Despite all the economic problems facing the world from Covid-19, the lockdowns and the associated downturns, Zimbabwe has built in the resilience into its economy and not just to cope, but to grow.
As the Mid-Year Budget Review presented by Finance and Economic Development Minister Professor Mthuli Ncube last week showed, Zimbabwe is coping by growing its way out of trouble and it is growing by producing more. Minister Ncube raised his estimate of economic growth for this year from the 7,4 percent he estimated near the end of last year when presenting the Budget for this year to 7,8 percent.
His higher level of optimism comes from an even better harvest than he was hoping for. Before the serious rains started he was confident, whatever happened, of an 11 percent increase in agricultural production as a direct result of the input financing and other Government programmes that he had already paid for.
The way the farmers grabbed these opportunities and ran with them, backed by excellent rains, has seen agricultural output rise 34 percent by value and that is the main driver of the acceleration in national growth. The Minister was confident that the extra cash needed to buy that harvest was being mobilised, with the private sector coming in strongly. That is mainly forward purchases from the Grain Marketing Board, a remarkably risk-free process since the harvest physically exists.
Better global commodity prices help, especially in the mining sector, and while these might mean higher prices for fuel and some of the industrial raw materials like oil seeds, the continued increase in local production more than balances the extra costs of what we must import.
The effect of this economy growth can be seen in the balance of payments in the current account.
Overall, the Minister sees a healthy balance of US$611,6 million down on the surplus of just over $1 billion last year. A big change is the trade account, where imports are likely to exceed exports, not by much, but causing a deficit of around US$106 million on that account.
This does not mean we are exporting less, in fact merchandise exports are predicted to rise 4,2 percent to US$5 139,8 million.
But merchandise imports will rise 11,2 percent to $5 245,7 million.
The main feeders of this import rise are plant and machinery and raw materials. These are extra things that the productive sectors need to buy not to “recover”, since basically we have done that, but to grow and expand.
The extra imports are not feeding consumption, but production.
Part of that growth in production-related imports can be funded by the fact that this year we are not importing maize, since we have grown our own and the foreign currency we needed for that critical import can now be diverted to areas that do lead directly to even more growth. A more than doubling of diaspora remittances plus other growing payments will cover that modest trade imbalance and leave that useful surplus.
The Minister was continually stressing production and growth. His main statement, a background document, showed rather graphically his emphasis and that of the Second Republic on growth. From the Government side there is the capital requirement to fund inputs for the farming schemes and buy the harvest, all of which is eventually reclaimed when farmers deliver their crops and when those crops are sold to the industrialists as raw materials.
On the physical side there is the infrastructure: the roads, the dams, the schools, the hospitals, the clinics. These are the Government’s responsibility and we fell behind when we were spending just about all our tax dollars on recurrent expenditure with almost nothing on the capital account.
One of the major achievements of the fiscal reforms of the Second Republic has been to bring in tight controls on budgeting and spending, so a big chunk of every tax dollar can be spent on what is needed to make the economy grow even faster and so generate extra taxes that push it even further.
The Government is not really into producing itself. But it has to lay out the infrastructure and services that the farmers, miners, industrialists and service sectors require to produce without looking over their shoulder the whole time.
On the actual budget we once again have the new normal, of not just a balanced budget, but even a modest surplus. Minister Ncube had budgeted for a small deficit of $7,7 billion in the first six months. In fact, revenue rose by around $16 billion, roughly split between more tax revenue from an economy expanding a bit faster than expected, and between fixing the service charges in ministry fees to reflect cost-recovery.
Around half that extra revenue went on eliminating the budgeted deficit and creating a small, but useful surplus of $570 million. A good chunk of the rest went on a 6 percent increase in staff costs, mainly hiring 3 000 extra teachers and filling the almost 5 000 extra health posts approved last year, with enough left over with which the Government could push its capital programme, such as the major road repairs now in progress.
These surpluses are always needed for emergencies. For example last year’s surplus funded the major off-budget spending of almost US$100 million on buying around 18 million vaccine doses so far.
Covid-19 did introduce extra costs, starting with the teachers and nurses recruitment, and more than doubling the money Treasury had to pay out in social payments. But a little bit of adjustment here and there, the Government managed. We need to remember that while Treasury and the Finance Ministry might draft and control the Budget, the Finance Minister needs the active co-operation of his ministerial colleagues to make the Budget work and full backing of the President himself who makes the final decisions. Minister Ncube took care at the start of his review to thank the President and his colleagues for their help.
The basic summary of his speech came at the end. Zimbabwe is doing well.
The private sector — the farmers, miners and industrialist — is growing the economy. The Government is paying its bills and fixing and expanding the infrastructure so people live better and the producers do more.
We just need to carry on as we have been doing. No major policy changes were required, just a commitment to keep pushing ahead as we have been doing.