eBusiness Weekly
Oliver Kazunga
Economic analysts and other key stakeholders have ruled out the possibility of Zimbabwe achieving the targets under the National Development Strategy 1 (NDS 1) due to a number of factors that continue to haunt the economy.
Under NDS1, a five-year economic blue-print launched in 2021, the Government aims to improve power generation to 3 500MW as well as maintaining a single digit annual inflation rate of between 3 percent and 7 percent in line with the Sadc Macroeconomic Convergence Target.
In addition, the Government set itself a target to grow exports by 10 percent annually by next year as well as maintaining a public and publicly guaranteed external and domestic debt to Gross Domestic Product ratio at below 70 percent, something that has been hard to come by.
Over the years, Zimbabwe has been largely dependent on mineral exports for foreign currency earnings, exporting commodities such as gold, platinum and diamonds.
Last year, the southern African country’s total exports grew by nearly 10 percent to US$7,2 billion from US$6,59 billion in 2022, indicating a 9 percent growth, but the foreign problem remain unsolved.
In separate interviews this week, economic analysts said given the prevailing difficult economic climate where currency volatility has become a major cause for concern, attaining NDS1 targets remain a pipe dream.
“Given the time period obviously with other variables like energy, our chances of achieving them is obviously difficult and we have to review our targets given that the operating environment was not allowing for a number of things, particularly exports to GDP.
“The exports are required to grow by 10 percent per annum but because of companies are not producing due to the constrained power supply situation, it will be very difficult to achieve the 10 percent annual growth rate in exports, and also because production is subdued, the targeted employment levels of 760 000 jobs by next year will be very difficult to achieve.
“As we speak right now, personally I don’t think in 2025 we can talk of achieving the targets under NDS 1,” said the Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Chris Mugaga.
“What we need to talk about is roll over, how do we review, realign and restructure our targets so that we meet those targets . . . achieving the initial targets, it’s not going to be an easy walk in the park because we are talking of just under two years to go.”
Mugaga said although inflation is among the challenges impacting negatively on economic growth, that should not be the worry until authorities address the currency issue.
“Inflation should not be an indicator, anyone should worry about at the moment is we are marrying US dollar and Zimbabwe dollar inflation.
“The currency issue can only be addressed by liberalising the exchange rate and that will inspire confidence,” he said.
Economic analyst, Trust Chikohora, echoed similar sentiments adding that the 760 000 jobs targeted under NDS 1 would not be achieved as production in the manufacturing sector remains limited.
“So far it’s quite clear that all those major targets like energy, 760 000 jobs have not yet been achieved and will not be achieved because of the current state of the economy that’s characterised by runaway inflation and the exchange rate going wild.
“As long as the situation is like that, it’s very difficult to attain NDS 1 targets which require economic stability in order for us to achieve economic growth.
“The policies that the Government has got in place, particularly to do with money supply growth are not being adhered to in such a way that you contain money supply growth,” he said.
“The policy that they have are not achieving the containment of money supply growth because that is what creates inflation and exchange rate instability. The confidence in local currency is not there and the Government has not been able to boost confidence in the market and defending the Zimbabwe dollar at all.”
On the back of the prevailing economic situation, Chikohora said, it is imperative for authorities to come up with policy frameworks focused on first achieving stability of the exchange rate and inflation,” he said.
Economist and businessman, Luxon Zembe, said it was unfortunate that the economy is not performing well with year-on-year inflation this month picking up to 55,3 percent from the February 2024 rate of 47,6 percent.
“It’s moving very fast if you look at year-on-year inflation and also our exchange rate is going up rapidly and the liquidity situation at the moment is very tight.
“As a result of a tight monetary policy system which leads to very high lending rates, the economy cannot get resources from our financial system because of high lending rates and this also constraints economic activity on the ground.
“Availability and accessibility of financial resources by businesses determines the extent to which our economy will tick, so in a situation where you have got very high interest rates, what do you expect.
“So far, lending rates for Zimbabwe dollar loans is above 130 percent and in US dollar terms plus or minus 15 percent and globally we are looking at plus or minus 2 percent and that even makes us very uncompetitive,” he said.
Zembe said because of high interest rates local industries are not able to borrow loans from the banking sector to boost their operations and produce products that become competitive on the global scene.
“If we cannot compete on the global scene it means we cannot export or trade with the rest of the world and our economy will continue to shrink day and night because we are also not generating foreign currency that’s required to sustain the economy,” he said.
“Look at what is happening on power supply, we are now on more than 12 hours of power outages because we are relying on hydropower from Kariba – because of drought its (Kariba Power Station) capacity is going to be further reduced.”
Last week, the Zambezi River Authority that administers water allocation for electricity generation at Kariba Power Station indicated that water levels at the dam continue to decline standing at 477,54 metres as of March 19, 2024 from 477,66 m the previous week.
Kariba Dam is designed to operate at levels between 475,50m and 488,50m (with 0,70m freeboard) for electricity generation.
During the same day last year, dam levels stood at 478,12m.
Until the next hydrological review at the end of this month to determine the amount of water allocation for hydropower generation, ZRA has set electricity production at the plant at an average of 214MW.
“Furthermore, the lake level is currently receding, contrary to its historical hydrological performance where it should have been rising during this period of the year.
“The obtaining recession in the lake levels is mainly due to the below average rainfall received during the on-going 2023/2024 rainfall season,” the authority said last week.
According to the Zimbabwe Power Company (ZPC), as of March 26, 2024 Kariba was producing 326MW against an installed capacity of 1 050MW.
At the moment, the country requires 2 200MW compared to 1 121MW Zimbabwe was producing as of March 26, 2024 according to ZPC.
Zimbabwe and the southern African region to which the Zambezi River lies, has been hit by the El Nino-induced drought as the region received normal to below-normal rainfall in the 2023/2024 rainy season.
Due to the dry weather phenomenon the country and the region have experienced, the Zambezi River has not received significant inflows resultantly affecting the required water levels to support power generation at Kariba.
In this context, the authority has maintained the 16 Billion Cubic Meters (BCM) water allocation for this year providing for combined annual average power production of 428MW, shared equally (between Zimbabwe and Zambia).
