Zimpapers Logo

Africa Moyo Deputy News Editor

TREASURY remains confident that Zimbabwe’s economy will grow by 3,8 percent this year driven by strong performances in the mining, construction, agriculture and housing sectors, despite challenges such as electricity shortages and potentially uneven rainfall patterns.

In an exclusive interview in Harare yesterday, Finance and Economic Development Minister Professor Mthuli Ncube said the harmonised elections expected sometime this year should not have any adverse impact on the economy.

In the 2023 National Budget statement, Prof Ncube said the economy was projected grow by 4 percent last year, still high but lower than 2021, mainly due to global and domestic developments, particularly the impact of high inflation and resultant stabilisation measures on credit and demand.

This year, global economic growth is projected to moderate to 2,7 percent, down from 3,2 percent last year, but Zimbabwe is banking on strong mineral prices, among other factors, to achieve a 3,8 percent economic growth, significantly beating the global average and being among the African leaders.

Global tensions, especially in Eastern Europe where Russia is conducting a special military operation in Ukraine, have caused major supply disruptions and led to historical high prices for most commodities in 2022, and these are projected to remain high in the medium term.

“We are very upbeat about the outlook of the economy as I presented in the 2023 National Budget statement.

“We still expect the economy to register a 3,8 percent economic growth during 2023, sustained by bullish performance in the mining, construction and agriculture, as well as accommodation sectors,” Prof Ncube said.

In line with President Mnangagwa’s New Year message, he said, focus for this year is on continuing the national economic transformation agenda by modernising, industrialising and growing the economy in the march towards the attainment of Vision 2030 of an empowered and prosperous upper middle income society.

“We are cognisant of the risks ahead such as the domestic power generation constraints, potentially uneven rainfall patterns, as well as global economic uncertainties emanating from geopolitical developments and the post-Covid-19 impact on the global economy.

“Notwithstanding, we are optimistic that we will achieve the 2023 macroeconomic targets as outlined in the 2023 National Budget, as Government is implementing mitigatory measures against the risks to ensure the economy remains on the desired trajectory.

“It remains our aim to consolidate stability and resilience so that economic growth going forward, is achieved in a less volatile environment.”

Prof Ncube said the historical volatility of GDP growth where one or two years of high growth are interrupted by a year or two of low or negative growth, militate against the long-term compounding of annual growth rates and sustained growth to achieve Vision 2030 targets, which require consistent and stable annual growth rates of above 5 percent.

To ensure economic growth targets are achieved, Zimbabwe is addressing electricity supply issues after generation levels declined considerably due to low water levels at Kariba Dam and frequent breakdowns and logistical challenges at Hwange Power Station.

Electricity shortages are affecting the entire SADC region, with Zambia announcing on Wednesday that it would increase load shedding to 12 hours a day due to low water levels at Kariba Dam which they share with Zimbabwe. The two countries are now having to use just the inflows into the lake, in a low flow month, having exhausted the stored flood waters. The Zambezi never runs dry, but at the moment what flows over the Victoria Falls is what flows into the largest power station in each country.

The Maamba Collieries Limited Plant’s 150MW generator was also taken out for routine annual maintenance from January 4 to 20, worsening the electricity situation in Zambia.

Prof Ncube said the power situation in the SADC region was compromising electricity sharing through the Southern African Power Pool (SAPP).

However, he said, the Government has mobilised resources to secure additional imports from Electricidade de Moçambique of Mozambique and other SAPP members with surplus to support the current power supply, assisting in reducing load shedding.

“Efforts will be made to secure additional imports while work is underway to ramp up domestic production at Hwange Power Station and other small thermal power stations, complemented by Independent Power Producers initiatives.

“Recently, Government announced an Implementation Agreement to expedite the commissioning of 27 solar IPP installations with potential to generate over 900MW.

“The GIA includes a project development support agreement, a power purchase agreement, and an agreement with the RBZ for guaranteed payments of dividends and foreign loan repayments to external investors and lenders,” said Prof Ncube.

Much of this IPP generation would be solar, which can be implemented quickly once the investor is willing to move. The extra power during the day would allow Zesa to store more water while the sun shines to use in the power station at night.

Turning to the expansion of Hwange Power Station where two new Units, 7 and 8, will generate an additional 600MW, Prof Ncube said the Government “is working tirelessly” to ensure the completion of the project.

“To date, it is pleasing to see that the technical tests are progressing well and Zesa expects the first additional 300 megawatts from Unit 7 soon,” he said.

Prof Ncube said the Government will continue to ensure price and exchange rate stability which has come about as a result of deliberate interventions such as the enforcement of value for money on all Government contracts, introduction of gold coins to mop up surplus liquidity and offer an honest alternative store of value.

Treasury has also increased the bank rate to positive real interest rates, as well as a cocktail of other measures introduced by both Government and the Central Bank during the course of last year.

Some economists claim that the stability would be eroded once the Government starts paying all contractors who are undertaking infrastructure development.

But Prof Ncube said: “Let me set the record straight, Government is paying all its suppliers after the validation exercise while re-negotiations were undertaken on overpriced contracts. Therefore, the current stability cannot be attributed to non-payment of suppliers. The value for money exercise is meant to ensure that supplies to Government are correctly priced in the public interest and to ensure that overpriced goods do not adversely impact the exchange rate and inflation stability.”

When value for money was enforced, around 70 percent of contractors were quickly able to establish their credentials and were paid, so the delays only affected 30 percent.

In respect of the auction rate system for foreign currency, Prof Ncube said it was always a stepping stone towards a market determined exchange rate as part of the broad macroeconomic reforms, hence the introduction of the willing-buyer willing-seller exchange rate system.

During the year, the auction rate, used for bulk imports, came into alignment with the interbank market rate.

Prof Ncube said they have already re-affirmed their commitment to refine the current auction system to enhance efficiency through further liberalisation of the market as outlined in the 2023 National Budget.

“This was further buttressed by the resolution of the Monetary Policy Committee in December 2022,” he said.

Asked if the anticipated harmonised elections will not negatively affect economic stability, Prof Ncube said Government operations were “autonomous of the political calendar”.

“We have already set the economic agenda through the 2023 National Budget outlining projected economic growth, supporting policies and programmes. A budget has been allocated to priority areas including the harmonised elections.

“Instead, the holding of elections has the potential of enhancing economic activities as political parties and contestants spend their resources through campaigns and related activities,” said Prof Ncube.

Zanu PF’s 7th National People’s Congress held at the end of October last year overwhelmingly resolved that President Mnangagwa be the party’s presidential candidate following a realisation that the infrastructural development projects he initiated needed to be completed while new ones are started.

Presently, the Robert Gabriel Mugabe International Airport is being modernised while about 171km remain to be rehabilitated on the Harare-Masvingo-Beitbridge highway after 400km were completed and opened to traffic.

Other projects include the game-changing Lake Gwayi Shangani construction, the expansion of Hwange Power Station, construction of many dams such as Muchekeranwa, the Dinson Steel project in Manhize, and the modernisation of the Beitbridge Border Post.