Zim-Asset stillborn as economy slumps

Crafted by the Zanu (PF) government as the remedy to the country’s economic turmoil, the $27 billion economic blueprint has failed to provide any solution to the dwindling economy.

The four clusters expected to bolster economic transformation areFood Security and Nutrition, Social Services and Poverty Eradication, Infrastructure and Utilities and, Value Addition and Beneficiation.

The problem is that the government has no avenues to source funding to implement projects such as the Batoka Hydro Power Station – $2,4 billion, road dualisation – $3,027 billion, dam construction and water treatment plants – $1,776 billion.

A key problem is that the budget is highly skewed towards recurrent expenditures as opposed to capital projects.

We need Europe

The Confederation of Zimbabwe Industries vice chair Henry Nemaire believes the success of Zim-Asset lies in government’s ability to reengage Europe.

“Europe should be at the forefront of our economic transformation in order to bring about the fruits of Zim-Asset. We should be relying on Europe for foreign direct investment. Yes China is there but Europe should be our main focus, because our past experience has proved that we are failing to understand our Chinese brothers,” said Nemaire.

He urged government to fast-track the issuance of 99-year leases to big corporates so that they can use land as collateral to attract investment.

Economic Analysts Tobias Kuwengwa said “Zim-Asset is politically driven and can only work if the powers that be warm up to the West.”

Revenue shrinks

Statistics from the Finance Ministry indicate that revenue collections during the first quarter of 2014 underperformed by 3,9 percent compared to the corresponding period in 2013 – $805,5 million compared to $838 million.

Value Added Tax collections declined by 15,1 percent during the first quarter of the year compared to 2013. This has translated to severe liquidity constraints in the financial sector, which has seen growth in domestic credit of only 8,6 percent between February 2013 – February 2014 compared to about 34 percent in 2012/13 and 50 percent in 2011/12.

Most notabl is the weak performance of the Zimbabwe Stock Exchange reflected through declining of both industrial and mining indices as well as falling total market capitalisation. It dropped 20,6 percent from $5,2 billion to $4,2 billion by end of March this year.

Imports declined by 13,2 percent and exports by 23 percent in comparison with the same period last year.

Finance Ministry permanent secretary Willard Mangungo said his strategy was to progressively reduce the ratio of recurrent expenditures to 30 percent of the total.

He also hoped that the new diaspora bonds would help. “In 2013 the country received $1,8 billion as remittances from its nationals abroad and we have to tap that market.

CBZ Bank is working on modalities of issuing a $200 million diaspora bond, which will be guaranteed by Afrixembank,” he added.

Industry Minister Mike Bimha says there is urgent need to resuscitate economically strategic companies such as Zisco Steel. “ZISCO is very strategic. It affected industries not only in the area where it is situated but the entire country. The majority of companies that closed in Bulawayo relied on ZISCO. Given that Zisco opens, you will find that they will resume operations as well,” he said.