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BizDay Zimbabwe

Economy key challenge to new govt

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OUTGOING Finance Minister Tendai Biti painted an economy trapped in a plethora of challenges, including declining industrial output, a frail agricultural sector and tepid growth, when he presented his last mid-term fiscal policy last month.
In fact, Zimbabwe had plunged into a recession since November last year, when Biti’s 2013 National Budget projected five percent Gross Domestic Product (GDP) growth.
Last week, he reviewed the GDP growth  target by 1,6 percent to 3,4 percent after an industrial crisis slowed capacity utilisation further to about 40 percent, from 44,2 percent in November 2012.
Cumulatively, the write-down had knocked industrial output by about 17,2 percentage points since November 2011, when capacity utilisation was estimated at 57 percent.
This deep recession is what the new administration would be confronted with.
But there are already fears that ZANU-PF’s radical approach to business could lead the country into a prolonged crisis.
Economic analysts urged the new ZANU-PF government to embrace several growth stimulating measures to tackle the economy.
Some critics even suggested that the party  might even need to embrace proposals outlined by the Movement for Democratic Change (MDC-T) led by Morgan Tsvangirai in its election manifesto.
They said ZANU-PF’s manifesto, which promised to create 1,3 million jobs in five years and unlock close to US$2 trillion in new wealth through the controversial empowerment policies, would not match the scale required to rebuild the economy.
The indigenisation law requires foreign-owned firms to sell at least 51 percent shareholding to locals.
The MDC-T had promised to deliver one million jobs in five years but had put in place several measures to drive international capital and improve Zimbabwe’s international relations.
“Their (ZANU-PF) manifesto cannot carry this country forward,” said Takunda Mugaga, head of research at Econometer Global Capital.
“They have to consider the MDC-T’s JUICE. We need to revise the Empowerment Act. We cannot afford to go it alone.”
He added: “President Mugabe should be   somehow inclusive in his approach to the economy. He must trim his Cabinet. We need serious faces in Cabinet, which are not politically minded.”
In last week’s review of the fiscal policy, Biti said the slowdown would be felt across all sectors.
What should worry the next government, however, was that the mining industry, the driving force behind any semblance of recovery registered between 2009 and 2011, was now expected to slide by a massive a 12 percentage points to 5,4 percent, from 17,1 percent.
Agriculture, hunting and fishing, originally projected to grow by 6,4 percent, was revised to 5,4 percent, while manufacturing was expected to remain at 1,5 percent growth.
The 1,5 percent, could still be too ambitious.
Biti said the power and water sectors would now grow by 0,3 percent this year, from the 2,2 percent projected in November last year.
He said the construction sector, the main driver of growth in any economy, has had its growth targets reviewed by 2,2 percentage points down to 3,2 percent, from 5,4 percent.
Given the spate of company closures that characterised the economy before the polls, which turned into a full-blown industrial crisis, output could have declined even further.
A number of influential listed and private corporations, including the drug maker, CAPS Holdings, were badly hit.
CAPS had its head office auctioned for US$1,5 million three weeks ago after battling to settle US$4 million in debts.
Bookshops chain, Kingstones Limited’s assets were sold to recover debts.
The Zimbabwe Stock Exchange has de-listed several manufacturing firms this year alone.
These included Apex Corporation Limited, Gulliver Consolidated Limited, Steelnet Limited and Cairns Holdings Limited.
Cambria, Chemco, Interfin Holdings and Trust Holdings Limited have been suspended, while Steelnet went into liquidation after facing working capital problems.
Several other manufacturing firms are in a precarious state, and many of them, especially in Bulawayo and Mutare, are tottering on the brink of collapse.
Captains of industry remain worried.
“Most big companies have closed because of the liquidity crunch,” said Zimbabwe National Chamber of Commerce president, Hlanganiso Matangaidze.
“We cannot work,” he told The Financial Gazette.
“As soon as elections are over, we are going to engage government.” The Financial Gazette

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