Speaking at the Mandel Economic Outlook symposium on Monday last week, Tony Hawkins, a professor at the University of Zimbabwe’s Graduate School of Management told participants that foreign capital accounted for the bulk of investment in Zimbabwe in 2010, a situation that reflects the country’s propensity for external dependence.
“About 85% of the country’s Gross Domestic Product came from foreign trade in 2010 while 45% of domestic expenditure was on imports,” Hawkins said.
Zimbabwe imports machinery, transport equipment, chemicals, and fuels, with South Africa and China being the country’s main suppliers.
“The drivers of Zimbabwe’s economic growth are largely exogenous with no consensus within the weak, fractious, fragile coalition on what needs to be done,” he said.
Zimbabwe’s exchange rate, interest rate and money supply, which is presently unknown, are all “exogenously” determined owing to the country’s use of the multi-currency regime.
“Indeed, even when politicians do agree, the coalition (government) lacks the resources, policy instruments and policy capability at implementation level to take the initiative,” he said.
Government’s medium-term economic programme document that sustained economic growth depends on far-reaching policy changes to create a business and investment-friendly domestic economic climate.
Without the cash, we’re going nowhere
Desire Sibanda, the permanent secretary in the Ministry of Economic Planning and Investment Promotion, says contextual factors have to be taken into consideration with regard to Zimbabwe’s economic planning priorities.
“Right now what Zimbabwe needs most are lines of credit through FDI (Foreign Direct Investment) inflows.
“There is a funding development plan focusing mainly on investment led recovery,” said Sibanda, adding that there will be critical need for equity injections in existing businesses this year.
The Economic Planning and Investment Promotion ministry anticipates a growth rate of well over 9% this year buoyed by growth in the agricultural, mining, manufacturing and tourism sectors.
The Economist magazine places Zimbabwe’s economic growth rate this year at a modest 5%.
Economic commentator John Robertson said although foreign investment was initially needed, the country now needs to focus on reviving production as a matter of priority.
“The country needs to restore its credibility and recover its reputation with lenders through getting back to work and paying off debts,” he said.
Robertson was optimistic that the country would receive loans and equity capital from lenders once there were clear indicators of sound macro-economic policy consistency.
Hawkins said the remedy lies in re-building institutions, ensuring that macro-economic policy fundamentals were in place in terms of creating a suitable investment climate for doing business.