adminMakanaka Nyamutowera Business Correspondent
THE Government is set to launch a new economic blueprint for Zimbabwe named Zimbabwe Agenda for Sustainable Socio-Economic Transformation using some of the pointers borrowed from the Zanu-PF election manifesto.
Implementation of the blueprint will start next year amid a liquidity crisis which seems to be worsening. The delay in presenting the National Budget has also done more harm than good as people have interpreted it to mean that the Government has run out of funding options.
There is a lot of anxiety as the populace awaits Government’s delivery of its election promises. We have had a number of economic blueprints over the years with some ending up in the dustbin failing implementation. With the current economic scenario the Government has a challenging task ahead of it.
ZIM Asset implementation is expected to last until December 2018. Sustainable economic development is proposed to be achieved through indigenisation, empowerment and employment creation. To ensure this, Government will put in place robust monetary and fiscal policy measures which are aligned to the programming requirements of the plan.
Exploitation of the abundant natural and human resources in the country will also be a priority. It is expected that the plethora of challenges which have engulfed the various key sectors of the economy will be addressed. Manufacturing has seen a sharp drop in capacity utilisation which has led to the closure of several companies. The mining sector is suffering from the absence of long-term capital which is critical as mining is capital intensive.
The economy is expected to grow by an average of 7 percent during the implementation period with the highest growth of 9,9 percent expected in 2018.
This will be buoyed by strong growth rates in agriculture, mining, manufacturing, electricity and water, construction, finance and insurance and real estate.
For the plan to work according to the blueprint there has to be improved liquidity and access to credit by key sectors of the economy, establishment of a Sovereign Wealth Fund, improved revenue collection, increased FDI, improved supply of utilities, establishment of Special Economic Zones and the continued use of multi-currencies. Critical clusters were identified and game plans crafted that are expected to stir economic growth.
It is clear that the Government is aware of the critical areas that need to be addressed for the economy to turn around.
The big question is can it be done? While there appears to be some fresh thinking in terms of some policy plans, it consists largely of the same old ideas that have been touted over the years.
There is need for the plan to explain clearly where and how the massive investments that are required to resuscitate key sectors of the economy are expected to come from.
It is well known that investments come from savings and both private sector capital spending and public sector investments are falling far short of target.
Gross fixed capital formation at 15 percent of GDP is about half the level required for replacement and increased expansion.
It therefore means that investments need to be financed from abroad. We are to an increasing extent heavily reliant on international trade and capital transactions with net imports over a quarter of GDP.
It is therefore necessary to align the indigenisation objectives with the need to attract investments from abroad. The indigenisation laws in their current form defy the laws of economics in terms of the need to attract foreign capital.
In addition, while we acknowledge that we have abundant natural resources, there has not been a reasonable estimate of the quantity and value of extraction required to ensure that they will sustain the economy.
This is a major omission from the plan. Again, money has to be poured in first before we can start to reap the returns from these resources.
The average growth rate of approximately 7 percent per annum, that is expected to be achieved during the tenure of the plan looks a bit overoptimistic. Of the revenue the Government collects — approximately 85 percent is allocated to consumptive purposes. It would be a miracle for GDP to grow at that rate without FDI.
Then as mentioned earlier, we are externally dependent and our growth rates depend primarily upon global growth rates and the demand and prices of primary commodities and our domestic climatic conditions.
The IMF recently trimmed down global growth rates due to a sluggish recovery in the US and the persistent problems in the eurozone.
The so-called Brics apart from Russia are also having problems of their own which has seen their currencies depreciating and their economies flagging. So we should expect little in terms of an external stimulus to boost out growth.
The mining sector is one of the sectors that is being been touted as the driver of the expected growth. The necessary investment required for this is well over US$6 billion, according to sector estimates, which is huge. In addition, electricity and the rail transport system which are critical to mining operations have to be revamped. Electricity generation particularly has to increase more than the anticipated growth in mining output if we are to achieve our growth targets.
All this takes time and resources. Processing and beneficiation, whilst critical, requires investments in both human and physical capital for it to happen.
With little opportunities for employment currently, it is going to be hard to stop the massive brain drain and convince critical skills in the diaspora to come back home.
The plan also does not spell out how the Government will tackle a huge external debt of around 100 percent of GDP most of which constitutes arrears.
It will be hard to borrow or issue bonds whilst we are already overborrowed and in arrears. There is therefore a need to stick to the IMF staff monitored programme so that there can be a workable debt agreement with our creditors which is a precondition for further borrowing.
The indigenisation laws too have to be diluted in order to attract FDI. Zimbabwe’s problems are structural and long term in nature.
Therefore, short-term populist policies are unlikely to provide a solution. There are no quick fixes. Our policy decisions have to be aligned with the need to create a sustainable climate for long-term recovery.
The fact is we cannot go it alone. Most successful countries have not done it alone nor have even the most successful businesses.
The key word for the plan to work is ‘‘implementation’’. We have to translate our plans into action in order to achieve success.
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