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Restoring business confidence vital

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Zimbabwe’s 2013 harmonised elections have come and gone. The past year of the inclusive government has been blamed for policy contradictions and lack of coordination associated with electioneering which resulted in the subdued investor confidence and a slowdown in the economic performance.
The Mid-term Fiscal Policy Review presented on July 25, 2013 confirmed fears that the economy had slowed down significantly in the first half as evidenced by the downward revision of the projected 2013 economic growth rate from five percent to 3,4 percent. The projected growth rate is the lowest since the inception of the multi-currency regime and marks the second consecutive year economic growth has declined after peaking to 10,6 percent in 2011. Further cementing the economic challenges was the decline in the country’s ranking on the Doing Business Indicators from 170 in 2012 to 172 out of 185 countries in 2013.
The agriculture and mining sectors emerged to be the largest contributors to the expected reduced economic growth rate.
A decline in maize output and a downward revision in the projected sugar output are expected to see the agriculture sector growth rate slowing down to 5,4 percent from an earlier projection of 6,4 percent. The mining sector on the other hand is expected to grow by 5,3 percent, a significant downward revision from 17,1 percent growth that was envisaged in the 2013 National Budget due to the prevailing lower prices on the market.
Revenue from gold production in the six months to June remained the top earning mineral for the country at US$325,75 million a decrease of 27,42 percent from the comparable year ago perioddue to softer international gold prices and local systemic factors such as inadequate energy and sub-optimal cost structures. According to half year figures from the Chamber of Mines, gold production amounted to 6 727,36 kilogrammes from 8 593kg last year. Gold output is expected to reach 17 000kg at year end, from 14 742kg last year.
The manufacturing sector is the hardest hit owing to liquidity challenges, high borrowing costs, and lack of competitiveness due to antiquated machinery, high utility charges (power and water) and inflexible labour laws resulting in high employment costs against low productivity. Hard hit sub-sectors included textiles and ginning, clothing and footwear, paper printing and publishing, chemicals and petroleum products.
The manufacturing sector is expected to grow by 1,5 percent in 2013 but this may not materialise as evidence on the ground indicates that companies are closing and capacity utilisation is declining. The economy has been facing various challenges that include shortage of power, working capital, low capacity utilisation and liquidity shortage.
These challenges have crippled the economy since dollarisation and there is need to attract foreign direct investment to address capital requirements in the economy.
The new government should prioritise the resuscitation of industry, funding of the key productive sectors and create an enabling environment for the growth of the economy.
Meanwhile, the Reserve Bank of Zimbabwe governor has moved in to allay fears of an immediate return of zimdollar saying there were no immediate plans to do away with the multi-currency regime. This follows a wave of panic withdrawals that has hit the banking sector.
On Monday (05/08/13) the Zimbabwe stock market lost 11,09 percent to 205,57 points, as the results of 2013 harmonised elections sent investors panicking amid fears that the new government would reintroduce the Zimbabwean dollar and intensify the empowerment drive. The total market capitalisation tumbled to US$5,34 billion from US$5,97 billion with most investors cancelling their buy orders.
Some of the stocks that lost ground were Delta down 20 percent, Econet down 14,71 percent, Hippo Valley down 4,76 percent, Edgars down 28,57 percent, and OK Zimbabwe down 13,33 percent. The stock market slump is the clearest sign of how jittery the business community is about the indigenisation policy. Another major worry among most investors is the reintroduction of the Zimbabwe dollar. There is no clear timeframe as to when the local currency would be reintroduced.
Blue-chip counters such as Delta, Innscor, Econet and OK have become a haven for foreign investors due to their low risk profile and liquid nature. This comes as investors earned a 40 percent return on the equities market in the half-year to June 2013 despite numerous challenges, key among them an acute liquidity crisis.

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