Brighter prospects for Zim economy
ECONOMIC data released this week is evidence of Zimbabwe’s remarkable progress in recent years and greater achievements lying ahead.
The country has overcome a number of hurdles, including hyperinflation and currency instability, to emerge as a stable and growing economy.
In particular, the growth of the agriculture, mining and manufacturing sectors has been encouraging, according to many observers.
These economic sectors are the backbone of the economy and their continued impressive growth will create quality jobs and boost prosperity for the citizens, in line with Government’s vision of attaining an upper middle-income economy by 2030, which is indeed achievable.
“The sustained prudence by the Treasury and the monetary authorities will certainly keep the economy on a growth trajectory going forward,” economic analyst Dr Langton Mabhanga told The Sunday Mail Business in an interview on
Friday.
He said Treasury and the central bank had been working hand in glove to implement sound fiscal and monetary policies that created a stable macroeconomic environment characterised by a relatively stable exchange rate and price stability.
Despite the impact of drought, floods and Covid-19, the economy is on a positive growth trajectory and is projected to rise by 5,3 percent this year, driven by agriculture and mining.
However, in 2024, economic growth is expected to slow down to 3,6 percent mainly due to the expected impact of the El Niño phenomenon, Finance and Investment Promotion Minister Professor Mthuli Ncube said in his presentation during a pre-budget seminar on Wednesday.
After the 2019 drought, the agriculture sector has been on a growth path due to smart conservation agriculture practices under the Pfumvudza/Intwasa scheme.
This has been coupled with continuation of input support programmes for farmers, improvement in extension services, mechanisation and irrigation development, said the minister.
“Growth has been spread across most sub-sectors,” said Minister Ncube.
“Although variations in seasonal rainfall have led to fluctuations, output has generally been on an upward trend. As a result, the country is now able to meet the national food security requirement, especially for grain,” Minister Ncube added.
The contribution of the mining sector to the gross domestic product (GDP) has been steadily increasing from 11,5 percent in 2018 to the current level of 13,2 percent. Similarly, the sector has been on a growth trajectory since 2020.
The growth is driven by increased output across all minerals and discovery of new ones (lithium), as well as investments in additional capacities.
In terms of investments, the mining industry has surpassed the US$12 billion target, said Prof Ncube.
Industry capacity utilisation reached a 10-year high in 2022. This steady increase in capacity utilisation corresponds with the increasing local production, said the minister.
Tourist arrivals tailed off in the aftermath of the Covid-19 pandemic, but have been on the rebound since 2021. In the first half of 2023, Zimbabwe received 529 078 tourists, an increase of 50 percent compared to the same period in 2022.
“Key sectors such as mining, agriculture, manufacturing and tourism have been performing well and are expected to continue performing better in the coming years,” said economist Carlos Tadya.
“We urge the Government to continue to pin down (on) any scheming that may cause attacks on the currency to sustain growth.”
The decline in inflation is also a positive development. Inflation erodes the purchasing power of consumers and businesses, and it makes it difficult to plan for the future.
The decline in inflation will allow Zimbabweans to save more and invest in their future.
The exchange rate depreciation that induced inflation experienced in May and June 2023 is now under control, in response to a raft of measures implemented by Government.
Year-on-year inflation decelerated to 18,4 percent in September from 30,9 percent in June, while month-on-month inflation eased to 0,95 percent from 12,1 percent in the same period.
“These figures indicate that the Government and central bank’s measures are having a positive impact on inflation,” said Minister Ncube.
“The exchange rate and prices have stabilised in response to policy interventions made in May and June.
“The stability is also attributed to the introduction of the gold coins and gold-backed digital token for value preservation purposes and are now for transaction purposes as well.”
Government revenues in the US dollar have increased substantially from US$2 billion in 2018 to current levels of around US$7 billion, while spending capacity has increased from US$3 billion in 2018 to US$7 billion. This has enabled Government to invest in social protection and
infrastructure programmes, the Treasury says.
Last week, the Zimbabwe Investment Development Agency reported that 180 investment proposals worth US$3,4 billion were issued during the third quarter of 2023, despite it being an election season. The increase in investment is a sign that investors have confidence in the Zimbabwean economy, even during an election year.
The investment proposals cover a wide range of sectors — including mining, agriculture, manufacturing and tourism. This is a positive sign, as it indicates that investors are interested in all aspects of the Zimbabwean economy, analysts say.
The new statutory instrument that guarantees use of US dollars in Zimbabwe was expected to boost bank lending, investments and economic growth
“This is the key issue that was missing . . . this is why banks had stopped lending. There was no certainly about what was going to happen beyond 2025 and naturally, in view of the fact that there was a statutory instrument (SI) issued to the effect that if you borrow in US dollars, you pay in US dollars . . . so that SI was also expiring 2025. This (new) SI guarantees certainty around the use of US dollars and we should see banks start lending again to the productive sectors,” Economics professor Gift Mugano said.