HomeNewsWe are being too cautious about recovery — Tetrad

We are being too cautious about recovery — Tetrad


Tetrad Holdings, a niche private investor with diverse financial interests in Zimbabwe, says Zimbabwe’s economy “is pumping again” and played up the possibility of a growth upgrade this year.

Ranga Makwata, a portfolio manager for Tetrad’s fund management, said the mid-term fiscal review and financial reports by trading companies confirmed the recovery is stronger than officially projected.

“In recent weeks we have read reports from the International Monetary Fund (IMF) and heard the mid-term review from Finance minister Tendai Biti,” Makwata said.

“In recent months we have also heard from companies operating on the ground in terms of their current sales and future intentions.

We therefore find it hard to understand why both the IMF and government are being as cautious as they are.”

“That said, we are pleased that they are not being overly optimistic as past governments have tended to do. Nonetheless their views give a rather sobering view of the economy rather than an upbeat and exciting outlook for a country barely in its second year of reform that we would rather take.”

The IMF believes that Zimbabwe’s nominal gross domestic product (GDP) would only grow marginally to about $5,5 billion from around $5,1 billion last year. In 2008, nominal GDP was about $3,2 billion.

Although nominal GDP is still about half its peak in 1997, the movement since the pre-multiple currency period shows a big jump.

The IMF believes the rate of growth in real GDP will slow to around 2,2% this year and fall flat to 0% next year on concern that Zimbabwe’s exports were falling far short of imports and that financial and fiscal vulnerabilities were aggravating.

But Tetrad thinks this view is too pessimistic and ignores the informal sector, which currently accounts for over 60% of Zimbabwe’s overall economic activity.

The company suggests the value of economic activity in total is about $8 billion to $10 billion or more because of its high level of informality.

“Zimbabwe’s $5 billion economy compares with
$14 billion for Zambia, a country with a similar-sized population,” Makwata said.

“In the past, and before the ‘lost decade’, Zimbabwe’s economy was always around 50% larger than Zambia’s as our agriculture, tourism and manufacturing sectors were always much larger whilst Zambia’s copper mining industry was still recovering from years of neglect.

“Indeed, had Zimbabwe continued on its growth path that it began from the mid 1990s, its economy today could well be a $25 to $30 billion economy. But it didn’t and it’s not.”

Makwata uses Zimbabwe’s projected nominal GDP of $5,5 billion and GDP per capita of $450 to illustrate that the country’s recovery so far is no mean achievement.

“According to the IMF and government of Zimbabwe’s GNP per capita (ie economy per head) is US$450 which compares with Zambia at US$1 200 per head. The spending patterns in both countries alluded to above would suggest the opposite.”

Last year Zimbabwe’s GDP per capita was $245.

“If we look at Zimbabwe’s major exports being generated by the mining, tobacco and cotton sectors in 2010, we also see an upbeat picture.

Gold production is estimated by the Chamber of Mines to be around 7,5 tonnes in 2010 compared with 5 tonnes in 2009 and 3,5 tonnes in 2008.”

“That’s a 50% increase over the year when gold prices have reached new highs. The value of those exports should be roughly US$250m.”

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