adminGDP refers to the market value of all final goods and services produced within a country in a given period, normally a year. GDP per capita is an approximation of the value of goods produced per person in the country, equal to the country’s GDP, divided by the total number of people in the country. It is often considered as an indicator of a country’s standard of living. It is, however, not a measure of personal income.
Minister of Industry and Commerce, Professor Welshman Ncube, said the most important thing, however, was determining whether or not the elections to be held this year would destabilise the economy.
He said the country’s economic prospects were good but subject to the elections, which he hoped would not cause political instability. Prof Ncube said capacity utilisation of industries in the country had improved and this would result in an improvement of the country’s economy.
“Capacity utilisation since the inception of the Government of National Unity improved from 10 percent to 34 percent by the end of 2009. It escalated to 43 percent in 2010 and was at 57,5 percent in 2011,” said Prof Ncube.
He said capacity utilisation of the country’s industries was set to improve by at least another 10 percent this year and there should be about 70 percent capacity utilisation by the end of the year.
Capacity utilisation is a concept that refers to the extent to which an enterprise or a nation actually uses its installed productive capacity. Thus, it refers to the relationship between actual output that is produced with the installed equipment and the potential output, which could be produced with it, if capacity were fully used.
After years of decline, GDP growth was estimated at 8,2 percent in 2010 and 7,8 percent in 2011, driven by rapid expansion of mining output and exports, and agriculture.
In spite of this, there is also high unemployment, which is estimated at 80 percent.
Following the adoption of the multi-currency regime, consumer prices fell by 7,7 percent during 2009, before rising by 2,5 percent in the first 10 months of 2010. Inflation averaged 4,9 percent in 2010. Year-on-year inflation was 4,2 percent in November 2010 and was forecast to increase marginally to 5,9 percent in 2011.
Last year, the Kimberley Process Certification Scheme (KPCS) approved Zimbabwe’s diamonds for export, which could significantly improve the country’s economic prospects this year.
However, the US, which holds the chair of the Kimberley Process Certification Scheme this year, could sabotage the development because it was one of the countries, together with Canada and their allies, that were against the certification claiming that Zimbabwe’s diamonds were blood diamonds.
The term “blood diamonds” refers to a diamond mined in a war zone and sold to finance an insurgency, invading the army’s war efforts, or a warlord’s activity, usually in Africa where around two-thirds of the world’s diamonds are extracted. The phenomenon of conflict minerals has the same nature.
The KPCS is the process designed to certify the origin of rough diamonds from sources that are free of conflict funded by diamond production. The process was established in 2003 to prevent diamond sales from financing rebellious movements. The certification scheme aims at preventing “blood diamonds” from entering the mainstream rough diamond market. It was set up to assure consumers that by purchasing diamonds they were not financing war and human rights abuses.
The Chiadzwa diamonds could generate about $2 billion revenue a year, so revenue from there can stimulate growth.
Meanwhile, Zimbabwe’s industries have been on a recovery path with the introduction of various funds that are meant to revive the country’s industries.
Although not yet disbursed, the Distressed Industries and Marginalised Areas Fund (Dimaf) that was set up in May last year to provide working capital to Bulawayo companies, which suffered from financial marginalisation by local financiers, is something to look forward to in 2012.
An eight-member taskforce chaired by Prof Ncube was formed to investigate the problems affecting Bulawayo’s industries and come up with recommendations and among the recommendations it proposed, the taskforce team reported that the city needed about $50 million to restore Bulawayo’s pride as the country’s industrial hub.
The fund was meant to resuscitate companies that were facing liquidity challenges in the hyperinflation era of 2008 and 2009 and it was reported that 87 companies closed down in Bulawayo alone in 2010, with over 20 000 jobs lost.
Prof Ncube said the re-tooling, rehabilitation and re-building of the country’s industries could achieve this, hence leading to the country’s economy improving.
“The only uncertainty is on the elections because those will determine where we will go as a country. Challenges continue to be largely the same in terms of the lines of credit for industry and fair track, fair competition in terms of what is exported,” he added.
Whereas financial flows to Africa have increased rapidly during the last decade, in Zimbabwe they have been poor. Between 2000 and 2010 the sum of Foreign Direct Investment (FDI), portfolio investment and Official Development Assistance (ODA) increased almost five-fold from $27 billion to $122 billion.
Africa’s economies have bounced back from the slump that had been caused by the global recession but Zimbabwe in particular is set to experience economic growth this year.
Economic analyst and industrialist Dr Eric Bloch said the country would experience minimal economic growth in 2012 as a result of better agriculture and tourism. He said economic growth would be limited until after elections.
“I believe we will see some minimal economic growth as a result of better agriculture and tourism but growth will be limited until elections are held because until then, there will continue to be the lack of money due to few investors,” said Dr Bloch.
Dr Bloch said the increased royalties and the severity of indigenisation policies, which require foreign investors to have minority shareholding, were marginalising the mining sector.
“This will restrict the growth of the economy because it chases away investors. The Kimberley Process will however be of benefit,” he said.
Dr Bloch said although the Kimberley Process would be helpful, it would not result in significant benefits.
The Ministry of Tourism and Hospitality Industry last year said it would not renew the licences of foreign-owned tourist companies that have not complied with the Government’s indigenisation policy. The responsible minister, Engineer Walter Mzembi said his ministry was working closely with the Ministry of Youth Development, Empowerment and Indigenisation to make sure that tourism and hospitality companies owned by foreigners sell 51 percent of their equity to indigenous people.
Engineer Mzembi said if the companies already had partnerships with black people, his ministry would thoroughly scrutinise the partnerships to ascertain their authenticity.
He said he had already instructed the Zimbabwe Tourism Authority not to issue licences to companies that did not have indigenisation plans lined up for this year.
The new requirements will affect restaurants, lodges, hotels, car hire companies and travel and tour operations.
What is very critical for Zimbabwe, however, is high production across all sectors of the economy. Although there were a significant number of challenges in 2011 such as that of the national carrier, Air Zimbabwe, prejudicing the country’s tourism sector by suspending operations on some lucrative routes, liquidity shortage and so on, the year 2012 is expected to present better opportunities for the country.
Online Reporter