Zimbabweans feel the pinch

via Zimbabweans feel the pinch – DailyNews Live by John Kachembere and Xolisani Ncube  21 OCTOBER 2013

As economic and social fortunes continue to dwindle, the cost of living has become too high for the ordinary Zimbabwean.

A snap research carried out by the Daily News revealed that social infrastructure and other services are deteriorating while the liquidity crisis in the country has worsened from what it was four months back.

This is despite the fact that Zanu PF and President Robert Mugabe — who has ruled Zimbabwe for the past 33 years — vowed to improve the lives of people once elected.

In its election manifesto, aptly titled; Taking Back the Economy; Indigenise, Empower, Develop and Create Employment, Zanu PF promised to take people to the land flowing with milk and honey by creating a

$2 trillion economy.

The ruling party pledged to grow the economy by implementing socio-economic policies which would see the creation of at least 2,265 million jobs.

They also promised to increase the Gross Domestic Product (GDP) growth from 4,4 percent to 9 percent by 2018.

The new economic blue print Zimbabwe Socio-economic Transformation (Zimset) states that the economy will grow by an average of seven percent in the next five years.

But evidence on the ground suggests that people’s lives are not improving as 60 percent of the 13 million people living in Zimbabwe are said to be poor.

Of that figure, 16 percent are said to be extremely poor while 58 percent of families in Zimbabwe cannot afford to eat three meals a day.

This comes at a time when the country has been experiencing drought since the turn of the millennium.

UN  Food and Agriculture Organisation (FAO) estimates that 2,2 million people, which translates to about 1 in 4 families in rural Zimbabwe, are in urgent need of food aid.

Simbarashe Moyo, the Combined Harare Residents Association (CHRA) chairperson, said unless something is done soon, the country risks reverting to the hyperinflationary period scenarios of yesteryear.

“Generally it seems there is high possibility that we will return to the 2007-2008 situation where basic commodities were scarce and a lot of people succumbed to cholera,” he said.

Moyo noted that the increase in the number of companies that are shutting down was serious cause for concern in a country with one of the highest unemployment rate in the world at around 80 percent.

In its monthly economic review for August, 2013, the Reserve Bank Of Zimbabwe (RBZ) noted that on a month on month basis, broad money supply in Zimbabwe declined by 1,5 percent to $3 796,24 million in August, from $3 854,92 million in July 2013.

“The month on month decrease in broad money was on the back of withdrawals on most deposit classes.

“Major declines in deposits occurred at commercial banks, which registered net outflows across all deposit classes amounting to $56,08 million, during the month of August 2013,” said RBZ.

Post elections, banks slowed down on lending due to the high levels of non-performing loans and an uncertain economic environment as the new government is yet to define its economic road map.

Many banks are currently conservative and failing to meet the loan appetite from the public and private sector. The lending is estimated to have declined to below 55 percent.

As a result of the high perceived risk which has been magnified by political uncertainty, capital inflows into the country are mismatched with the demand for long term credit in the economy — resulting in a serious liquidity crisis.

Economist Christopher Mugaga said Zimbabwe is still suffering from a confidence crisis as evidenced by few people who are depositing their money in banks.

According to RBZ, 70 percent of the country’s 13 million people have no bank accounts.

“The liquidity crisis is also being made worse by a prolonged economic stagnation which is being confused with recovery,” he said adding that foreign investor apathy with Asian countries shunning capital intensive projects in the country has exacerbated the situation.

“The cycle from tobacco harvesting is also stretching a distant leaving the liquidity cycle following suit,” he said.

Mugaga asserts that the market could also be taking a position ahead of the budget statement — which is expected to be announced next month by the new Finance minister Patrick Chinamasa.