admin Dr Bongani Ngwenya
Preamble:
SINCE the end of the hyperinflation era of 2008 the Government through the Ministry of Finance and Economic Planning and other relevant Government structures has been making projections year after year that total exports will grow by certain per centum. For example in 2016 total exports were projected to grow to $3,9 billion by the end of the year, being driven by a strong performance in tobacco, platinum group metals, nickel and many other minerals that was realised in 2016. During the annual budget review for 2016, and 2017 economic outlook, the Finance Minister highlighted that the current account deficit was benefiting from the improved exports and the declining imports which were estimated to have narrowed down to a deficit of $552 million, from $1,5 billion that was recorded in 2015.
In 2017, for example total exports were projected to reach $3,9 billion, on account of strong performance in tobacco, platinum group metals, and nickel, among other minerals, while on the other hand imports were expected to increase to $5,4 billion on account of a surge in the imports of intermediate goods required in the productive sectors. Furthermore interventions to improve domestic production, such as Statutory Instrument (SI) 64 of 2016 and many more and efforts to achieve value addition were expected to see the continued decline in the current account of Zimbabwe’s balance of payments into the year 2018.
In the period under review, that is, with respect to the year 2016, total exports of goods increased to $3,7 billion, from $3,6 billion that was recorded in 2015, driven mainly by gold and tobacco export revenues. The Finance Minister alluded that mineral exports grew by 6,4 percent, to reach $2,2 billion from $2,1 billion in 2015, largely reflecting strong performance in gold exports, which recorded $913,4 million in 2016, on account of improvements in both the production of the mineral and the international gold prices. Enhanced production performance expectations, coupled with the firming international mineral commodity prices, for the platinum group of metals, diamonds and nickel, and were expected to push mineral exports to $2,3 billion in 2017.
Regarding the exports of Zimbabwe’s agriculture products in 2016, the exports grew by 4,8 percent from $1 billion in 2015 to $1,1 billion. In the period under review, that is, 2016 improved performance in tobacco production accounted for $933 million of the total agricultural exports. In the previous year, that is, 2015 tobacco had accounted for $855m in export revenues. However, sugar exports significantly declined from $108,9 million in 2015 to $53 million in 2016, with the total agricultural exports expected to increase by 6,7 percent to $1,16 billion in 2017, being led by tobacco and sugar.
On the industrial front, exports of finished manufactured products were seen to be on the increase, recording $183 million in 2016, from $175 million of the previous year, that is, 2015. The minister indicated that these exports ranged from foodstuffs, furniture, building materials, chemicals, packaging materials, footwear, and plastics, among many other goods. The minister lamented that challenges were, however, experienced with exports of such semi-processed products such as the ferro-alloys and cotton lint. During the period under review the overall performance of the total manufactured exports goods were expected to register growth from $320 million in 2016 to $363 million by the end of 2017. However, commenting on imports, Minister Chinamasa suggested that total imports had dropped by 15 percent, from $6,1 billion in 2015 to $5,2 billion in 2016, owing to Zim Asset intervention measures to stimulate domestic production of goods and value addition, and as a result increasing the supply of the domestic products and minimise the imports burden. In the meantime, the imports are expected to increase to $5,4 billion on account of a surge in the imports of intermediate goods that are required by the productive sectors of the economy.
The need for imports reduction:
It is very clear that the imports burden has continued unabated to weigh down the country’s economic growth. The country’s import bill has been running on average, double the export earnings. This phenomenon culminated in the liquidity problems in economy. While it may be true that issues of externalisation and corruption have contributed to the biting liquidity problem as well, it should be clearly understood that the continued unsustainable import bill has been draining the country’s foreign currency reserves or the stock of the multi-currencies as they are being mopped up from both the formal and informal financial systems of the economy.
Top on the list of imports are the average 10 import items that have drained the country’s foreign currency reserves, with the indicated items below showing what transpired with respect to the year 2016-mineral fuels including oil: $1,5 billion (28,8 percent of total imports); cereals: $518,6 million (10 percent); machinery including computers: $468,1 million (nine percent); vehicles: $341 million (6,5 percent); electrical machinery, equipment:
$263,5 million (5,1 percent); pharmaceuticals: $202 million (3,9 percent); plastics, plastic articles: $181,8 million (3,5 percent); animal/vegetable fats, oils, waxes: $154,6 million (three percent); iron, steel: $113,7 million (2,2 percent) and other chemical goods: $105,2 million (two percent). With the mineral fuels including oil drawing or constituting the largest portion of the country’s imports to the tune of $1,5 billion in 2016 alone and translating to 28.8 percent of the country’s total imports for the year 2016.
Zimbabwe’s exports have performed badly since the end of the hyperinflation era. As a result the economic growth of the country continues to be slow, and Zimbabwe’s export market will inevitably face further hardships unless the new government riding on the new political dispensation creates effective policies to stimulate exports through increased industrial capacity utilisation. In addition, the Zimbabwean debt crisis will not be short term.
Therefore, the Government needs to come up with strategies for responding to these problems in the mid and long term in addition to devising methods to stimulate exports as an interim measure.
According to Government statistics, the marginal reduction in total imports is the main reason that Zimbabwe’s industrial capacity utilisation begins to show some positive growth since the introduction of the import measures that have imposed the restriction of importation of certain products. If the Government can come up with ways of turning this passive import decline into a more active type of import substitution, then Zimbabwe would not only be able to maintain domestic product and economic growth, but would also achieve other goals, such as saving on energy, millennium developmental goals and building the industrial competitiveness. Now is a good time for the Government to attract foreign investment into the industry as well to boost the waning industrial capacity utilisation in order to achieve meaningful import substitution. Promoting import substitution can strengthen the domestic industrial development, which could help the future growth of exports. Employing import substitution and economic structural adjustments would likely be an effective and feasible way to help the nation keep its exports competitive.
In conclusion, the economy has continued to slow down after a significant recovery during the government of national unity with the industrial capacity utilisation not making any meaning improvement. While the President has outlined the key areas for economic turnaround that his administration intends to focus on, such as — value chain of agriculture, mining sector, infrastructure development and energy, it is paramount that the administration focuses on industry resuscitation as well. Declaring the country’s industry a special economic zone would go a long way towards improving industrial capacity utilisation and eventually reducing the imports burden on the economy. It would have been good that industry resuscitation formed the fifth pillar for Zimbabwe’s economic turnaround efforts.
Dr Bongani Ngwenya is based at the University of KwaZulu-Natal as a post-doctoral research fellow and can be contacted on [email protected]
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