The Sunday Mail
Martin Kadzere and Kumbirai Tarusenga
ECONOMIC analysts see little prospects of improvement in industrial activity next year on the back of shrinking demand due to diminishing disposable incomes and challenges related to key economic enablers such as water, electricity and fuel.
Some analysts told this publication that while the 2020 National Budget attempted to place emphasis on productivity, there had not been specific interventions announced by Finance and Economic Development Minister Professor Mthuli Ncube to address some of the bottlenecks related to the key enablers.
Zimbabwe is facing its worst electricity shortage since 2015, with consumers going for prolonged periods without power. Power rationing is largely resulting from low production at the country’s main electricity plants in Kariba and Hwange.
Kariba Hydroelectric Power Station, the country’s largest power plant with a capacity of 1 050 megawatts, is producing at below 10 percent because of low water levels in Lake Kariba, while the ageing Hwange thermal plant is constantly hit by breakdowns. Foreign currency shortages are also constraining the country’s ability to import power.
Consumers are already grappling with soaring inflation that is eroding their earnings and this will negatively impact on aggregate demand. Monthly inflation for October rose to a four-month high of 38,75 percent from 17,7 percent the previous month, driven by increases in food and alcoholic beverage prices.
The publication of annual inflation data is suspended until February next year.
The economy is also faced with serious water cuts, foreign currency and fuel shortages.
While Prof Ncube introduced incentives aimed at supporting industry, these would have little impact in the absence of adequate key enablers to support growth.
“Gearing for higher productivity is certainly a contradiction (reality),” said Mr Anthony Mandiwanza, chief executive of Dairibord. “The minister was silent on many issues affecting the industry and this relates to power, water, fuel and foreign currency shortages. In the absence of these, how do you expect to stimulate production?
“The other challenge that we will certainly face is declining demand of goods as income will continue to be eroded due to inflation. It will be difficult for businesses to not rescue workers (through salary adjustments) without increasing prices.
“We expect a more challenging year; confidence is quite low,” Mr Mandiwanza added.
Zimbabwe’s manufacturing industry remains one of the key economic sectors and used to account for about 12 percent of the country’s Gross Domestic Product (GDP).
It also used to process about 65 percent of farm output and was a significant employer.
Many companies are still using outdated equipment due to funding constraints.
This year, the Government projects manufacturing industry to register a 0,1 percent growth rate, but the industry says it is a bit on the low side. What the limited growth is also signalling is that the country will continue to depend on imports.
This militates against the efforts to boost foreign currency inflows and create jobs.
“The first quarter of the year 2020 is not bright as we carry over problems as a country,” economist Dr Gift Mugano said. “Already, we are facing a challenge of foreign currency and going into the first quarter of 2020 will have much more shortages.
“Inflation is also going to pull us through to 2020 as we still have prices of basic commodities indexed to foreign currency. In the Budget, the minister expects a 0,1 percent industrial growth indicating that there is no much growth expected from the industry. Rather, the 3 percent growth is expected from the agricultural sector.”
Economist Mr Moses Chundu weighed in saying: “Workers are not satisfied with disposable incomes, which might have a negative effect on the industry because there is no motivation enough for the workers to work. So we don’t see light for the year 2020.”
Critics say the biggest incentive that authorities should offer productive sectors is a stable operating environment. Incentives, be it in tax credits, will be a waste of resources and effort as long as the operating environment is plagued by very high inflation and an unstable exchange rate as well as the absence on key enablers.