Adios 2023, business hopes for better 2024
CAPTAINS of industry and commerce have expressed hope that the coming year will be better than 2023, which was generally tough for business.
The first half of 2023 was highly volatile, punctuated by episodes of high inflation, exchange rate volatility and acute electricity shortages.
To the contrary, the second half of 2023 has been more stable in terms of inflation and exchange rate following several policy measures instituted by the Government, which included interest rate hikes, mopping up the Zimdollar from the market through gold coins and suspending payments to contractors.
The stability of the economy being witnessed has also been buttressed by the extension of the multicurrency period to 2030, allowing businesses to plan for the future and make key investment decisions.
Electricity supply has also greatly improved after the Government commissioned Hwange Thermal Power Station Units 7 and 8, which are already feeding an additional 600 megawatts into the national grid.
Experts believe the El Niño weather phenomenon poses a major challenge to national food security, macroeconomic stability and economic growth. However, the Government has put in place contingent measures to minimise the effects of possible low harvests.
In an interview, Confederation of Zimbabwe Industries president Mr Kurai Matsheza said industrialists wanted 2024 to be better.
“But there are headwinds in our way, particularly the projection of a heavy drought, so, if agriculture does not perform well, it is going to filter into manufacturing.
“With the trend in commodity prices for minerals, we hope it will reverse, and with the commissioning of Hwange Units 7 and 8, we hope electricity will be much more stable,” he said.
He said industry also welcomes the extension of the multicurrency system to 2030.
Mr Matsheza further said: “Engagements with the IMF (International Monetary Fund) (for the) Staff-Monitored Programme, we hope, at some stage, it becomes a work programme, with some lines of credit opening up, which will help us as an industry.”
The contrasting halves of 2023 resulted in companies remodelling their operations, in line with the more prevalent US dollar sales, to cushion themselves against balance sheet erosion.
Businesses whose models relied heavily on credit sales abandoned offering Zimbabwe dollar credit facilities to hedge against value loss and ultimate business failure due to an inflationary environment and high interest rates.
In its 2024 Budget submissions, the Zimbabwe National Chamber of Commerce said tax alignments and incentives would result in a sustainable revival of the economy and employment creation.
“There is a huge disparity in the tax-free threshold in Zimbabwe dollar and US dollar terms, as local currency earners are being prejudiced, and the tax policy thus lacks fairness, which is one of its basic principles,” it said.
However, in the 2024 National Budget, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube instituted a raft of tax measures crucial to mobilise revenues.
Economist Dr Prosper Chitambara said, while 2023 has had its fair share of positives and negatives, the economy ended up performing better than what many people had initially postulated in terms of growth.
He said next year could be more difficult than 2023, especially due to the projected El Niño effect, which is going to adversely affect agricultural production, which might, in turn, affect industry and the rest of the economy.
“So, the diminished agricultural production means more inflationary pressures in terms of food pricing, as the Government has to then spend more money to mitigate that through social protection in importing food, and that is going to affect the current account and trade balance situation,” he said.
“If there is less rainfall, it means diminished hydroelectric generation, which will have an impact on businesses and the economy; therefore, we hope the economy registers positive growth.”
The Government has since projected economic growth to slow down to 3,5 percent in 2024, a decrease from 4,5 percent projected in 2023, as agricultural output is expected to suffer from the predicted erratic and below-average rainfall caused by the El Niño weather phenomenon.
Agricultural economist Dr Reneth Mano said, because agriculture remained the backbone of Zimbabwe’s economy, El Niño posed a major challenge to national food security, macroeconomic stability and economic growth.
“The business community and Government are, therefore, advised to plan for the worst while praying for the best outcome in terms of agricultural production, food security and the rationally expected slowdown in GDP (gross domestic product) growth.”
Dr Mano noted that, for the domestic milling and stockfeed industry, the Government had already started allowing duty-free imports of maize for the private sector, which should rejuvenate the milling industry and ensure affordable maize meal.
“For the stock feed industry, additional policy measures for the drought year are for the Government to additionally start allowing for duty-free imports of soya bean meal to reduce the pressure on food price inflation by reducing the domestic cost of stock feed and livestock production,” he said.
Another economist, Mr Victor Bhoroma, said potential drought could negatively impact food security and agricultural productivity, which would mean that food inflation could be elevated.
However, he said, prospects for gold, platinum, chrome, nickel and lithium prices remained positive on the global market; hence, mining exports would likely carry the country through 2024 and provide a buffer against headwinds.
“Despite the negative impact of the business environment, especially the monetary policy, the growth in exports and diaspora remittances will remain key to driving domestic demand,” said Mr Bhoroma.
In their quarterly updates, Zimbabwe Stock Exchange-listed firms applauded Government policy interventions implemented in the second quarter, which brought sustained stability. The companies said prices were fairly stable, as was witnessed by receding inflation and exchange rate stability.
First Mutual Holdings, in its nine-month trading update to September, said the operating environment was stable following policy intervention measures instituted by the Government to tackle price and exchange rate volatility.
Leading property developer Mashonaland Holdings said the Reserve Bank of Zimbabwe exchange rates stabilised during the third quarter, pursuant to monetary policy interventions.
Another property firm, First Mutual Properties, said the operating environment had been characterised by increased activity across key economic sectors.