Economic outlook

John Robertson, Robertson Economic Information Services

12 February 2018

Zimbabwe: Economic Outlook, First Quarter, 2018

Well-supported claims can now be made that that Zimbabwe is changing course and the country will soon be heading in a more promising direction. While the damage endured by the economy over many years will take some time to repair and tangible momentum in the new direction has yet to be achieved, claims can also be made that the risks of further damage have been almost eliminated and some of the barriers that previously prevented progress have been removed.

With toleration of corruption now greatly reduced and officials setting a deadline for the return of money illegally banked abroad, genuine investors are now more likely to displace opportunists who exploited Zimbabwe’s weakened defences to drain the country of hard currency. The investors who do come will be free to accept as partners only those who can pay for their shares and more supportive arrangements will encourage partnerships between experienced farmers and those with allotments of land.

Hopefully, improving prospects will boost confidence enough to reverse the direction of the capital outflows of recent years. Improving prospects of more dependable agricultural product deliveries should start to attract investment into many manufacturing businesses, but several severe impediments remain in place. Some of these could be quickly removed.

Attacking the long list of business licences, approvals and permits would be a start. For most of these, the fees collected do no more than pay the salaries of the individuals empowered to collect them. The amounts collected are therefore a hidden tax from which no benefits are derived, but they are high enough to add to local costs and to make imported goods prices more competitive.

Another group of handicaps comes under the heading of labour regulations. Between them, Labour Laws and the influences of trades unions have added to the reasons why Zimbabwe has become a high cost country that encourages the importation of many goods and services that should be produced locally. In combination with the restrictive and expensive business licence regulations, they account for much of the serious unemployment rate and all the attendant social problems. If these easily removed handicaps could be given immediate attention, the country would quickly experience the expansion of many companies and the formation of perhaps far larger numbers of new businesses.

The promises of far-reaching changes have permitted the development of a much more optimistic mood at every level of economic activity throughout the country and these promises have been welcomed largely because of the hopes of improving employment opportunities. Actual job generation numbers will therefore become the principal measure of the success of the new leadership. Job creation comes about as a direct result of investment and however much the mood has improved, it will not translate into investment decisions while unnecessary policies and practices continue to undermine every investor’s prospects of making a profit at reasonable, competitive prices.

The budget provisions are supposed to be debated in Parliament this month. We have yet to see whether all the Vote Appropriations will be passed without useful debate, as has been the case almost every year until now.

Basic issues, such as the need to shed about half of the 22 ministries and a similar proportion of government’s establishment, should be the cutting edges of the coming debates. However, claims that progress with the needed retrenchments will be impossible before employment growth starts in earnest will no doubt prevent action being taken yet again.

The budget figures were presented in two different packages, these being the Minister’s speech and the Estimates of Expenditure. Unfortunately, they disagree with each other.

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