It can’t be business as usual

Vandudzai Zirebwa Buy Zimbabwe
Zimbabwe has experienced leaps and bounds of mixed economic fortunes over the last ten years or so. One variable that has been on a continued and worsening position is the current account.

And to date Zimbabwe has a larger current account deficit than its peers and it is more than the country’s investments and is substantially larger than average for sub-Saharan Africa. The current account deficit which averaged 22percent between 2010 and 2014 and is estimated to be 17, 4 percent of gross domestic product in 2015, according the World Bank has stifled the much needed liquidity in the economy.

The continued deterioration of the current account against limited investment inflows likely to trigger a macroeconomic imbalance that is likely to exacerbate the woes of not only the industry but also the financial services sector.

Recent growth of the Zimbabwe economy has been largely driven by consumption and both public and private investment has fallen since 2011. Capital flows, including external borrowing and asset sales are sustaining consumption growth by financing an unsustainability high current account deficit.

The ballooning deficit has been further worsened by mainly the depreciation of the SA rand to its record lowest levels against a firming US dollar. Predominantly, 60 percent of Zimbabwe’s imports come from South Africa, a factor that has out priced local goods on the local market against South African imports.

From Buy Zimbabwe assessment there is a possibility of further compression of exports due to weakening global commodity prices against rising imports, a scenario which sounds scary given the insufficiency of foreign currency reserves at disposal to finance the current account deficit.

The road to salvage this economy from these woes will be difficult and there is need to approach a business unusual approach. Presenting the 2016 monetary policy statement , the RBZ Governor, Dr Mangudya bemoaned unprecedented growth in unproductive illicit financial deals in the form of trade mispricing, externalisation of export sale proceed and remittances of unproductive and unsanctioned investment coupled with porous border posts, tax evasion and smuggling.

These leakages are dwindling the fiscal space of the Zimbabwean economy which is flooded with cheap imports.

Dr Mangudya highlighted some of the immediate measure in his monetary policy, the need to inject new finance for machinery, reviving the manufacturing sector to improve on the capacity utilisation.

Moreover measures that include the reduction of the cost of finance which is expected to make bank loans cheaper and improve the easy of doing business are likely to have resultantly positive effects in the economy.

More importantly there is an urgent need for a national strategy for foreign direct investment which the government and the private sector must jointly develop and execute in order to attract FDI in more conscious and directed efforts towards industries that have bigger multiplier effects on key aspects such as employment creation and foreign currency generation.

There is a deliberate call for the government to continually institute smart protectionism by deliberately imposing tariffs on consumer products that can be manufactured locally at marginal cost differences. This kind of protection should be meant to level the playing field and also aiming at nurturing those industries with the capacity to produce and sufficiently supply the domestic market.

The state of the key enablers such as electricity supply, railway transport, and road network becomes are leading factors denting national and export competitiveness.

Maintaining the status quo in an environment with uncontained trade deficit and a worsening balance of payments position and low investment appeal is plunging Zimbabwe into a supermarket economy, with very high unemployment and declining government revenues which will ultimately lead to a decline in social services and nailing Zimbabweans into perpetual poverty.

The mushrooming of foreign supermarkets with mostly foreign goods is a direct indicator of such a problem .We should take advantage of the depreciated rand to acquire the capital equipment taking advantage of the strong currency we are currently using.

Let me conclude by saying we need to revise our economic thinking and the ubuntu values that we have since forgotten and give value to our competencies.

This should provide businesses and public policy a powerful tool for economic development, profitability and the promotion of the public good.

Such a state of affairs will be a significant confidence booster that will deal with a pathetic performance on key competitiveness enablers, as such investment in a function of every factor. This calls for planning, leadership, vision and policy and more importantly execution which is the major missing link in the Zimbabwean economic paradox.

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