IN a 20-page analysis that tried to locate the driving force behind Zimbabwe’s protracted economic crisis, researchers at Morgan&Co this week expressed displeasure at the dire implications of government policy flip flops.
But it quickly linked the mayhem to a 22-year-long global embargo linked to gross human rights abuses, land redistribution programme and disregard for property rights.
The embargo is itself a contested issue — many say it has only been containing the transgressions of a few targeted members of the ruling elite.
But Zimbabwe’s corruption accused rulers say their efforts to build a successful economy have been frustrated by the international sanctions regime, said by Zanu PF to have cost Zimbabwe US$42 billion between 2000 and 2013.
In a report titled Economics & Equity Strategy Note, the Zimbabwe Syndrome, which gives insights into why the country continues to swim in crisis, Morgan&Co hints at how sanctions have hit capital markets, triggering an eruption of haste measures.
It says in the past year, other debt-strapped developing countries have also been “squeezed”, and the “pain is intense”.
“According to the International Monetary Fund, debt loads in poorer countries around the world stand at the highest levels in decades,” Morgan&Co said.
“For example, Zimbabwe currently has unsustainable debt amounting to US$13,15 billion. Squeezed by high costs of food and energy, a slowing global economy and a sharp increase in interest rates around the world, developing countries are entering an era of intense economic pain. This includes limited fiscal space, weak growth and increased poverty levels. Worse still, for a country like Zimbabwe that is twirling under economic sanctions, it has had to go it alone,” the research firm added.
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“As a result, government has been dipping its fingers everywhere through policy shifts that have largely made forecasting and planning mammoth endeavours for business leaders and investors in local capital markets. Our concern is that the policy shifts have become somewhat of a syndrome on the part of policymakers. Instability has become a common feature or condition in the economic structure of Zimbabwe.
“One fundamental observation is that stock prices have declined significantly in real terms and the market is looking cheap. The recent sell off on the Zimbabwe Stock Exchange has resulted in apparent undervaluation of traditional bluechips like Delta, Econet, Innscor, Hippo and Meikles, while there has been no fundamental changes to business models. Additionally, the financial services sector remains undervalued,” Morgan&Co noted.
Investors have been caught up in the cross-fire, especially as annual inflation rages, and the domestic currency falters.
The report revealed graphic details of the “headwinds” that continue to “hamper” a “much solid recovery” for Zimbabwe.
But most of the drawbacks confronting the economy are internal, it showed.
Morgan&Co still tipped Zimbabwe for a recovery in 2022.
But it said the pace of this rebound would hinge on how the country will manage problems that may pop up as upcoming general elections draw closer.
These include recurrent power shortages and the “colossal” debt.
It said these factors would frustrate ongoing efforts to cool off protracted jitters.
In July, authorities acknowledged how shocks roaming the economic landscape had limited growth when Finance and Economic Development minister Mthuli Ncube cut gross domestic product growth targets to 4,6%, a significant reduction from 5,5% projected in December 2021.
Ncube cited depressed activity as rates rioted, while inflation raged.
Authorities project the annual inflation rate to plummet from October, after hitting 286% last month — one of the most aggressive such rises in recent months.
Morgan&Co called on the government to keep an eagle’s eye on the inflation rate, a scourge that is not new to Zimbabwe after forcing the abandonment of the domestic unit in 2008.
“A key concern has to do with emerging inflationary pressures in the domestic economy and a deteriorating Zimbabwe dollar,” the advisory firm said.
“This has triggered the Zimbabwe government to institute measures that have impacted local capital markets. Further, the introduction of gold coins to the universe of investable assets has implications on traditional investment markets in Zimbabwe (such as the stock market). Overall, while we expect the country to register modest growth in 2022, extreme economic risks still exist and continue to hamper the potential for a solid economic recovery,” the report further noted.