AFRICANGLOBE – Zimbabwe’s economic growth is projected at 9.4% in 2012 against a background of improved positive performance in sectors such as agriculture, mining, tourism, social sectors, finance, and electricity, Finance minister Tendai Biti said.
The growth is expected to be propelled by momentum from the 2011 fiscal year where the economy is still estimated to grow by 9.3%, with the mining and agricultural sectors greatly benefiting from firm international commodity prices.
The positive performance in 2012 is expected to be underpinned by further growth in finance, expected to grow by 23%; mining 15.8%; tourism 13.7%; agriculture 11.6%; manufacturing 6% and transport and communication 6%.
Biti a member of the opposition MDC-T indicated that the performance of the real sectors is not yet optimal in face of the financing and power supply constraints which are stifling productive sectors.
“However, the performance of our real sectors is not yet optimal, given financing and power supply challenges that the productive sectors continue to experience,” said Biti.
Biti further highlighted that the current levels of public and private investment thresholds in capital development remained at low levels which are inconsistent with the support necessary to underpin rapid economic growth.
Capital development, as measured through gross fixed capital formation which is fostered by a savings and investment culture, was needed, he said.
“Given that public and private investment in capital development is an essential imperative for economic growth, it will be necessary that our fiscal stance inculcates a culture of high savings and investment,” the minister observed.
Economic commentator Eric Bloch said Biti’s growth targets were feasible given that the economy is coming off a low base.
He said: “The economic growth is feasible. The economy is coming off a low base. It’s not a lot given where we are coming from but this is subject to whether we see progressive political stability and agricultural output. Once we achieve political stability, it complements the economic side. But for me the only negative in the budget was the increase in mining royalties. This is going to be a deterrent to investment in that sector.”
But skeptics like John Robertson an economic analyst said “negative investment policies such as indigenisation regulations forcing foreign investors to dispose of controlling shareholding in local operations to indigenous Zimbabweans would deter investment and impact on the growth estimates”.
He said: “These projections have to be premised on the fact that commodity prices are going to remain high but we might see lower average commodity prices next year.”
Biti further explained that Zimbabwe’s domestic investment shortfalls necessitate the need to intensify strategies that attract foreign direct investment which is inextricably connected to growth and capital formation.
Zimbabwe’s foreign direct investment in 2011 remained at low levels of US$125 million.
Robertson concurred with Biti on the need to attract foreign direct investment, citing the negative sentiment on the indigenisation programme which could cause the 2012 economic growth target to be unattainable.
“Also, indigenisation policies are going to prevent foreign investment inflows. We might not reach these levels because we have not been able to attract investment this year. In order to grow next year, we should have attracted investment this year and even if we had attracted investment next year, it is not going be immediately productive,” said Robertson.
The agricultural sector requires more than US$2 billion annually to fully take advantage of its potential.
Biti indicated that this can be achieved through joint efforts between government, the private sector and external partners. Farmers also have to play their part, demonstrating preparedness for upcoming agricultural seasons.
“The projected growth in agricultural production of 11.6% in 2012 takes account of the number of financing facilities established by government, the banking sector, co-operating partners, seed and fertiliser suppliers, in support of the preparation for the 2011/2012 agricultural season,” Biti said.
The mining sector, which is expected to grow by 15.9%, was initially projected to grow by 33% in 2011 but this was revised down to an estimate of 25.8%. The revisions were on the back of a decline in production levels of platinum, nickel and palladium.
Biti said the mining sector attracted US$502 million worth of approved lines of credit in 2011, spurred by huge platinum, gold, diamonds and coal reserves he expected mining to remain the anchor of economic growth in 2012.
“Mining is anticipated to remain the major driving force behind overall economic growth, benefitting from further private capital injections, from international commodity prices and anticipated initiatives to minimise electricity supply interruptions,” said the minister.
The growth in manufacturing of 6% in 2012 is expected to be on the back of spill-over benefits from the positive performance in both agriculture and mining sectors.
But the manufacturing sector still faces challenges to be overcome, including mobilisation of additional lines of credit for new plant and equipment in industries and other working capital requirements.
Capacity utilisation was indicated to be averaging 57.2% in the manufacturing sector in June 2011, but has improved to 65% in some of the higher performing sub-sectors of the economy.
The financial services sector, which is projected to grow by 23% in 2012, with a deposit base estimated at above US$3.8 billion by then, is anticipated to lend 80% of the deposits to deficit units in the economy.
Biti indicated that more than US$2 billion is estimated to remain outside the formal banking system because of absence of incentives and also historical lack of confidence concerns in the banking sector. He also allocated US$100 million towards the sector to help restore the Reserve Bank of Zimbabwe’s role as lender of last resort as well as support interbank trading.
Reserve Bank governor Gideon Gono last night said overally Biti’s budget was balanced.
“We applaud the minister for restoring our lender of last resort function at the level he has given us. He presented a pragmatic budget which tried to give something to everyone. He also gave tremendous respect to Zimbabwe in the eyes of the international community by benchmarking allocations to regional and international minimum stipulations, be it in health, education, or agriculture. The decision to establish a three-year rolling on agriculture is commendable.
“So is his bold move to review mining royalties and tariffs. Our levels of consumptive imports alarm all those interested in improving capacity utilisation, production and job creation. It was important to deal with that. Overally it was a pragmatic and balanced budget.”