Economy heading for all-time low

Zimbabwe’s ailing economy is expected to hit its lowest levels since the end of the global recession and is unlikely to improve in the medium- to long-term, bar a major political shift to investor friendly policies. This is the grim outlook for the economy according to senior economist at NKC Independent Economists, Christie Viljoen, who told FTW that while tobacco farming and mineral production sectors were “holding up well”, secondary and tertiary sectors were under pressure from weak consumer, business and investment confidence. NKC is a political and research unit based in the Western Cape that analyses the political and macroeconomic environment of 30 African countries. Viljoen said economic growth had declined from an average of 9% per annum during 2011-2013 to 3.1% last year. “The country will not improve on the 2014 performance this year in the wake of the political developments seen in December. Weak government finances, low consumer confidence, and the country’s healthy import appetite will weigh down local economic activity,” he said. Viljoen said the economy was not expected to grow by more than 3% during 2015, with much of this coming from farming and mining. “Consumer price def lation – a drop in shelf prices – will continue in at least the early part of the year, while domestic manufacturing capacity utilisation is likely to decline further to below 30%,” Viljoen said. Three quarters of goods sold in Zimbabwe are imported, half of these from South Africa, he added. Viljoen said almost every sector had been impacted by the government’s recent increases in import duties and surcharges and the next step was to introduce more toll roads. However, costlier imports would not stimulate local production, he said, as many products remained cheaper to source from South Africa and local factories were constrained by electricity and skilled labour shortages and a lack of capital investment. Viljoen said the country’s major challenge was the political climate. “Any hopes for a more moderate economic policy regime going forward were lost when the ruling party dismissed Vice President Joice Mujuru. The selection of Emmerson Mnangagwa as heir-apparent to President Robert Mugabe brings a fresh round of uncertainty over key issues such as relations with the west, Zimbabwe’s indigenisation policy, and the prospects of external debt relief,” he said. Viljoen said the ruling Zanu-PF, under the leadership of a faction that was determined to continue policies of the past in an “irrational and unpredictable” style of leadership, would end any recovery prospects and prevent significant capital inflows due to the high levels of political risk.