The highs and lows of 2017

The Manica Post - - Business - Kudzanai Gerede Busi­ness Cor­re­spon­dent

AS THE 2017 draws to an end, Post Busi­ness looks at some ma­jor eco­nomic high­lights that char­ac­terised the busi­ness out­look through­out the course of the year.

The econ­omy tra­versed a chal­leng­ing ter­rain with enor­mous head­winds chief among them be­ing the acute cash short­ages, high pre­mi­ums for cash on Real Time Gross Set­tle­ment and mo­bile money trans­ac­tions, and a price re­bound out of de­fla­tion since 2014, all this tak­ing a toll on busi­ness op­er­a­tions in the coun­try.

On a pos­i­tive note, the coun­try recorded sub­stan­tial gains in agri­cul­ture, a key sec­tor that con­se­quen­tially feeds into var­i­ous other sec­tors such as man­u­fac­tur­ing and phar­ma­ceu­ti­cals through value chains.

How­ever, the man­u­fac­tur­ing sec­tor per­for­mance took a down­turn, partly be­cause of a gen­er­ally low busi­ness ac­tiv­ity in the coun­try but largely as a re­sult of for­eign cur­rency short­ages for ei­ther im­por­ta­tion of in­puts or ac­qui­si­tion of new equip­ment and tech­nolo­gies.

The Con­fed­er­a­tion of Zim­babwe In­dus­tries (CZI) Man­u­fac­tur­ing Sec­tor Sur­vey 2017 showed that 30 per­cent of firms in the sec­tor are on the brink of col­lapse ow­ing to for­eign cur­rency short­ages.

This is de­spite Cen­tral Bank pri­ori­ti­sa­tion of for­eign cur­rency avail­abil­ity for pro­duc­tive play­ers to set­tle for­eign pay­ments, but the wait­ing list has since over­whelmed the avail­able for­eign cur­rency.

In his Mid-Term Mon­e­tary Pol­icy state­ment in Au­gust, Re­serve Bank of Zim­babwe chief Dr John Man­gudya stated that the Cen­tral Bank had man­aged to se­cure an ad­di­tional bond notes ex­port in­cen­tive scheme of US$300 mil­lion un­der a standby liq­uid­ity sup­port from Afrex­im­bank which started rolling on the first of Septem­ber with hopes to not only liq­uefy the econ­omy but re­cap­i­talise de­pressed ex­port pro­duc­tion.

How­ever, an­a­lysts were quick to ad­vise the Cen­tral Bank on the need to clamp down on in­dis­ci­pline within the fi­nan­cial ser­vices sec­tor that saw fresh bond notes flood­ing the par­al­lel mar­ket while lo­cal banks were run­ning out of notes. The con­se­quences of this led to high pre­mi­ums on the par­al­lel mar­ket which sparked in­fla­tion.

Rev­enue fig­ures, how­ever, looked good for Trea­sury in 2017.

Last year ZIMRA missed its US$3,60 bil­lion tar­get man­ag­ing to col­lect a to­tal of US$3,46 bil­lion but ex­ceeded its first quar­ter (FQ 1) gross col­lec­tion tar­get by 6 per­cent to­talling US$ 862,47 mil­lion. This con­tin­ued into FQ3.

As part of in­creas­ing rev­enue col­lec­tion, ZIMRA has been en­cour­ag­ing SMEs to reg­is­ter and pay their pre­sump­tive taxes through out­reach pro­grammes across the coun­try while it also em­barked on the fis­cal­i­sa­tion pro­gramme, which en­sures con­fig­u­ra­tion of fis­cal de­vices to en­able them to record sales and other tax in­for­ma­tion on the fis­cal mem­ory at the time of sale for use by the tax au­thor­i­ties in Value Added Tax ad­min­is­tra­tion.

To fur­ther bef up the ex­port sec­tor, Gov­ern­ment in Oc­to­ber re­moved ex­port per­mits for all in­dus­trial com­modi­ties un­der a new Statu­tory In­stru­ment 122 of 2017, as it sought to at­tract lo­cal man­u­fac­tur­ers of com­modi­ties into the ex­port sec­tor by eas­ing the ex­port pro­cesses.

Un­der the new ar­range­ment, man­u­fac­tur­ers will not need to seek Gov­ern­ment au­tho­ri­sa­tion for ex­port­ing their com­modi­ties as it is ex­pected to im­prove ef­fi­ciency to busi­ness.

The min­ing sec­tor un­der­went no­table im­prove­ments in 2017 par­tic­u­larly in chrome, di­a­mond, coal and gold sec­tor.

Gov­ern­ment na­tion­alised chrome claims to small-scale in­dige­nous play­ers while it se­cured cap­i­tal in­jec­tion to­wards equip­ment, ex­plo­ration and restruc­tur­ing of gold, coal, di­a­mond and chrome sub-sec­tors.

US$80 mil­lion was in­jected into Zim­babwe Con­sol­i­dated Di­a­mond Company (ZCDC) for up scal­ing min­ing op­er­a­tions fol­low­ing the shut­ting down of joint ven­ture com­pa­nies in Chi­adzwa.

ZCDC 2017 half year per­for­mance was at 1,1 mil­lion carats against 690 000 carats re­alised the pre­vi­ous year.

Buoyed by re­cov­er­ies of com­mod­ity prices on the in­ter­na­tional mar­ket, Gov­ern­ment also re­cap­i­talised Hwange Col­liery Company and since the cap­i­tal in­jec­tion, the company moved from a monthly pro­duc­tion out­put of 30 000 tonnes last year to 300 000 tonnes a month.

Good times lie ahead fol­low­ing the US$400 mil­lion re­cap­i­tal­i­sa­tion of the coun­try’s sole rail­way liner NRZ af­ter a suc­cess­ful joint bid by Di­as­pora In­fra­struc­ture De­vel­op­ment Group, a con­sor­tium of Zim­bab­wean in­vestors liv­ing abroad and South African in­vestor, Transnet, ealier this year.

The re­cap­i­tal­i­sa­tion ini­tia­tive will focus on ac­qui­si­tion and up­grade of wag­ons, up­grad­ing the company’s in­for­ma­tion tech­nol­ogy and sig­nalling sys­tems as well as in­creas­ing the paras­tatal’s ca­pac­ity util­i­sa­tion. Once the paras­tatal starts op­er­at­ing prof­itably, it in­creases its ca­pac­ity to set­tle its US$144 mil­lion legacy debt.

An­a­lysts hailed this de­vel­op­ment as a key driver to the rein­dus­tri­al­i­sa­tion agenda as an ef­fi­cient rail­way sys­tem is cost ef­fec­tive for trans­porta­tion of goods.

And still on in­fra­struc­ture de­vel­op­ment, in Au­gust this year, Finance and Eco­nomic Plan­ning Min­is­ter Pa­trick Chi­na­masa while ad­dress­ing lo­cal and in­ter­na­tional del­e­gates at a Lo­cal Au­thor­i­ties In­vest­ment Con­fer­ence in Harare said Gov­ern­ment would soon con­sider as­sent­ing to lo­cal au­thor­i­ties is­suance of bonds to finance var­i­ous in­fra­struc­ture projects.

“Gov­ern­ment will as­sist those lo­cal au­thor­i­ties whose fi­nances are in order. We can­not con­tinue to put money into a bot­tom­less pit. We can only put money where fi­nances are well man­aged.

“For those lo­cal au­thor­i­ties that are well man­aged I can sign off on that while I am blind­folded and give au­thor­ity for you to raise loans by way of in­fra­struc­ture bonds but you would need to demon­strate how that bond will be re­tired,” said the finance min­is­ter.

2017 will go down as a mo­men­tous year for the econ­omy as it en­tered a new dis­pen­sa­tion fol­low­ing the res­ig­na­tion of for­mer Pres­i­dent Cde Robert Mu­gabe and the as­cen­dance of Pres­i­dent Em­mer­son Mnan­gagwa seen as open­ing a new eco­nomic epoch for the coun­try.

The new dis­pen­sa­tion has al­ready made ad­just­ments to the In­di­geni­sa­tion and Em­pow­er­ment Law by scrap­ping the 51-49 per­cent clause which has been a ma­jor de­ter­rent to in­vest­ment into the coun­try. The 51-49 per­cent ra­tio will now only ap­ply to the di­a­mond and plat­inum sec­tors. Cor­po­rate gov­er­nance is­sues are be­ing tack­led with the ob­jec­tive of cur­tail­ing ram­pant cor­rup­tion which was de­rail­ing eco­nomic progress. This in­cludes the ex­ter­nal­i­sa­tion of funds and as­sets three-month mora­to­rium ef­fected by the new Pres­i­dent.

Pres­i­dent Mnan­gagwa

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