mining, tourism, construction and the financial sectors projecting a 2,7 growth next year.
The budget catered for a host of fiscal initiatives aiming at promoting local manufacturers such as the removal of selected motor vehicles and buses imported by government and School Development Associations from the Duty Free Certificate Facility in a move to protect and empower local motor manufacturers.
There was also rebate of duty on capital equipment imported by mining, agriculture, manufacturing and energy sectors for equipment valued at US$ 1 million and above.
The year ended on a high note for the tourism sector as the country hosted the 18th International Conference on Aids and STIs in Africa (ICASA).
The conference also yielded business for Harare’s enterprising home owners since all hotel space had been fully booked as more than 4 500 delegates attended the event.
“ICASA was a high yield conference with delegates staying for more than 12 days. All hotels, lodges and hostels were fully booked to the extent that some delegates had to be booked in houses that were inspected prior to the conference as we anticipated this overflow,” Tourism and Hospitality Industry Minister Walter Mzembi said.
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