Online Reporter
ZIMBABWE has been reflecting a strong economy for much of the Second Republic, but has largely been reliant on Diaspora remittances to balance the books and ensure that we have a positive current account with foreign currency inflows exceeding outflows.
This has been important as Zimbabwe imports most of the time more than exports, and a lot of the foreign currency shortages and instability were built around this negative balance of trade, while a lot of the more recent stability and access to foreign currency was built around making sure that a significant fraction of Diaspora funds were put to productive use.
The stability was also built around the measures taken to narrow the trade gap, with economic growth demanding that this was done more positively by expanding exports, with reduction in imports following increases in output for the more important products that were being imported, and the import substitution following longer-term economic viability rather than just plugging in a local product.
This policy has seen the gap narrow over the last few months until the trade account went positive in August.
A lot of the progress comes from the rise in volumes and prices for metal and mineral exports, especially gold, and these exports accounted for 93,7 percent of the volume of August exports.
This places Zimbabwe firmly in the family of commodity exporters, like the oil states and other countries that are reliant on non-manufactured exports.
It can be slightly destabilising, but Zimbabwe exports gold at full value, as refined metal bars rather than ores, or gold dust or partially processed products. So we get full value.
The other precious metals exported, the platinum group metals, are not yet at the ingot stage, but a great deal of processing is now done locally, with the major miners wanting to do more, as they also want to upgrade the value of their sales. The insistence by the Second Republic for growing and maximum local processing and value addition is justified by the prices in what otherwise could be seen as a slightly depressing mineral markets.
More importantly, accelerating the Government policy for maximum processing will reduce the dependence on gold by boosting the value of other metals and still retaining the value of gold.
This will grow the export pot and spread the risk. At the same time, we need to look at other products we can export, and we should be following the modern policy of expanding exports rather than trying to limit imports. Growing our way to prosperity makes more sense.
The increase in trade and in trade surpluses will become ever more important, especially as we work out the payment plans that must accompany any sorting out of our arrears, and especially as we move towards a single currency.
One reason why so much stability was achieved, even with a negative trade account, was a decision that effectively moved a large block of the largest single import from the trade accounts to financing through the direct and indirect use of diaspora money.
This required allowing the petroleum trade to use foreign currency almost exclusively, at least for the moment while stability was being won.
But as more of our trade moves into balance, there will be a number of direct benefits, not least the possibility that petroleum imports are financed from exports. That will allow the practical creation of the single currency.
It will also allow the use of diaspora funds where they will do the most good, not so much as way of ensuring we have a positive currency account, but that we will be building up our capital and local investment accounts.
Zimbabwe, like most developing countries, does not have vast surpluses of capital and yet the diaspora inflows are one of the most available and obvious.
More of that money ought to be going on construction, on setting up new businesses and the like, rather than being spent on petrol and consumables, especially imported consumables.
Zimbabwean families receiving diaspora money might well need it to buy food and pay medical bills and school fees, but as it gets recycled it should be going into wealth creation, rather than consumer spending.
A positive balance of trade, even with the main exports being things like metals and minerals and the main imports being manufactured goods and raw materials for our own industry, will still see a far stronger economy and a far better balanced economy.
It will also make it clear where possibilities for growth exist, both in extending exports and in building up our ranges of goods made locally.
Imports this time should be the equipment and machinery needed to expand local production, rather than the goods themselves.
By following the present policy of managing foreign currency by expanding exports and so the sources of foreign currency, rather than the old fashioned management of imports to limit spending, we have already seen what not only works better, but what expands the economy as well.
Using market forces to grow an economy is the most sensible way of doing this, and the Second Republic has made such use the obvious way for winning the highest growth rates in our history.
