Recovery – the signs that abound

Notwithstanding a disproportionately high wage bill, the new political administration has made telling interventions in road construction and rehabilitation work in cities and around the country.
In themselves, these targeted public works are beginning to stimulate economic activity through driving aggregate demand and creating employment.

There is a curious constituency in Zimbabwe that is fervently betting that the incoming Government will fail in its declared intention to grow the economy and improve people’s livelihoods.

They cheer every bad headline – however contrived – and venerate any perceived indication that the economy might be declining.

It is precisely within this context that the US decision to extend sanctions on Zimbabwe was tacitly welcomed by this quarter.

But in a bizarre way, this can be expected, especially from partisan political tribes that subordinate national interests to their own vaulting ambitions.

For some political parties, whose major drive is to assume the levers of power at all costs as opposed to advancing national interests, no price is too steep to pay and no sacrifice is too sacred for them to assume the levers of power.

Over the years, philosophers and political scientists have been interrogating the roles and efficacy of opposition politics in various political systems – from multiparty democracies to those that believe in one-party statism – and their roles in economic development.

But as doomsday critics continue to frenetically push a dystopian narrative, especially on social media, economic fundamentals and developments are telling a different story.

This is obviously the bane of shaping the world through confirmation bias – an incorrigible drive to seek, interpret and recall events to suit one’s pre-existing bias.

It is fatal.

The incoming Government has already indicated that mining and agriculture will be the plinth on which the economy will be rebuilt.

Agriculture

Exponential growth in agricultural productivity naturally has a multiplier effect on the economy through boosting industry and commerce, as the sector, in addition to employing 70 percent of the population, contributes 60 percent of raw materials to industry.

Encouragingly, this year, Zimbabwe has recorded the highest ever tobacco deliveries (250 million kilogrammes) since commercial production of the golden leaf began in 1894.

Last year, deliveries topped 186 million kg.

And this has an impact on the fiscus, as this year’s sales have risen to $733 million from $553 million a year ago, which represents an incredible leap of more than $179 million.

The same pattern is being mimicked in the cotton sub-sector, where deliveries of 122 000 tonnes that have been made to date are 20 percent more than this year’s targeted output.

Exports of cotton lint are therefore forecast to jump by a massive 240 percent to $85 million from $25 million a year ago.

Overall, it means a $60 million addition to the national purse.

Targeted subsidies to soya beans – whose producer price has since been hiked to $780 per tonnes – wheat and other crops will inevitably help increase production.

Not only does this help generate foreign currency, but in saving it as well through import substitution.

Mining

Perhaps the major highlight that portends the upward trajectory of the economy is the performance of the gold sector, where output has grown to 21 tonnes during the first seven months of the year.

This figure, with a full five months to go to the end of the year, compares favourably with the 24,8 tonnes that was realised in the whole of 2017.

Just like in the tobacco sector, it is now a foregone conclusion that output will break the 27,1-tonne record set in 1999.

Government believes that this year’s output will breach the 35-tonne mark, the highest ever recorded in the country’s history.

It is worth noting that the earnings from gold exports in the January to July period, at $850 million, is $219 million more than what had been earned in the nine-month period to September 30 last year.

It is an incredible feat by any measure.

Data from the Chamber of Mines of Zimbabwe shows the same pattern for other minerals.

First-half diamond production has jumped to 1,5 million carats from 1,08 million carats, chrome (692 000 tonnes from 595 000 tonnes); lithium (29 000 tonnes from 19 000 tonnes); and coal (1,1 million tonnes from 875 000 tonnes).

Overall, the Reserve Bank of Zimbabwe reports, exports grew by 23 percent in the first six months of the year.

Though nitpickers have been quick to point to the widening current account deficit of $1,4 billion, what they conveniently fail to tell is what we can discern from the disaggregated data, which essentially shows a gradual increase in the import of raw materials and capital goods for industry.

For example, commenting on the recent data from Zimbabwe Statistical Agency on the first-half trade statistics, Equity Axis – an online financial media services platform – indicated that in July, diesel, petrol and power imports made up 42 percent of the total imports.

But most tellingly, machinery imports recorded a huge jump to $15 million in July from $3 million in June.

Quite noticeably, there is a demonstrable shift from consumption to production.

All these strong fundamentals, particularly in key sectors of the economy, are instructive.

They show that in the past eight months, the incoming Government has sufficiently lined its ducks in a row to enable them to pick up from where they left before the July 30 elections.

Sanctions factor

However, what drives the conviction of most pessimists is the belief that the sanctions, especially those that have been refreshed by the US, will have a deleterious effect that will paralyse the incoming Government.

Such assumptions are premised on Section 4 of the Zimbabwe Democracy and Economic Recovery Act which directs US officials to veto any extension by the respective institution of any loan, credit, or guarantee to the Government of Zimbabwe, including veto any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the US or any international financial institutions such as the World Bank Group and IMF.

It seems sanctions and tariffs have become a tool of choice for the US government’s foreign policy.

Turkey, Russia and Iran are among countries that have recently been slapped with sanctions, while China and Japan have been on the receiving end of trade tariff hikes from the US.

Far from the belief that the sanctions are invoked to enforce democracy and human rights, they are actually meant to push for America’s economic interests.

Iran’s Foreign Minister Mohammed Javad Zarif couldn’t have put it any better when he noted in an interview with CNN on August 19 that the US is addicted to sanctions; adding that these measures often do not produce their intended outcome – regime change.

In addition, at a rally in West Virginia on August 21, US President Donald Trump gloated about how the $34 billion worth trade tariffs imposed on China were meant to prevent the Asian economic giant – the world’s second-biggest economy – from overtaking the US.

“When I came, we were heading in a certain direction that was going to allow China to be bigger than us in a very short period of time. . .that is not going to happen anymore,” he said.

Admittedly, sanctions can significantly encumber economic growth, but in some circumstances their effects can be overstated.

Last week, Lands, Agriculture and Rural Resettlement Minister Perrance Shiri told farmers that they can do better, even under sanctions.

He said: “Sanctions have nothing to do with our farming and productivity, so we should free ourselves in that sector.

“We can perform better even when we have sanctions. We have land, water and other resources that would enable us to enhance productivity.”

This is the zeitgeist informing the incoming Government: the belief that we are the people that we have been waiting for, and we have the inherent ability to shape our own destiny.

With the much-needed discipline, underlined by a crackdown on corruption and the judicious use of local resources, Government clearly has the ability to add fillip to local economic growth.

Notwithstanding a disproportionately high wage bill, the new political administration has made telling interventions in road construction and rehabilitation work in cities and around the country.

In themselves, these targeted public works are beginning to stimulate economic activity through driving aggregate demand and creating employment.

Furthermore, Government’s ability to attract investment commitments of more than $16 billion in a short period of time and in an environment where it is not receiving financial support from international finance institutions, shows how it is possible to leverage on equity investments and public-private partnerships to spur economic growth.

Russian example

Countries like Russia and China have evolved into upper-middle income economies over the past two to three decades despite significant headwinds and ill-will from the West.

After the 1998 Russian financial crisis, the country began its reforms in 2000, a period which coincided with the rise of Vladimir Putin.

And in the seven-year period through 2007, Russia experienced unprecedented macro-economic stability.

Between 1999 and 2008, Russia grew by an average 6,9 percent.

Even after the global financial crisis which set in the latter part of 2007, which was caused by the sub-prime mortgage crisis in the US, the Russian economy continued on a growth trajectory.

In 2013, the World Bank declared Russia a high-income country.

After controversies over Ukraine and Crimea, the US and EU slapped sanctions on the Kremlin, but the country still has managed to record better-than-expected economic growth.

Presently, it is considered the sixth-largest economy in the world by purchasing power parity.

In essence, the rise of Beijing and Moscow has dismantled the economic hegemony of the United States, which bodes well for countries such as Zimbabwe, and Harare now has an option to seek mutually beneficial partnerships with these economies.

Already the new administration’s engagement and re-engagement foreign policy stance has begun yielding dividends.

This week, Harare and Beijing will have yet another round of bilateral talks as the two countries seek to deepen their economic relations.

So, the script might not exactly pan out as the pessimists would like it and with time, they might be unpleasantly surprised by developments that are taking place all around them, which they conveniently seek to ignore.

1,033 total views, no views today