Business: 2018 outlook promising:
ON THE backdrop of a tumultuous 2017, experts are confident the year 2018 will bear a much positive outcome for the economy particularly with regards to increased investment flows into the country expected to be the key determinant for economic growth.
Increased Foreign Direct Investment has been elusive partly as a result of the 51-49 percent clause in the Indigenisation and Empowerment Law with other factors such as poor competitiveness, negative country perception and rampant corruption dampening investors’ confidence in the market.
The global outlook is, however, encouraging, with the World Bank Outlook October report having already projected a 3.4 percent growth in Sub-Saharan Africa for 2018 as a result of stabilisation of fiscal deficits, narrowing of current account deficits and a slight rebound in commodity prices.
This withstands mounting vulnerabilities both in the region and also at a local level that includes the rising public debt, financial sector strains and weak production.
However, following recent political developments which led to a change in the country’s political leadership, which has given birth to a new dispensation, major changes have already been made that are likely to impact the economy in positive light.
The amendment to the Indigenisation and Empowerment Act that will see the scrapping off of the 51-49 percent threshold is expected to be finalised this year and the motion has already received applause from various quarters as crucial to attracting foreign capital.
Furthermore, this comes at a time when the country is expected to fully operationalise the Special Economic Zones following the setting up of the board to be chaired by former Reserve Bank of Zimbabwe governor Dr Gideon Gono late last year.
This is a major boost for the ailing manufacturing sector.
Economic analysts say this will further be boosted by the gains already made from the Ease of Doing Business reforms which have been underway since 2015.
“Before we talk of any changes in legislature with regards to the indigenisation law, let us first agree that investors are concerned with the business operating environment for them to make a decision that they want to invest here, so the Ease of Doing Business reforms are thus so important because they determine the day-to-day running of the business, and that is key,” competitiveness expert Pepukai Chivoore told Post Business this week.
“So we are optimistic that what the Office of the President and Cabinet (OPC) has been doing will boost business in 2018 as they will be finalising set targets,” he added.
In his 2018 National Budget statement, Finance and Economic Planning Minister Patrick Chinamasa projected a 4,5 percent GDP growth.
Owing to commodity prices improvement, the country projects mineral receipts of US$2,5 billion in 2018 up from US$2,3 billlion. This growth in the sector will be achieved as a result of interventions that include the consolidation of the diamond sector, increasing coal output following recapitalisation of Hwange Colliery Company and funding of small-scale gold miners by the Central Bank which saw increased output from the artisanal miners in the past two years.
However, analysts expect continuing headwinds that characterised 2017 to pose a stern test for the new Government in the short to medium term.
The liquidity crisis and cash shortages will need to be improved for the smooth flow of business in the country. This will, however, hinge upon the country’s readi- ness to improve its export receipts to generate adequate foreign exchange to stabilise the financial sector.
Resultantly, this has given exerted inflationary pressures on the economy despite calls by President Mnangagwa for stabilisation of the pricing system during the just ended festive period.
However, the finance minister has already pegged inflation at an average of 3 percent in 2018, and analysts warn of an uphill task ahead as far as restricting price hikes is concerned given rampant buying and selling of bond notes on the parallel market.
“Putting an end to the thriving parallel money market should be enough to stabilise the financial sector. High cash premiums are pressing inflationary pressures and if left unattended will prompt a massive rise in inflation going forward in 2018,” said economic analyst Percy Gwanyanya.