There is every reason to be optimistic

Yesterday’s news from the Zimbabwe National Statistics Agency (Zimstat) indicating the rate at which prices are increasing slowed to an annual rate of 194 percent in April from 240 percent a month earlier couldn’t have come at a better time.

It feeds into the continued build-up of good news for the economy.

The sustained slump in the inflation rate from a peak of 837,5 percent in July last year, and indications the trend is likely to continue, simply means Government has managed to tame menacing volatile prices that were making it difficult to plan, budget and invest.

This does not mean that prices are not increasing, but they are creeping up at a rate that is reasonable and manageable to allow forward planning.

We all saw how volatility can be counter-productive.

Last year, particularly during the first half of the year, some projects were suspended or deferred as cost escalations made their continued implementation unsustainable.

Workers had the ignominy of watching their incomes evaporate as prices of basic commodities and rentals galloped.

Companies grappled with valuing and pricing their goods and services as they couldn’t keep up with unpredictable market trends.

The freshly minted local currency progressively lost ground and made the market doubt whether it could be a reliable store of value and an ideal medium of exchange.

All this affected market sentiment and confidence, which is bad for business and the economy.

However, the introduction of the foreign currency auction system on June 23 last year began to turn the tide. Numbers do not lie.

It is not accidental that the auction system coincided with the progressive decline in the inflation rate, from 837,5 percent in July, 761 percent in August, 659,4 percent in September, 471,3 percent in October, 401,6 percent in November and 348,6 percent in December. And the pattern has continued this year: 362,6 percent in January, 321,6 percent in February and 240,6 percent in March.

Overall, the trend has spanned a period of ten months.

This is why Finance and Economic Development Minister Professor Mthuli Ncube sounded an optimistic note when he spoke to US-based news service Bloomberg TV last week.

“We brought the currency volatility issue under control. The currency is quite stable right now, and stability is our focus. This is what is driving inflation downwards; inflation is falling fast . . . We expect that by July this year it will just dip below 100 percent. By year-end, it will be in the teens . . .,” he said.

Already there are signs the economy is going to continue improving.

The huge harvest this year, following a successful 2020/2021 cropping season, would not only make households and the nation food-secure, but will also result in significant cost-savings.

By some estimates, the country could save more than US$200 million through import substitution.

This reduces pressure on the Zimbabwe dollar and buttresses stability.

But the huge windfall that will naturally accrue to our hard-working farmers — who are just emerging from two successive seasons of drought — would stimulate consumer demand in the economy.

It has to be remembered that Treasury has since set aside $60 billion for the Grain Marketing Board (GMB) to buy maize and other crops that would be delivered by farmers.

Suffice to say, it would be a good pay-day for producers.

Of course, there is demonstrable evidence of the positive correlation that exists between a good agricultural season and consumer spending.

For example, during the first quarter of 2017, blue-chip company Delta Beverages reported the same trend.

“We report a positive volume out-turn which is attributable to improved consumer spending arising from a better agricultural season and the bedding down of electronic payment platforms in settling transactions,” the company said in a statement then.

Increased business for industry bodes well for employment and general economic activity. Most importantly, stability would allow the massive infrastructural projects planned by Government for this year to proceed unhindered.

And this is precisely the reason why Minister Ncube maintains that Zimbabwe might achieve its target of 7,4 percent growth this year. The only impediment that might potentially affect progress is the coronavirus pandemic, which presents unpredictable and ever-changing risk.

However, on that front, we have exceeded expectations, which is quite a feat, especially for an economy that is under sanctions and has had to fight the pandemic without financial support that has been extended to other countries. By last week, more than 300 000 people had received their first dose of the vaccine, while Victoria Falls City has since reached herd immunity. The decision to now focus on key populations in key cities is well-conceived and largely expected to create a sustainable path to normalcy.

All that is needed is to double down on the vaccination programme.

The faster we vaccinate, the faster we are likely to emerge from the woods.

But there is every reason to be bullish and optimistic.

We seem to have now turned the corner.