WHILE business frets over the envisaged impact of the forthcoming elections that will bring to an end the shaky coalition government, investors now contend that the post-election period could provide a solid platform for robust growth.
Experts say already, investors have adopted a wait-and-see attitude until after elections largely expected sometime later this year.
Since the formation of the inclusive government and adoption of a multi-currency regime in 2009, Zimbabwe has enjoyed strong economic recovery.
The securities market has, however, failed to perform to expectations due to several factors relating to political uncertainty Last year, the country’s economic recovery began slowing down as talk of elections intensified.
Today NewsDay Business takes a look at two reports produced by IH Securities and Invictus outlining the various scenarios likely to play out this year.
Below are excepts of the Invictus Securities forecast contained in the 2013 Zimbabwe Equity Strategy Outlook: A watershed year for Zimbabwe research note.
We estimate real GDP growth of circa 9,5% in 2014 and 9,4% in 2015. We expect fiscal revenues to increase in 2014 as the economy recovers and there is greater transparency and accountability of diamond receipts.
We expect growth to moderate to circa 4% in 2013, although constraints on energy supply and weak competitiveness may pose a challenge to achieving these rates.
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Foreign investment is likely to be hampered by a poor business climate, uncertainties over the implementation of the indigenisation policy and political instability, while domestic investors may face difficulties accessing long-term credit.
Post elections, we expect government to adopt a vigorous programme of structural reform and strengthened macroeconomic management, which would allow the country to sustain higher rates of growth.
We remain optimistic that post 2013, we see Zimbabwe achieving more robust growth rate of circa 9,5% in 2014.
We expect to see an acceleration in government revenue collection especially from the mineral sector in 2014, combined with greater fiscal prudence, which will be critical in maintaining fiscal sustainability.
It is imperative that government seeks to rebalance expenditure mix, especially by containing the growth of the wage bill, to create the fiscal space needed for increased social spending and public investment.
Improving public financial management would help reinforce expenditure control.
While the trade deficit has deteriorated in recent years, we do believe that exports, especially in the mineral sector, will continue to expand as imports decline, thereby narrowing the trade deficit.
The financial sector remains fragile, but we believe that recent changes to the financial regulatory framework (especially the increase in capital requirements from $12,5m to $100m) will go a long way in restoring confidence in the sector.
As stated in the Mid-Term Plan, we expect government to maintain the multi-currency regime through to 2015 and believe that it will be desirable for the government to establish a currency board to review all available options.
Government debt stands at over $12,5b or 109% of GDP. We believe that addressing Zimbabwe’s large debt overhang and achieving external sustainability will require strong macroeconomic policies and a comprehensive arrears clearance framework supported by donors.
Refraining from further non-concessional borrowing and avoiding selective debt servicing is advisable as these may complicate reaching agreement with creditors on a debt resolution strategy.
We believe that government remains committed to reducing Zimbabwe’s outstanding debt through the Zimbabwe Accelerated Arrears Clearance, Debt and Development Strategy (ZAADDS), policy announced in 2012.
We are encouraged by the improvement in macro-economic conditions over the last three years and believe that Zimbabwe remains firmly on the path to sustainable economic growth.
Much has been achieved in recent years, but much more needs to be done to restore investor confidence in the country.
Improving the business climate is necessary to strengthen competitiveness, build investor confidence, and boost the growth potential.
Invictus Securities is a brokerage firm facilitating trade on the ZSE.
