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Why Zim needs to diversify economy

BY TATIRA ZWINOIRA

The International Monetary Fund (IMF) has lowered its sub-Saharan Africa growth projectiosn to 3.2% this year and 3.6% in 2020 from its April figures due to trade and growing domestic policy uncertainties.

These figures were from its April 2019 World Economic Outlook (WEO) report where the Bretton Woods institution had projected sub-Saharan Africa’s economic growth to be 3.5% and 3.7% for 2019 and 2020, respectively.

The reasons behind the drop in figures were weather shocks and uncertainty in the commodities markets.

Yet, despite this, Finance minister Mthuli Ncube in the 2020 budget said key growth restoration drivers would be agriculture and mining where he is expecting a 5% and 4.7% growth, respectively.

As such, government needs to be reminded why it may have to relook at its plan of pulling Zimbabwe out of recession and register its envisioned 3% recovery growth.

The IMF projected that Zimbabwe’s economy would contract by 7.1% by yearend before rebounding by 2.7% next year.

Ncube has used agriculture as a key growth driver as the sector plays a key role in Zimbabwe, contributing 11% to the total gross domestic product (GDP) and is the main source of livelihoods for around 67% of the country’s population.

According to the Agriculture Survey 2019, whose results were released early this year, 70% of Zimbabwe’s population is directly dependent on agriculture with supplies from this sector contributing the bulk of raw materials to manufacturing.

But, due to the rising temperatures, agriculture has become greatly hampered as the rise of warmer conditions has translated into lower yields in recent years.

For example, the United Nations Environment Programme (UNEP), Emissions Gap Report 2019 released last Tuesday says by the end of the century global temperatures are expected to be 3.2 degrees Celsius warmer, even if climate targets are met.

And, if this revelation is taken alongside a book by the National Research Council, titled ‘Climate Stabilisation Targets: Emissions, Concentrations, and Impacts over Decades to Millennia’, 2011, the world will face severe consequences from these temperatures.

On southern Africa, the book found that these warming temperatures would translate into 5-10% less rainfall per degree resulting in more dry spells in the region.

Already, there has been a large increase in the frequency of drought conditions compared to the 14-year average with the 2018/19 season being one of the worst in over a decade.

In Zimbabwe, drought has left 60% of the 14 million population food insecure.

As a result of warming temperatures, both crop and livestock farming have seen capacity reduced by half.

Another challenge facing agriculture is poor funding, mainly as a result of most farm owners lacking title deeds and as such access to bank loans.

In Zimbabwe, all farming land is owned by the State, which issues farmers with 99-year leases.

However, , banks have refused to recognise the instruments as security, mainly because they are not tradable.

While government has promised to address the land ownership question, it is still yet to do so despite implementing the land reform programme in 2000.

With all these reasons, agriculture can no longer be a cornerstone of this once vibrant agricultural producing economy.

Ncube is expecting mining the sector to rebound by 4.7% next year.

However, according to American think tank, the Center for Strategic and International Studies, Sub-Saharan African countries are being impacted by the global trade wars.

This is due to increased US tariffs on China, which has precipitated drops in commodity prices.

These drops could significantly reduce returns from Zimbabwe’s minerals such as gold, diamonds, and platinum.

The findings were bolstered by African Development Bank experts, who warned that the trade tensions could cause a 2.5% reduction in the GDP in resource-intensive African countries.

The reason why commodity prices drop in periods of trade uncertainty is due to investors moving into financial markets, which are largely seen as safer havens for their investment.

Already, the IMF has predicted the oil dependent nations of Angola and Nigeria to see economic declines while the more mineral reliant South Africa is also expected to see subdued growth.

As such, if bigger and more commodity dependent nations are expected to take a beating to their economies, what more of Zimbabwe?

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