THE World Bank has warned that anxiety over Zimbabwe’s forthcoming elections and lack of clarity on the indigenisation and empowerment policy made the economic outlook in the coming year gloomy despite enormous potential by the mining sector to drive the economy.
Report by Bernard Mpofu Chief Business Reporter
According to the latest research note released by the multilateral lender at the High Level Technical Dialogue on Zimbabwe Growth Recovery held yesterday, economic growth is expected to slow down in the coming years due to political uncertainty.
Zimbabwe is headed for watershed elections expected to mark an end to the inclusive government formed in 2009.
“Baseline projections forecast that the economy will grow at 6% in 2013, moderating to 5% in 2014 and 2015 as level of investment remains below potential,” reads the report in part.
“The outlook remains fragile and clouded by possible compression of exports due to the unfolding global economic slowdown, the risk of disorderly unwinding of vulnerabilities in the banking sector, downside risk in the agricultural sector, potential destabilising effects of indigenisation programme on the economy, external vulnerability and uncertainty from the new electoral cycle.”
The World Bank noted Zimbabwe had not yet entered a sustained path to recovery adding that growth in the mining sector was being inhibited by limited exploration. The government figures show that foreign direct investment, which at peak accounted for an average of 20% of the gross domestic product (GDP), now accounts for 3% of GDP.
“Sustainable growth will require a further expansion of imports leaving room for expanding inflows of capital goods.
“This will depend on the capacity to further expand exports, beyond the rebound driven by higher international commodities prices, mainly in mining and agriculture,” the World Bank report reads.
The Breton Woods institution also advised the government to encourage foreign direct investment and exploration in the mining sector saying the capital-intensive industry had the capacity to boost other key economic sectors. The mining sector currently accounts for more than 50% of the country’s exports.
The World Bank attributed an economic rebound that started in 2009 after a decade-long meltdown to the mining sector that currently accounts for the bulk of export earnings.
“However, given the lack of exploration that is likely to take place with the current fees and uncertainty with respect to ownership, it does not seem likely that there would be a major increase in activity in the long run,” the World Bank noted.
“The two biggest impediments to new investment and exploration are indigenous ownership requirements and the very large application and registration fees for prospecting and exploration.”
Under the country’s equity laws, foreign-owned companies operating in Zimbabwe are required to dispose of 51% shareholding to locals.