eBusiness Weekly
Economy Uncensored with Tapiwanashe Mangwiro
The country has for the past 40 to 60 days been plunged into election mode and less work for the betterment of the economy, but now the dust has settled and the electorate has more expectations for the next five years.
Zimbabwean President Emmerson Mnangagwa was re-elected for a second and final five-year term last week in results announced much earlier than expected as the incumbent won 52,6 percent of the votes, the Zimbabwe Electoral Commission said. The 45-year-old opposition leader, Nelson Chamisa, got 44 percent, the commission said.
With the task of re-election done, the bigger job awaits as the electorate has its expectations and we look at some of the issues they will expect to see being solved and resolved.
Currency and inflation
The first term of President Mnangagwa’s reign was characterised by hyperinflation and rapid depreciation of the new Zimbabwe dollar which has struggled to find its footing. With him being given another five years by the people, he needs to find a solution to these twin problems as they have left many wallowing in poverty.
With the hyperinflation getting as high as 896 percent year on year, his administration has tried to keep it falling down to the current levels of 77,2 percent although it is still high.
The rapid depreciation of the local currency that began its life trading at 1:25 to the USD and now trading at 1:4 604 per dollar in four years, has left people without the ability to serve, let alone afford a decent living.
To make a lasting legacy to the people, he needs to look at putting money in their pockets and make them able to save and at bare minimum afford a decent life.
Once this is achieved, the now defunct middle class of the economy will be back and that will increase economic growth as citizens become a part of the demand for goods and services offered.
Improvement of health sector
In the years after independence in 1980, the country built a renowned network of primary health clinics taking care into rural areas, and general hospitals in towns and cities.
However, it is no longer like it was in the 1980s as a lot of the equipment has been run down, and it is reported that you can have whole classes of students graduating who have not been exposed to certain procedures.
Government figures show that more than 4 000 doctors and nurses left the country from 2021 to 2022 alone, weakening a health sector already almost derelict from lack of funds due to many reasons among them sanctions.
The wish for a common man is to see the government prioritising the sector as it is as vital as any in the economy and saves a lot of money from health tourism that we are currently giving to others.
It might not be world class, but the electorate would want to see significant improvements in the sector as well as making the service affordable taking into consideration the remuneration levels in the country.
Energy
Demand for power is already over 2 000MW, and rising, this means that Zimbabwe still has a big power gap to fill.
Power utility ZESA is on record saying applications of at least 2 350MW for extra electricity have been delivered and this is more than the country’s current installed capacity. These applications are from the mining sector, which needs power for new operations and expansion projects and the high energy consuming Dinson steel project, which alone needs over 500MW immediately for its first phase.
With an installed capacity of 2 342 MW (now 2 900MW) comprising 55 percent thermal and 45 percent hydro energy, the country is unable to utilise its capacity due to limited access to water and fuel as well as ageing equipment.
Zimbabwe currently uses 1 671MW despite a 2 200MW installed demand because the country’s industrial base is no longer at the same level it used to be, given the economic downturn in recent years.
In this coming term, his administration might not be able to conquer the energy problem, but they have proven to be able to work around the problem with the Hwange 7&8 and also the relaxation of independent power producers’ requirements.
What the electorate can wish for is to have a base for the next Government to work with in the quest for a sustainable energy source.
Re-Industrialisation
At its peak in 1998, the manufacturing sector contributed 42 percent to the country’s export earnings.
Deindustrialisation in Zimbabwe started around 1995, but at a gradual pace, then picked up in 1997 and 1998 after unbudgeted Government expenditures led to loss of value for the Zimbabwean dollar.
Zimbabwe’s investment climate is still hampered by the unpredictability of the Government’s economic policies especially monetary policies and lack of respect for property rights. Additionally, the current complex exchange control regime makes it difficult to remit dividends and move capital formally.
The country is still instituting a market based foreign exchange market which makes it hard to do business in the country.
Half of the country’s import bill so far in 2023 is composed of products that used to be manufactured in Zimbabwe but are now being imported from China, Singapore and neighbouring countries who are now manufacturing at a lower cost than Zimbabwe.
The country’s import substitution policy should have non-monetary incentives such as import duty or VAT holidays based on attaining specific production targets. These should be sorely for imported products that can be manufactured locally such as Fertilisers and Agro Chemicals, Industrial Chemicals, Newsprint, Paper and Packaging materials, Pharmaceuticals, Iron and steel products, Furniture, Plastics, Skin Care and Beauty products.
Industry in the coming term will hope for government to look at how re-industrialisation should be propped up in order to reduce the import bill of the country, hence saving money for other investments.
Debt resolution
According to Treasury, total external debt, excluding Reserve Bank of Zimbabwe debt and blocked funds, is estimated at US$8,3 billion, including US$5,7 billion of bilateral debt which is 69 percent of the amount, US$2,6 billion of multilateral debt which is 31 percent of the amount. Of the said debt, interest and penalties represent 76 percent or US$6,3 billion of the said amount.
The external debt overhang continues to weigh down heavily on the country’s development efforts, as access to external financing remains very limited due to the accumulation of external debt arrears.
Zimbabwe has been making token payments to all its foreign financiers it owes among them the Paris Club, which has 17 members, the World bank and the African Development Bank (AfDB).
In the coming five years, the hope is that the token payments become meaningful debt repayments in order to improve the country’s credit rating which has hindered local companies from accessing cheaper loans in order to compete with other regional companies.
We do not expect them to expunge such a heavy debt in the five years but they need to have a solution to the problem and commitments to finish off the repayments.
Tapiwanashe Mangwiro is a resident economist with the Business Weekly and writes this in his own capacity. @willoe_tee on twitter and Tapiwanashe Willoe Mangwiro on LinkedIn
