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Africa Moyo
Interview
Zimbabwe has started the New Year with high hopes of an economic boom, taking advantage of the successes posted under the Transitional Stabilisation Programme (TSP). However, the year started with a 30-day national lockdown being imposed and thereafter, a further two weeks added as part of efforts to flatten the curve after a spike in new Covid-19 cases. To have an appreciation of what the year holds, our Deputy News Editor Africa Moyo (AM) spoke at length with Finance and Economic Development Minister, Professor Mthuli Ncube (Prof Ncube). Read the following excerpts . . .
AM: A New Year is born, an old problem called Covid-19 remains with the country and world. Tell us your projections for the year in light of challenges posed by the pandemic.
Prof Ncube: As the New Year begins, Covid-19 remains a serious challenge to the country and the world at large. Most worrying is the emergence of new variants of the virus which spread faster and are potentially more deadly. On a positive note, the world is now rolling out vaccines and fortunately there is some evidence that some of the vaccines may be effective for the new variants.
However, manufacturing capacity of the vaccine is still constrained to meet the huge demand and they are concentrated in developed countries, disadvantaging developing countries. You may also note that the distribution mechanisms of the vaccine are also a challenge as some require strict refrigeration all the time.
It is our hope that as the production lines are expanded, Africa and other developing countries will easily access them. Having said that, the pandemic is indeed causing a risk to the economy threatening realisation of our projections for the year 2021.
However, you may be aware the economy has contracted for the past two consecutive years putting it on a very low base hence giving room for recovery.
You may also note that drought was one of the major drivers of the recession during the past two years as agriculture activities and electricity generation was compromised. However, the season to date has been quite positive, and is promising to be a better season that presents an opportunity for a strong rebound of the economy.
Furthermore, Government did not impose a blanket ban on all economic activities in our Covid-19 containment measures, as some sectors have been allowed to continue such as mining, manufacturing and agriculture activities. This is positive for economic growth.
Having said that, it is premature to conclusively say the pandemic has already compromised our projections. If we manage to bring under control this second wave in the shortest possible time, economic activity will recover.
So, the thrust of Government is to expedite the rolling out of vaccines. As Government we remain positive on the outlook of the economy in 2021. As the year progresses, we will be able to fully assess how the positive impact of some sectors of the economy such as agriculture and electricity availability counteract the negative impact of the virus on some sectors like tourism, education and the informal sector.
AM: In light of the threat posed by the pandemic, is Zimbabwe going to meet its economic growth targets? If so, what could be the drivers?
Prof Ncube: As discussed in the previous question, there is indeed threats to the attainment of economic growth targets. The major downside risk is the pandemic and its related containment measures. I have to mention that this virus is also taking away some of the critical human skills which will present a long term growth challenge for the country.
On the positive side is the favourable rainfall season to date that has come at an opportune time when Government had put in place various initiatives such as the Pfumvudza/Intwasa Conservation Scheme/Presidential Input Scheme and the National Enhanced Crop Productivity Scheme (Command Agriculture) targeting maize, traditional grains, soya beans and cotton.
The good rains will also enhance domestic electricity generation, particularly from Kariba. Availability of uninterrupted power supply to our productive sectors will be critical going forward.
We are also grateful that the country has been spared from the devastating impact of two tropical cyclones that have hit the region to date with minimum damage to agriculture, infrastructure and livelihoods.
The economy is also set to benefit from the relatively higher international mineral commodity prices expected this year. We know that, there are high prospects of recovery of the mining industry in 2021 basing on the recent State of the Mining Industry Report produced in 2020 which indicated that about 90 percent of the miners are planning to ramp up production in 2021, while 10 percent expect to remain at the same level.
Production is expected to increase by between 10 percent and 30 percent, while capacity utilisation will rise to 80 percent in 2021 from 61 percent in 2020. However, we also know that these expectations are subject to down side risks from the pandemic. The impact of the lock-down has also resulted in the increased demand for communication services which we expect to positively affect growth going forward.
AM: Industry and commerce wants more working hours beyond the 3pm set by Government to boost production and sales. What can be done to strike a balance between the desire to contain Covid-19 and profitability?
Prof Ncube: Well, it is not for me to decide on this, but Cabinet remains guided by technical and scientific advice through the Inter-Ministerial Task Force on Covid-19 as well. But what I know for sure is that, Government is preoccupied with the need to save lives through containment measures of the virus to manageable levels to avoid straining our health system.
Therefore, at the moment, the law enforcement agencies are making sure people and businesses adhere to current restriction guidelines to bring this second wave under control. Governments, therefore, urges businesses to conduct regular Covid-19 tests for their workers and enforce the principle of social distancing on both employees and customers to in order to control the virus.
The sooner we put the second wave under control, the earlier Government can review operating hours for businesses.
AM: A number of gains including spending cuts, stabilisation of the forex rate through the auction, etc, have been recorded in the economy through TSP. Are you confident of maintaining such gains going forward?
Prof Ncube: We are very confident of maintaining the TSP gains going forward. The TSP reform progress was the first phase of a long journey. As the curtain closes on the TSP, Government launched the second “leg” of the reform and development agenda — The National Development Strategy 1 (NDS1), running from 2021 to 2025.
In 2021, Government will pay particular attention to the following issues contained in the 2021 National Budget which are derived from the NDS1:
Inclusive Growth and Macro-stability;
Developing and Supporting Productive Value Chains;
Optimising Value in our Natural Resources;
Infrastructure, ICT and Digital Economy;
Social Protection, Human Capital Development and Well-being;
Effective Institution Building and Governance; and
Engagement and Re-engagement.
AM: Revenue collection projections are clearly in jeopardy since the year has started with fewer importers able to travel. What’s the plan going forward for the country to implement projects and activities it had planned for the year?
Prof Ncube: As I said earlier, the lockdown measures have not affected the formal sector very much and if we look at preliminary data for the month of January, indications are that we are still within our revenue targets.
If the situation persists for a long time, regrettably, it will have an impact on our revenue collections that will also necessitate realignment of Government expenditure. Government always endeavours to leave within its means.
AM: The 2021 Budget has allocated $19,5 billion towards devolution, but communities fear that not much might be covered due to lock-down measures. What can you tell communities about this?
Prof Ncube: Government remains cognisant of the right of communities to manage their own affairs and to further their own development. Already, there are quite a number of projects and programmes that are ongoing.
With the coming in of the second wave and the lock-down measures, Government is looking at modalities and measures of sustaining the implementation of devolution programmes and projects. For instance, most road construction projects have already been categorized as essential services, allowing contractors to undertake works, respecting the WHO and Ministry of Health and Child Care Covid-19 regulations. It is, therefore, too early to project that not much will be done this year. We remain optimistic on the effectiveness of Government interventions to bring the virus under control.
AM: Rains across large parts of the country have affected the mining sector and targeted output may decline by year end as miners spend more time dewatering their mining areas. To what extent may this effect economic growth?
Prof Ncube: These are seasonal effects to production that have been taken into account when coming up with the annual mining output target. Rains usually affect small-scale miners, who respond by suspending operations during this time of the year.
Read full interview on www.herald.co.zw
Large-scale miners have established coping mechanism, meaning they have enough water pumping capacity that is being supported by constant electricity supply. It is too early to make judgement calls on the extent to which the economy will be affected as we are only one month into the year. The monthly production out-turn is yet to come out and that will give us a sense of how big the impact is and whether it can be recovered during the year or not. As of now, the mining target still holds.
AM: What is your comment on the promising agriculture season? Could the sector cancel out the challenges facing other sectors?
Prof Ncube: The promising agriculture season is a result of favourable climatic conditions characterised by normal to above normal rainfall and Government’s timely interventions through programmes such as Pfumvudza, Presidential Input Scheme, National Enhanced Crop Productivity Scheme (Command Agriculture), the Livestock Growth Plan and Farm Mechanisation Programme. Agriculture remains the backbone of our economy and has a strong backward and forward linkages with the rest of the economy. For instance, the sector provides over 60 percent of raw materials as throughput into manufacturing. Its growth multiplier is estimated to be between 1,5 to 2,7 percent times.
At the same time, the manufacturing sector provides inputs to the agriculture sector in the form of fertilisers, chemicals and other implements. An anticipated boom in agriculture is undoubtedly going to lift a number of downstream industries, particularly those in agro-processing. In terms of its impact on inflation, the biggest component in the CPI basket is food (31,3 percent), hence an improved agriculture season will stabilise food supply and puts downward pressure on prices.
On the balance of payments side, food imports have been growing in the past years due to successive droughts. For the first eleven months of 2020, the country imported maize and wheat worth US$373 million. A bumper harvest will ensure we cut back significantly on the import bill. At the same time, we will be able to earn more from increased agriculture exports. On the fiscal side, there will be a relief as we will be able to redirect resources to other priority areas, since we will scale down on drought relief programs.
Given a strong relation between agriculture performance and poverty, a bumper harvest will lift a significant number of people out of poverty. Besides providing food, it will also increase income of households, which will spur aggregate demand in the economy.
AM: As the economy was being rebalanced since 2018, a number of citizens had challenges putting food on the table. What do you promise such people from this year on?
Prof Ncube: The economy is now on a path to recovery. The worst is over and Government is now working on ensuring the economy recovers strongly, taking advantage of the milestones from the TSP, and supportive measures as enunciated in the NDS1. Our key priority will be to nurture the stable macroeconomic environment currently prevailing in the country by continuing to implement prudent fiscal and monetary policies. Furthermore, Government will bring forward, business and infrastructure investment activity and adequately prepare and support the productive sectors, in a manner that does not promote vulnerabilities and instability.
AM: Civil servants, especially frontline workers battling the Covid-19 pandemic, want good news from you. What can you say to them?
Prof Ncube: Government and the people of Zimbabwe are indebted to the bravery and sacrifice of our health workers who face Covid-19 pandemic every day to save our lives. As Government, we will continue to provide incentives that ensure our health workers and other civil servants providing valuable services under these difficult circumstances are compensated accordingly.
As at 31 December 2020, Treasury had released about $24,5 billion meant to fight the pandemic. This resource envelope included risk allowances for frontline personnel and support to stimulate production. I want to assure the nation that, we will continue to provide the necessary support to frontline workers. The Covid-19 allowances and risk allowances are being reviewed and will continue in the foreseeable future. In addition, once the vaccine is available, top of our priority will be to inoculate the frontline workers first. Already, discussions are currently underway with the suppliers from China, Russia, India COVAX and AU for country to access Covid-19 vaccine. The Government of Zimbabwe has set aside US$100 million for the acquisition of vaccine to cover 10 million people, constituting the herd immunity population target. The private sector has offered to complement Government’s resources in the acquisition of vaccines. The vaccines will be available for free for Zimbabwe citizens.
AM: Any social protection measures for this year?
Prof Ncube: Sure, this remains one of the main functions of Government. Social Assistance Benefits were allocated $5,5 billion in the 2021 Budget.
The outbreak of Covid-19 second wave is an emergency with humanitarian needs that will be met from the contingency and other budgeted expenditures. Affected citizens will be assisted within the broader traditional social protection interventions such as Drought Mitigation, Harmonised Social Cash Transfer and BEAM programmes. It is, however, important to note that the beneficiaries of such programmes would go through some means testing for eligibility.
AM: Thank you so much for your time.
Prof Ncube: Welcome.
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