adminRevenue buoyancy is the ratio of revenue to GDP, while “GDP” represents the total market value of all final goods and services produced in a country in a given year.
On current GDP figures for Zimbabwe, the country’s revenue buoyancy is estimated to be around 30,5 percent.
Experts are, however, of the opinion that a revenue buoyancy figure of 30,5 percent is too high for Zimbabwe, considering the extensive informalisation of its economy.
Economist Mr Joseph Mverecha said Zimbabwe’s estimated revenue buoyancy is even higher than that of South Africa, which is considerably more industrialised.
“On current GDP numbers, our revenue buoyancy would be about 30,5 percent, compared with that of South Africa at 27,5 percent.
“It is impossible to advance a proposition that says Zim is more efficient than South Africa at revenue collection when our informalisation is significantly bigger than South Africa’s. And the South African economy is about 30 times larger than Zimbabwe’s and that country did not experience the kind of meltdown we experienced between 2007 and 2008.
“It points veritably to only one thing – our GDP is understated,” he said.
Zimbabwe was projected to attain a GDP of around US$8,1 billion last year.
According to Mr Mverecha, the country’s GDP might have closed the year at around US$12,5 billion, increasing to around US$14 billion this year (assuming a revised revenue/GDP buoyancy of about 23,5 percent).
Zimbabwe’s current GDP estimate is even lower than that of Zambia, a country that is historically economically smaller than Zimbabwe.
Some observers have noted that the Zimbabwean economy (even at present) is much larger than that of Zambia, which is currently pegged at just over US$16 billion.
This indicates that the US$14 billion GDP estimate for 2012 by Mr Mverecha may itself be an understatement. But it is important to consider the decade of hyperinflation and economic debility that Zimbabwe underwent.
Nonetheless, a review of sectoral performance between the two countries shows that Zimbabwe has fared better from 2010.
Another factor that could contribute to the understatement of the country’s GDP is poor accountability of the output of its key resources, notably minerals, especially as they are exported in raw form.
Observers are of the view that some multinational corporations operating in the country may be involved in transfer pricing.
Transfer pricing is the price charged by one subsidiary
of a multinational company to another subsidiary of the same company. To this extent over-or-under pricing might take place, resulting in the country being prejudiced of revenue.
In 2010, Botswana-based financial services company Imara raised similar concerns around the International Monetary Fund’s projections of Zimbabwe’s GDP of US$5 billion.
“We remain totally unconvinced and further don’t believe that the underlying number used for the economy, being US$5 billion, is correct,” said Imara Asset Management (Zimbabwe) chief executive Mr John Legat at the time.
Moves by the Zimbabwean fiscal authorities seem to confirm a lack of conviction on their part on GDP figures that have been thrown around. For instance, in the 2012 National Budget the Government revised upward the size of the economy from
US$3,5 billion to US$5,1 billion, but with barely a corresponding uplift in the growth rate.
Furthermore, in the 2011 National Budget, Finance Minister Tendai Biti gave a re-rating of the GDP of up to US$8 billion.
Contention around the size of the Zimbabwean economy appears to stem from poor statistical management on the part of the Zimbabwe National Statistical Agency emerging from a prolonged hyperinflationary period.
Online Reporter