THE new government was appointed in September and has a daunting task to turn around the fortunes of this country.
Growth projections for the year have been revised to 3,4%. Finance minister Patrick Chinamasa told NewsDay that the country requires real money, not small money, to grow. The issue of liquidity has been a major impediment in this economy as it is the fuel required for the economy to function effectively.
NewsDay Business Reporter Victoria Mtomba (ND) spoke to renowned economist Daniel Ndlela (DN) on the performance of the economy post the July 31 elections.
ND: How has been the performance of the manufacturing sector and the economy as a whole since the coming in of the new government in September to date?
DN: It is always difficult to look for change, transformation or performance of a sector like the manufacturing sector and the economy as whole in a short space of time such as one quarter or anything less than six months.
One thing for sure is that the economy has been on a slow mode since the beginning of the year and the mode accelerated from the end of the first half of the year in anticipation of elections.
Since the coming-in of the new government in August to date, the situation has obviously not shown any signs of improvement. Reports have continued to come about companies being placed under judicial management while others are going into liquidation as seen in the headlines. The dire state of the manufacturing sector that was made apparent in the Confederation of Zimbabwe Industries report with capacity utilisation of 39,6% in 2013 down from 44% in 2012 could actually deepen further when estimates for the second half of the year are made.
ND: How do you rate the performance of the economy in the three-month period that the new government has been in power?
DN: The economy in the four months that the new government has been in power has been on a virtual standstill, this notwithstanding the new pronouncements that are still to see their rollout or implementation timelines, such as contained in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset).
ND: Do you see Zimbabwe’s economy recovering any time soon?
DN: There was always no reason to expect a quick turnaround in the fortunes of Zimbabwe’s manufacturing sector for two main reasons. First, the sector has over a decade undergone a structural regression in which production deteriorated because of decay in machinery, equipment and production systems.
What the manufacturing firms are facing is an overriding economic distress resulting from production processes that have become obsolete. Thus, making the call for short-term solutions such as funding for raw materials, intermediate goods, spares and working capital is itself a redundant approach.
Many of the firms that have closed down or are teetering on the brink of shutting down need a structural change in their business model, for instance, new equipment and production methods, not just tinkering on changes in inputs and market outlets.
Second, at the tail end of certain sub-sector value chains, strong informalisation of the economy has destroyed the erstwhile market penetration of the local manufacturing firms.
ND: What is your comment on the delays in the announcement of the National Budget? Will that create uncertainty in the economy?
DN: The hope is that the budget will be read this side of the year. The whole budget cycle was unduly delayed following the election process. Obviously lack of a budget statement creates uncertainty in the economy, as policy direction remains in limbo.
ND: What is the outlook of this economy as a whole and what needs to be done to address some of the impediments that we are facing as a country?
DN: Outlook is pretty dicy for the year end. The new government, however, still has the opportunity to pursue a credible economic policy consistency aimed at attracting and retaining the confidence of business and foreign direct investment.