The Sunday Mail
Golden Sibanda
ALTHOUGH 2020 easily ranks as one of the most challenging for global economies and businesses due to the coronavirus, it may well pass as a productive one for some domestic sectors.
Though unfathomable, the impact of Covid-19 has been far reaching after it caused the shutdown of global economies while production and value chains were heavily disrupted or halted completely.
The world economy was forecast to contract by 4,4 percent in 2020, due to the fallout from the global pandemic and the recent spike in new infections may well retard anticipated recovery this year.
Likewise, the domestic economy has not been spared.
Finance and Economic Development Minister Professor Mthuli Ncube projected last November that domestic contraction might set in around 4,1 percent.
In the 2021 budget, Prof Ncube had forecast that the domestic economy would grow by at least three percent driven by strong performances in agriculture, mining, construction and tourism sectors.
However, the Zimbabwean authorities believe, from their own observations following the recovery noted in the last quarter of the year, that the contraction may come well below the initial projection.
Further, Prof Ncube projected in the 2021 National Budget that the domestic economy was largely expected to rebound and register growth of 7,4 percent this year.
The Treasury chief also projected that the economy would subsequently expand by at least 5 percent over the next decade.
Strong signs of economic recovery were thus recorded in 2020, in key sectors including mining, agriculture and manufacturing, despite the heavy strain of Covid-19-induced restrictions and lockdowns.
Statistics from the Ministry of Finance and Economic Development show that the country recorded its fourth consecutive trade monthly surplus in November as Prof Ncube’s measures to debase and stabilise the local currency started to bear fruit.
Reserve Bank of Zimbabwe Governor Dr John Mangudya told a recent Zimbabwe National Chamber of Commerce (ZNCC) conference that the central bank had “seen growth in this economy”, particularly towards the end of 2020.
This assertion was corroborated by Confederation of Zimbabwe Retailers president Denford Mutashu, who said an estimated 80 percent of goods in the local supermarkets were now local, signifying growth in production.
To back his assertion, the central bank chief gave glowing statistics relating to foreign currency inflows, Diaspora remittances, export earnings, banks’ nostro balances and stock of bank forex holdings.
Particularly striking was the revelation that the manufacturing sector — which perennially had been ailing and underperforming — grew by a staggering 26 percent in the 11 months to November 2020.
“Manufacturing has done wonders in 2020, a growth of 26,7 percent, that is not a small achievement,” Dr Mangudya said.
This industrial output growth represented the single largest growth of the manufacturing since the country attained independence and majority rule from former colonial masters Britain in April of 1980.
“The economy is growing significantly, especially the third quarter and fourth quarter of this year (2020), if you talk about the companies themselves. Look at the cement business; look at Lafarge, look at PPC.
“The numbers can show you, look at Delta, loot at the retail sector in this country, look at Bata, look at Nestle Zimbabwe; they are now exporting . . . We need to have more of these conversations.
“I am not saying a cosmetic statement, I have seen growth in this economy. As a bank, we think that we are going to do better than the (minus) 4,1 percent that has been projected as GDP growth in 2020.
“We think we are going to do between 2 percent and 3,5 percent negative growth, as opposed to 4,1 percent (negative growth because we have seen that the economy is not doing badly,” Dr Mangudya said.
Over the 11 months to November 2020, Dr Mangudya said the economy had generated US$5,8 billion compared to US$4,9 billion over the same period in 2019, despite the negative impact of Covid-19, which affected local business activity.
Export receipts rose by a remarkable 9 percent to reach US$3,7 billion during the period under review from US$3,3 billion a year ago.
Similarly, Diaspora remittances went up 17 percent on a year-on-year basis and this helped provide the liquidity required to support and sustain the forex auction market.
Minister Ncube is also on record as saying the economy is now on a good footing to register sustainable growth under the National Development Strategy (NDS1) going forward, following reforms under the Transitional Stabilisation Programme (TSP).
The two-year policy reform programme ticked all the boxes in terms of targets and key achievements include elimination of the twin deficits; budget and account deficits, which caused volatility.
For the first time in nearly two decades, Zimbabwe successfully reintroduced its domestic currency, which Prof Ncube says is an important element of the two critical legs of macro-economic management.
Authorities have their work cut out, as they set out to entrench prevailing economic stability anchored on declining inflation, seen below 10 percent by year end, and steady exchange rate, which in under a year has located its range circa $81,3/US$1.
Economic analyst Eddie Cross, a member of the RBZ monetary policy committee, admits Covid-19 has dealt a body blow on the economy, but is confident the green shoots of recovery have started to appear.
“The economy is recovering. The recovery is well underway and if we maintain the current stability I really think that 2021 is going to be a great year,” he said.
In 2020, the Zimbabwe Stock Exchange (ZSE) capped its biggest annual advance in a decade after a tumultuous year, with gains aided by the local dollar’s decline, high inflation levels, and undervalued stocks.
By the close of trading for the year 2020, the ZSE All Share Index was up 1 045,84 percent to 2 636,34, an all-time high. The Top 10 Index was the least performer, up 724,68 percent to 1 671, 47, a record high.
The Medium Cap Index, was the best performer, up 1 808, 02 percent to 5 491, 09, its highest level ever. In terms of value, the ZSE’s market capitalisation closed the year up 968 percent, at $317,9 billion up from $29 billion at the close in 2019.
This means the equities market, which was valued at US$1,77 billion using an official exchange rate of 16,77 at the end of 2019, closed the year up 115,5 percent to US$3,88 billion using the current official exchange rate of 81,78.
In percentage terms, the 968 percent gain is the highest for the decade. However, observers say the stock market has benefited from surges in inflation and repricing that ensued after de-dollarisation.
