Kudzanai Gerede: Business Correspondent
HAVING witnessed and endured mixed fortunes of the economy last year, analysts are optimistic that 2017 will usher in a new dispensation that will result in the recovery of the economy.They said the country will now see the results of several economic reforms undertaken by Government in its quest to resuscitate the productive sectors.
Analysts say the various strides taken to ease the business operating environment through the ease of business reforms, the finalisation of the Special Economic Zones bill and passing into law and revision of the indigenisation law by the President are likely to catapult investment interest.
Analysts bemoan the paltry Foreign Direct Investment (FDI) flows in the local economy of around US$ 550 million recorded last year as hindering economic recovery efforts but applauded Government for spearheading policy reforms last year that are set to improve the country’s business perception index performance critical in luring investment.
Finance and Economic Development Minister Patrick Chinamasa envisioned that the economy will grow by 1,7 percent when he presented the National Budget last year.
Economic expert Mr Pepukai Chivore told Business Post that the current growth projections are not likely to be missed this time around as the country’s primary sectors of agriculture and mining look set for major gains thanks to the good rains and improving commodity prices on the international market.
Already positives have been noted in the agriculture sector since the introduction of command agriculture last year, with large tracts of land that had become accustomed to idleness being utilised and the crops in good state.
“We are likely to see real growth this time around with agriculture set to record substantial gains thanks to prudent government policies in agriculture such as command agriculture which has been complimented by the goods rains currently witnessed across the country.
‘‘This sector was a major setback for the economy last year,” he said and added:
“Mining output particularly in the gold sub-sector is on a commendable rebound and the international commodity prices are likely to recover albeit slightly but this will at least ensure some stability in the extractive sector market.”
Average capacity utilisation for the mining sector in 2016 rose from 60 percent to 64 percent. Gold production increasing from 20.000 tonnes to 22.000 tonnes as government scaled support to small scale miners.
The expected growth in agriculture has also renewed optimism in other strategic sectors like manufacturing which draws over 60 percent of its raw materials from agriculture.
“The manufacturing sector will benefit quiet a lot from agriculture growth with timber, tea and leather products vital to the existence of key manufacturing entities in the country. We are likely to see the multiplier effect of the agriculture sector in our economy as downstream industries will benefit a lot from good harvest,”
“for instance, good produce for soya beans farmers is likely to prove vital for the recently completed cooking oil plant in Mutare and that goes to the leather and timber sub sectors,” added Mr Chivore.
The manufacturing sector is also expected to grow following the introduction of Statutory Instrument 64 of 2016 which was put in place to cushion local firms from cheaper external products.
In its initial six months to December last year, capacity utilisation in the manufacturing sector for the year rose to 47.4 percent from 34.3 percent previous year as local firms were already starting to gain their footing in the local market.
The positives intended from the introduction of the SI 64 are likely to be more forthcoming in 2017 as more local companies seek to take advantage of the initiative. The ministry of Industry and Commerce already stated last year that it will further widen the list of items scrapped from the Open General Import License in order to accord more sub-sectors a level playing field.
“We are still looking for more items so that we have another SI to protect our market,” Industry and Commerce deputy Minister Chiratidzo Mubuwa assured delegates at the Zimbabwe Chamber of Commerce conference late last year.
“We want to lubricate the local market so that you increase your capacity utilisation and productivity and make money. Then you will lubricate the fiscus,”
The services sector which now accounts to more than 50 percent to treasury will largely be determined by Central Bank ability to install stability in the financial services sector.
Last year services sub-sectors of retail and wholesale and insurance players endured biting effects of cash and liquidity challenges with business slowing down but the continuing dripping of the bond notes in the local economy is expected to stabilise the current cash impasse.
“The slow but cautious trickling of the bond notes into the local economy by the Central Bank should be applauded especially at a time when RTGS, plastic and mobile money transactions are improving. This should see the cash challenges ease by end of first quarter to second quarter,” said Mr Chivore.