STRATEGIC advisory firm Mark & Associates Consulting Group (M&A) says businesses should prepare to enter “uncharted economic waters” in 2024 as the year will be marked by policy shifts and uncertainty. This, according to the firm, will create both winners and losers.
“Already, the business community in Zimbabwe is seized with uncertainties around regulations, taxes and revenue measures introduced in the 2024 national budget,” the firm said in its latest research note titled: Zimbabwe 2024 Outlook & Strategy: Barbarians at the Gate.
“While national Treasury has moved in to ‘fine-tune’ some of the measures (exemption of basic goods from value-added tax and reduction of sugar tax), the policy environment remains ambiguous.”
Finance minister Mthuli Ncube was forced to review his budget, which had introduced tough demands to companies, the informal sector and citizens, including a wealth tax and sugar levy. He was also pushed in a corner over the damage his 2024 budget would wrought on the Zimbabwean economy, with the Confederation of Zimbabwe Industries estimating that its measures could trigger the collapse of companies.
In its report, M&A said it was a fact that most African governments were squeezed between poor citizens and big financial holes in public coffers.
“It is also a reality that depending on aid or hand-outs alone will not do the trick and politicians across Africa are asking more of their tax collectors,” it said.
“It appears that taxing citizens is the only feasible solution within their reach. We should expect a lot of altering of both fiscal and monetary policies in 2024 which would undoubtedly usher an unstable business environment. High levels of policy uncertainty will also lower investment, employment and economic output.”
The researchers noted that structural weakness, policy uncertainty, corruption and international isolation have inhibited the Zimbabwean economy from performing adequately since the early 2000s, resulting in episodes of economic recessions.
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While the 2009 to 2012 period witnessed a recovery in the economy, characterised by a revival in foreign investment and a multi-currency regime, political fragility has remained the major culprit. In 2023, government projected the Zimbabwean economy would grow by 5,5% on account of better-than-expected output in agriculture, in particular, tobacco, wheat and cotton.
However, economic growth is expected to slow down to 3,5% in 2024, mainly owing to the anticipated impact of the El Nino phenomenon and declining mineral commodity prices attributable to the global economic slowdown. In 2024, the agricultural sector is projected to contract by -4,9% due to the anticipated normal to below-normal rainfall pattern.
“Based on our estimates, we expect economic growth to be sluggish at 2% in 2024. The El Nino phenomenon, which is associated with extreme weather patterns, is expected to undermine agricultural production, especially for maize,” M&A said.
“Low commodity prices also present down-side risks for mining sector output.”
The firm further noted significant productivity headwinds associated with capital constraints, policy shifts and electricity shortages. Zimbabwe has been experiencing severe electricity load shedding attributable to technical challenges at thermal power generation plants coupled with falling dam levels and power import constraints.
