Online Reporter
ZIMBABWE’s economic growth rate this year, based on what was seen in the first few months of the year, is now estimated by the African Development Bank (AfDB) at six percent, up from the earlier forecast of 5,3 percent.
While the new forecast is the same as the six percent growth estimated in the national budget towards the end of last year, it can also be considered to be a harder figure since the AfDB has had the advantage of seeing that the hoped-for better rains did in fact fall, so creating a lot of growth in agricultural output, and the jump in mineral output driven by the gold output and prices.
Generally speaking, institutions like the AfDB will verge on the side of caution when making estimates and this produces the interesting position that the six percent is now, if anything, a minimum estimate although the bank will have tried to be as accurate as possible.
For last year there was a general estimate that growth fell to 2 percent on the back of the sharp decline in agriculture as a result of the El Nino drought.
However, detailed statistics from ZimStat, after they looked at all returns and figures, which can take months to turn up, found that growth in fact reached 2,9 percent, with manufacturing now becoming the largest economic sector in terms of value despite the continued rapid growth in mining values.
That sort of growth in a bad year, roughly the world average, shows both the resilience of the Zimbabwean economy and the growing diversity, such that when some important sectors see a decline, others can take up the slack and create enough growth to cope with the downside.
In the end, the biggest problem of the severe drought was not so much the value decline of 18,2 percent, which while bad still meant that the farmers produced just over 80 percent of what they had the year before, thanks to growing irrigation, better farming practices and selection of the right sort of crops.
The serious social effect was because the drought hit easily the largest sector when it came to how Zimbabweans earn a living. While farmers and their families are no longer a majority of the population following the development of other economic activities in rural areas, they are still the largest single group of Zimbabweans. So a lot of meaningful national development that pushes up a lot of incomes must come from the development stress of upgrading farming and farm incomes.
The diversity, and so the strength, of the Zimbabwean economy can be seen from the fact that while manufacturing last year moved into top position, it still contributed just 15,6 percent, meaning there is a lot of room for major industrial expansion with very little risk.
Having all productive major sectors of manufacturing, mining, agriculture, construction and tourism roughly in the same ballpark means that the economy is sufficiently diversified to cope with almost any sort of downturn and still grow.
Retail is important but tends to be built around incomes largely derived from the productive sectors. When people are earning more money they spend more money, and the retail sector gets a large chunk of that extra spending.
Retail growth is automatic when there is both production growth and a spread of the results of that production growth. We saw last year that the income falls in the largest group of Zimbabweans, the farmers, did have a knock-on effect in retail and its very slow growth.
When all major production sectors are growing, as by the look of it is happening this year, then we get these high rates of growth, and that growth is seen across a large number of people. This spread of growth is important when we look at our Vision 2030, the upper middle income economy, since that means we must also have most people in the upper middle income groups, otherwise we just get the sort of gross inequality we saw in colonial Rhodesia, which is not much use.
The Zimbabwean economy is not just dependent on growth, but also on our current account, the surplus of foreign currency flowing in compared to what flows out. When we have a strong positive balance, coupled with the right fiscal and monetary policies, we have a largely stable currency and so are able to build up our capital base both as individuals and as a country.
Complaints of foreign currency shortages are largely easing or even disappearing these days as exports rise while imports tend to remain flat. Even the need to import most of our maize for the millers over the last 12 months did not overstrain what has now become the new normal.
This is certainly happening this year. Our largest single export is gold, and gold exports by value surged 24 percent in the first five months, both with more gold now being sold through the official channels, and the higher prices. It is useful to note that gold when exported is processed to 99,9 percent purity, so we get full value.
The surge in gold exports has been accompanied by the dramatic growth in the amount of gold retained as reserves by the Reserve Bank of Zimbabwe, enough now to back all the ZiG in existence with a bit left over.
So we have had it both ways, more exports and a stronger currency. Efforts now in progress to end what farmers would call side-marketing of gold, that is gold being sold on the black market, will make this mineral even more valuable. Much has been done already, and most small scale miners have joined their formal-sector colleagues in legal sales.
The AfDB did note both the significant progress made by the Second Republic and offered suggestions for how that progress can be maintained, roughly the same sort of suggestions that have been coming from Zimbabwean economists for untangling and combining necessary regulation and licencing while dumping duplication and regulations that no longer make sense.
