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Business Reporter
Finance and Economic Development Minister Patrick Chinamasa has cut the mining sector growth forecast to minus 1,9 percent from 10,7 percent citing weak international minerals prices among main factors for the revision.
Presenting the 2014 Mid-Term Fiscal Policy Review Statement yesterday, the minister revised the 2014 initial mining sector growth forecast citing weak international prices for some minerals, frequent power outages, obsolete equipment as well as inadequate funding for recapitalisation.
“In 2014, the mining sector was initially projected to grow by 10,7 percent, largely driven by anticipated increased output for nickel, coal, gold and diamonds,” he said.
“However, weak international prices for some minerals, frequent power outages, obsolete equipment and inadequate funding for recapitalisation undermined performance during the first half of the year.
“Consequently, output for gold, platinum and diamond was subdued, necessitating a downward revision of sector growth to -1,9 percent,” Minister Chinamasa said.
Minister Chinamasa said the manufacturing sector also remained depressed and the combined effect of the two sectors’ poor out-turn prompted him to also revise economic growth projections from 6,1 percent to 3,1 percent.
“GDP growth for the year has been revised downwards from 6,1 percent to 3,1 percent, in view of under-performance of mining and manufacturing,” he said.
He said challenges to industry relate to antiquated and obsolete machinery, influx of imports, high cost of borrowing and weak demand due to liquidity constraints.
“Government will, therefore, be instituting measures to support the recovery of manufacturing, through promoting value chain and industrial linkages, leveraging the diverse domestic raw material resource base,” he said.
Minister Chinamasa said the poor performance in the first six months of the year reflected in low revenue inflows, depressed exports and imports during that period.
Cumulative revenue collections for the period January to June 2014 amounted to $1,7 billion, against a targeted inflows of $1,8 billion, resulting in a shortfall of $112 million or 6,1 percent of total projected revenue.
Against this background, Government projected revenue inflows are now seen at $3,8 billion from $4,1 billion although forecast expenditure remains at $4,1 billion.
He said that proposed policy interventions will embrace the support for agriculture and domestic industry, facilitation of foreign investor partnerships, clarity on indigenisation, demonetisation and continued use of multiple currency system.
However, agriculture remained the bigger driver of the economy during the first half of the year. This was on account of improved agricultural season, due to good rainfall and improved funding arrangements.
Resultantly, Minister Chinamasa said tobacco output surpassed the initial target of 171 million kg to record 215,2 million kg. Inflows of earnings from tobacco sales amounted to $678,3 million as at end of July. Similarly, maize output recorded 1,46 million tonnes, from the original target of 1,3 million tonnes.
The tourism sector performance was good during the half year period, benefiting from increased conference business during the first eight months of 2014.
“Resultantly, tourism contribution to GDP should rise to 15 percent, from the current 10 percent.
“This would see generation of earnings rising from the current $749 million to over $1,8 billion, as tourist arrivals increase from 2,5 million to 3,2 million by 2015.”
Online Reporter