Govt’s economic projections ‘fictitious’

via Govt’s economic projections ‘fictitious’ – The Zimbabwe Independent by Brian Chitemba October 25, 2013

THE economic growth projections by the Zanu PF government that annual GDP growth will average 7,3% over the next five years will remain elusive unless government institutes economic reforms to address fundamental issues crippling the economy such as severe liquidity constraints, acute power shortages and corruption, among a plethora of challenges bedevilling the country.

In its new economic blueprint — Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) — adopted by the party’s de facto supreme decision-making body in-between congresses, the politburo, last week, the ruling Zanu PF government says by the end of this year the economy will record 3,4% growth while further positive growth of 6,1% is estimated for 2014.

Zanu PF won the July 31 general elections this year amid charges by the opposition of systematic rigging and voter disenfranchisement.

The government’s economic plan pins its hopes on key sectors that include mining, agriculture, transport, information and communication technology and tourism, most of which continue to perform well below par. It also focuses on growth of the small and medium enterprises (SMEs).

But Zimbabwe has had a stack of high-sounding economic roadmaps such as the (Economic Structural Adjustment Programme, Short-Term Emergency Recovery Programme and Medium-Term Plan 2011-2015, among many others, which all failed to achieve intended results and gathered dust without being implemented.

Analysts are thus sceptical of the growth projections, arguing the closure of companies, coupled with low capacity utilisation in some operational firms, electricity and food shortages, high unemployment rate, low farm productivity and undercapitalisation of banks suggest economic instability.

In the last of his four-year tenure, former Finance minister Tendai Biti was forced to revise downwards the country’s economic growth projection from 5% to 3,4%, citing continued decline in production and an unstable political climate created by the country’s two major political parties Zanu PF and MDC-T.

Last week Finance minister Patrick Chinamasa — recently in Washington DC in the United States for the annual International Monetary Fund and World Bank Spring meetings — said Zimbabwe would not receive any money from multilateral institutions until it completes the staff monitored programme proposed by the International Monetary Fund.

This, for the time being, rules out possible Western assistance for ZimAsset.

However, Zanu PF believes if it focuses on four strategic clusters of food security and nutrition; social services and poverty eradication; infrastructure and utilities; and value addition with beneficiation, the economy will be turned around sufficiently to address critical issues affecting the long-suffering masses.

“This results-based agenda is built around four strategic clusters that will enable Zimbabwe to achieve economic growth and re-position itself as one of the strongest economies in the region and Africa,” wrote President Robert Mugabe in his foreword to the ZimAsset.

According to the economic plan, focus will be put on debt clearance, implementation of projects such as Chisumbanje ethanol, NewZim Steel, diamond cutting and processing, in addition to strengthening SMEs and agro-processing. Enhancing tax and non-tax revenue collection will also play a crucial role.

Mugabe’s administration expects to clear an external debt of US$6,1 billion. Cabinet has already approved the Zimbabwe Accelerated Arrears Clearance Debt and Development Strategy and the Zimbabwe Acceleration Re-engagement Economic Programme with the aim of clearing internal and external debts.

The government also expects to clear a housing backlog of 1,25 million within the next five years while priority will also be given to improving provision of energy, water, upgrading of roads and rail infrastructure.

However, prominent economist John Robertson dismissed the economic growth projections as “fictitious” because the country remained in a quagmire characterised by a severe power crisis and falling agricultural productivity.

He said government needed to prioritise new electricity generation projects and improve agriculture instead of relying on small-scale farmers.

“The economic growth projections by Zanu PF are just guess work and not based on practical calculations because how does the economy grow when there are serious food shortages across the country?” asked Robertson.

“Those who can farm should be allowed to do so. People who have no expertise to farm are allowed to do so at the expense of those who are capable.”

London-based academic Mugove Munatsi concurred with Robertson, saying the economy was unlikely to grow by 7,3% because hundreds of companies were shutting down.

A July 2013 National Social Security Authority (Nssa) Harare Regional Employer Closures and Registrations Report for the period July 2011 to July 2013 shows 711 companies in Harare closed down during the period, rendering 8 336 individuals jobless.

Major companies that have retrenched include platinum miners Zimplats and Unki, Bindura Nickel Corporation, Spar supermarkets, Dairibord, Cairns, Olivine Industries and PG Industries.

Munatsi said: “Zanu PF is hallucinating — the economy cannot be rigged, neither can it be shaped by propaganda. How can the economy grow by 7,3% when companies are shutting down left right and centre? The economy will not grow simply because Zanu PF wishes it to grow.

Zanu PF must create a conducive macro-economic environment to stimulate growth and curb endemic corruption.”

Academic Khanyile Mlothswa said implying the economy will grow by 3,4% in the two months remaining this year is incredible, especially from a point where most Zimbabweans are sure the economy is not growing.

The two remaining months, Mlotshwa argued, are not good for most businesses because industries will be winding down and taking a Christmas break, except for the hotel industry and tourism sector which may record significant growth during the festive season.

“There is always disagreement on what economic growth means.
Capitalist businesspeople declare profits every year when the rest of the country struggles with poverty, unemployment and hunger,” Mlotshwa said. “It has to be clearly stated that what is meant by economic growth is business growth or improvement in the economic situation for everyone.”

Zanu PF youth leader Absolom Sikhosana recently admitted his party would not manage to create the 2,2 million jobs they promised in their manifesto and election campaign.

Mlotshwa asked: “For the ordinary person, whose most practical chance of participating in the economy is through being an employee, what kind of economic growth that does not create jobs?”

However, in his foreword Mugabe said ZimAsset was crafted to achieve sustainable development and social equity anchored on indigenisation, empowerment and employment creation, which will be largely propelled by the judicious exploitation of the country’s abundant natural and human resources.

Nevertheless, the exploitation of natural resources, especially minerals, is not likely to have a significant bearing on the performance of the economy given the rampant corruption and shoddy deals such as those rocking diamond mining activities at Chiadzwa.

Revenue generated from the Chiadzwa gems has not accountably reached Treasury in previous years, raising speculation that a cabal of powerful politicians and businesspeople were siphoning millions of dollars at the expense of an ailing economy and citizens whose majority continue to wallow in poverty.

Several cases of high-profile corruption surrounding diamond mining have been exposed, including a recent one allegedly involving ex-Zimbabwe Mining Development Company chairperson Godwills Masimirembwa, whom Mugabe publicly said received a US$6 million bribe from Ghanaian investors.

This shows Mugabe’s administration has a herculean task to clean up economic activities if government is to ensure all due revenue goes to the fiscus in order to resuscitate the economy and meet the much-touted growth projections.