Economic outlook bleak

BY ERIC BLOCH President Robert Mugabe and his ministers have tried vigorously to convince the nation and the world that the distressed Zimbabwean economy is on the threshold of a turnaround. Regrettably, however, there is little to give credibility to their positive projections. To support h

is forecast of growth in the agricultural sector, the President predicated that the present season would see some 43 000 to 53 0000 hectares of tobacco, the basis of that prediction being, he cited, the extent of tobacco seedlings. Unfortunately, his advisors did not disclose to him that many of those seedlings have not been planted (and seedlings that are not planted do not grow!). Authoritative sources within the tobacco industry allege that only 20 000 to 26 000 hectares of land were prepared for a tobacco crop, subsequently planted, and now under cultivation. Thus, the actuality of the 2005/6 tobacco season is a probable crop of about 30 per cent less than the approximately 80 million kgs produced in 2004/5 (which will be only some 20 per cent of the 2001 harvest of 237 million kgs.)

The Minister of Finance projected a 14,8 per cent increase in agricultural production, basing his expectations upon a projected increase in maize production of 33 per cent, and of cotton by 26 per cent. Even if these projections materialize, which is unlikely, their benefit will be offset by the decreases in production of tobacco, sugar, tea and coffee. And the projected improvement in maize production disregards the extent to which recipients of inputs from Government have, in many instances, not used them for intended purposes. There are countless instances of fuel required for field preparation being sold in the Black Market, and of other inputs being illicitly exported to, and sold in, Zambia and Mozambique.

Minister Murerwa also predicted his bullish expectations of a 27 per cent growth in mining. It is indisputable that Zimbabwe’s mining sector is set for growth, for the rise in the world price of gold and the significant movement in exchange rates, has restored viability to many existing mines, enabling them to target increased production. Concurrently, there is some marked increase in investor interest in the potential of platinum and uranium mining, and exploitation of the vast methane gas field in Matabeleland North. Nevertheless, a 27 per cent growth in 2006 appears to be grossly optimistic, as many possible investors are holding back until Government discloses its intentions on economic empowerment within the mining sector.

The Minister further founded his positive projections upon an expectation of increased tourist arrivals, in view of Zimbabwe’s “track record of peacefulness and tranquility”. He was evidently unaware that perceptions (internationally and at home) of Zimbabwe are diametrically opposite to that contention. Farm invasions continue unimpeded, as do car-jackings, armed robberies, and the like. Only five days prior to the Minister’s statement, a white farmer was viciously strangled, and then burned to death. In practice, tourists are not significantly exposed to that lawlessness, which is targeted mainly at residents, away from the principal centres, but nevertheless the international image is very negative. In addition, the gross unreliability of air services by Air Zimbabwe, which has become a characteristic of almost all its internal, and regional schedules, and the nationwide scarcity of fuel, are major deterrents to tourists.

But the bleakest of the 2006 circumstances will be that of inflation. Following a prior optimistic projection by the Governor of the Reserve Bank of Zimbabwe, Dr. Gideon Gono, the Minister of Finance expects that the year-on-year rate of inflation (which was a horrendous 502,5 per cent in November, 2005, will fall to a maximum of 80 per cent by December, 2006). He wishes to achieve this first and foremost, by curbing money supply growth through constrained spending by Government and lesser recourse by the State to borrowings. Unfortunately, the road to Hell is paved with good intentions. Because the economic growth will not materialize as projected, the revenue flows to Government must be less than expected. Concurrently, exceptionally high inflation early in the year must swell State expenditure.

Inflation could prove Mugabe's Achilles' heel
Mugabe borrows from FCA's

Post published in: Economy

Leave a Reply

Your email address will not be published. Required fields are marked *