Road to Vision 2030: Progress so far
In September 2018, Zimbabwe launched its vision 2030 with aspirations to transform the local economy into an upper middle-income economy by 2030. The vision entails achieving per capita income of US$4,500 and sustained growth in nominal Gross Domestic Product (GDP) from the 2018 levels of about US$25 billion (Rebased figure) to US$65 billion in 2030. This necessitates sustaining economic growth rates of +7% per annum from 2018 to 2030.
Part of the values and objectives to attain the vision include improved governance and rule of law, respect for human and property rights. Additional objectives include inclusive socio-economic development programs, political and economic reengagement with the west, creation of an investor friendly environment, enhanced investment, and an aggressive fight against corruption. Over three years have passed since the vision 2030 was launched and its critical to assess progress to date.
Overall economic performance
After registering a 3,5% growth rate in 2018, the economy slumped to a 6,5% decline in 2019 against a target of 9% growth. In 2020, the economy receded further by 4,1%. However, the World Bank and other economic analysts note that the economy declined by more than 8% in both years (2019 and 2020). Key to the demise of the local economy in 2019 and 2020 was the introduction of the local currency and various policy missteps to de-dollarise the local economy before addressing structural weaknesses in the economy or implementing fundamental economic reforms that sustain a mono currency. Secondary causes of decline include persistent droughts, intermittent supply of fuel, hostile investment climate, persistent power and foreign currency shortages.
The economy is expected to register successive growth in 2022 with the government forecasting a 5,5% real GDP growth. The growth rests heavily on above normal rainfalls, low levels of inflation, increase in export earnings and diaspora remittances.
Managing inflation
The government has burned its midnight oil to tame inflation from the record 838% recorded in July 2020 to 61% recorded in December 2021. When vision 2030 was launched, annual inflation was 5% for August 2018. The increase in inflation brought untold damage to businesses and citizens as savings and income were eroded for the second time in a decade (after the 2008/2009 hyperinflation era).
Thus, the price instability was created by government policies. Inflation remains very high when compared to regional peers and is forecasted to trek back to triple digits in the run up to 2023 harmonised elections. The Sadc annual inflation average (If Zimbabwe is factored out) is less than 10%. A lot of work still needs to be done to reduce inflation to single digit figure below 7% as espoused in Vision 2030.
Infrastructure development
The country aims to improve infrastructure development and investment in energy, water, sanitation, roads, and housing projects to close the current gaps. A 2019 report by the African Development Bank (AfDB) pointed out that Zimbabwe needs over US$34 billion in the next 10 years to upgrade its infrastructure to achieve sustainable levels of economic growth. This means that US$3,4 billion is required in each year (up to 2030) to keep up pace with developments on the continent especially with fast developing peers in the Sadc region.
Key projects include Beitbridge to Chirundu and Beitbridge to Victoria Falls Highways, Hwange 7 & 8 Expansion, Batoka Gorge Dam and Power Station, Modernization of ports, Zambezi Water and Kunzvi-Musami Water Projects. So far, about 280km (Out of 900km) of the Beitbridge to Chirundu Highway have been rehabilitated using government resources. The US$1.5 billion Hwange 7 & 8 Expansion is anticipated to add 600MW to the national grid by January 2023 and has register 76% progress so far. Notable progress has also been registered on Gwayi-Shangani Dam (60% complete), RGM Airport Upgrade (to be completed by June 2023) and Beitbridge Border Post Modernisation (Freight terminal opened in October 2021). There has also been significant investment in the rehabilitation of urban roads, but the investment is very low if paired to demands. Sanitation, housing, railway, ports, and most highways require significant funding to deliver vision 2030.
Business environment, investment
Despite notable improvements on doing business rankings due to amendments of the Indigenisation and Empowerment Act and progress in business licensing turnaround times. The local business environment remains cumbersome, overregulated, bureaucratic and heavily controlled by the government (political interference). Key pain points for local and international investors are policy inconsistencies, complex taxation model, taxing foreign exchange regulations, flawed respect for property rights and rule of law (especially on land and mining).
Local investment has been very low in strategic economic sectors such as mining, agriculture, and manufacturing. Foreign investment inflows declined from a record US$745 million in 2018 to less than US$150 million in 2021. Private investment in agriculture, infrastructure development and manufacturing remain distressed while other key sectors such as healthcare, financial services and real estate receive significantly lower investment when compared to regional peers. The much publicised “Open for Business” campaign wilted due to lack of tangible reforms on the ground.
The government should double its efforts on simplifying trade and licensing procedures, reviewing the taxation system, implementing a market driven foreign exchange system, finalise the legacy land tenure issue and charter long term economic policies. Other outstanding aspects include transparency in mining through joining the Extractive Industry Transparency Index (EITI) and formalisation of artisanal mining to reduce minerals smuggling or under invoicing.
Inequality, poverty & living standards
The number of extremely poor Zimbabweans increased from 4,5 million in December 2017 to 7,9 million in 2020 (50% of the population), according to World Bank data. Urban poverty has also risen to alarming levels. The major drivers of the increase in poverty are high levels of inflation (loss of income and buying power), Covid-19 induced income losses, recurring droughts, corruption, and unequal access to public services such as power, clean water, housing, and health care. Inequality in Zimbabwe has risen sharply from 45 in 2017 to 50,3 in 2019 as measured by the World Bank Gini Index, with the richest 10% of Zimbabweans consuming 20 times more than the poorest 10%.
In a nutshell, per capita income has dropped underlying a drop in citizens living standards. To achieve Vision 2030, treasury needs to pay living wages to civil servants, increase allocations (not budgeted figures) for basic health & childcare, disability benefits and social grants for the vulnerable (children, pensioners, HIV & chronic diseases patients, and pregnant women). Income redistribution tools such as taxation equity, decentralisation of public services and devolution are imperative to addressing rising poverty levels.
Lastly, there should be a deliberate effort to prosecute clear cases of corruption as contained in auditor deneral reports, address infrastructure gaps in marginalised rural areas through building schools, irrigation projects and maintaining roads through capacitating of the District Development Fund.
Privatisation of state entities
The government set out a privatisation plan to dispose completely and partially privatise over 23 state entities and parastatals (SEPs) for its vision 2030. According to the AG Report of 2018, at least 23 of the targeted state entities were loss making and technically insolvent. These entities now sorely depend on the taxpayer for funding while piling more debt to the same. Since 2017, cabinet has approved the takeover of debts worth over US$1,5 billion by the taxpayer from struggling entities such as Air Zimbabwe, Ziscosteel, National Railways of Zimbabwe and Civil Aviation Authority of Zimbabwe as a strategy to lure investors.
These debts do not factor in the central bank debt of US$3,3 billion and the US$3,5 billion Former Commercial Farmers Compensation debt loaded on taxpayers in 2020 and 2021. About 12 commercial entities were set to be listed on the Zimbabwe Stock Exchange (ZSE) to improve efficiency while others needed corporate governance reforms. So far, no state entity has been listed on ZSE. Despite the operationalization of Silo Food Industries, the Airports Company of Zimbabwe and Zida; the government has registered dismal failed on privatization of state entities (partially or wholly).
Instead, the government acquired more dormant mining assets under the Kuvimba Mining House. The government has cited steep consultancy and advisory fees as the reason even though there has been no investor appetite for the assets due to unresolved investor concerns above and unending political interference in the running of state entities.
Zimbabwe is saddled with structural economic challenges that require free market reforms to stimulate a private sector led economy; Governance reforms to ensure transparency, equitable resource allocation and prudent economic management; and above all institutional reforms to ensure checks and balances to the executive arm of government. It remains to be seen whether Vision 2030 will not suffer the same fate as other yesteryear economic blueprints due to limited political will on implementing critically needed political and socio-economic reforms.