Tough first half predicted


Things are likely to be tough during the first half of this year. Inflation is likely to continue to rise while manufacturing is not likely to pick up significantly because of the shortage of fuel and foreign currency.

There is, however, one thing to cheer about. The country has been receiving good rains. If the trend continues, this could provide an impetus for growth.

Zimbabwe National Chamber of Commerce president Luxon Zembe said things were not looking good. The country had failed to provide adequate supplies of fuel during the festive season. This was an indication that things could get worse. Moreover, the price of oil on the world market was not yet stable.

Zembe said inflation was likely to continue to rise and could exceed 600 percent. Labour economist Godfrey Kanyenze said it could even reach 700 percent.

“Inflation was supposed to start declining from October but it is still going up. The government has not yet addressed the fundamentals that push inflation so things could even get worse,” Kanyenze said.

Both Kanyenze and Zembe, however, said inflation, which has been declared by central bank governor Gideon Gono as the country’s enemy number one, could start falling in the second half if the country had a good harvest.

Zembe said production in industry was likely to be slowed down by shortages of raw materials due to the shortage of foreign currency. Industry had no stocks when it shut down for the festive period. So there was likely to be a shortage of basic commodities and this could push up prices.

The Consumer Council of Zimbabwe said last week the consumer basket for a family of six had shot up to $16.6 million.

The shortage of forex was also likely to see the interbank rate rise to $100 000 to the greenback.

Bulawayo-based economist Oscar Chiwira said things were likely to improve if the country had good rains and so far things looked promising. He said that though good rains did not necessarily translate into a good harvest, there was a 50 percent chance that the country would have a good harvest if the rains continued to persist.

A good harvest would result in a reduction in inflation as people would have enough food. The food basket had the highest weight among the contributors to inflation.

If the country had a good harvest it could divert the foreign currency that it was using to import food to the manufacturing sector. An improvement in agriculture would therefore boost manufacturing and reduce unemployment.

Once the country grappled with the twin evils of inflation and unemployment, it would be on its way to recovery, Chiwira said.

Zembe said though the country had received good rains so far, the situation on the ground was not very encouraging. The country was not likely to have a bumper harvest because of the shortage of inputs and draught power.

“People are still running around trying to plant. Maybe our salvation will be in the winter crop, but this will depend on whether we plan properly,” he said.

Though agriculture was the backbone of the economy, the government was not giving farmers the right incentives. Zembe said the government had dithered on reintroducing pre-planting producer prices which normally provide incentives to farmers.

“Pre-planting prices are a production tool to influence farmers’ decisions. But the government has been dithering on this. So farmers have tended to shift to uncontrolled commodities such as horticulture,” Zembe said.

President Robert Mugabe admitted at the ZANU-PF annual conference last month that there were serious shortcomings in the planning and implementation of agricultural programmes.

He said his cabinet would hold an urgent ad hoc meeting to deal with problems of delays in the distribution of farming inputs in two days. It is not clear whether that meeting was ever held as President Mugabe left for the Far East soon after the conference and is currently on leave.


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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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