Zimbabwe’s tale of regression

Zimbabwe has missed just about every major economic target so far this year, with most indicators pointing to an economy headed for recession, a local investment advisory firm has said.

Finance Minister Patrick Chinamasa set an ambitious growth target of 2.7 percent – later adjusted to 1.5 percent — but Invictus Securities say the prevailing conditions point to weaker growth.

“In terms of revenue collections, we forecast the economy to register a modest 0.6 percent GDP growth, down from the official figure of 1.5 percent, underpinned by poor revenue collections, drought, low mineral prices and continued decline in productivity as political protests escalate,” said Invictus.

Revenue collection in the first half of the year at $1.65 billion was 6 percent below target as economic activity slows down, businesses collapse and more people find themselves out of work.

The first half’s revenue collection was 9.31 percent lower than last year’s figure. This underperformance has resulted in government failing to pay its workforce estimated at 500 000 workers on time since the country runs on a cash budget largely financed by taxes.

“A decline in revenue collection shows the shrinking of the revenue base as companies close down and people lose employment,” said Invictus.

Citing data from the Master of Higher Court, it said 949 employees were retrenched in the first quarter of 2016, down from 1 011 retrenched over same period in 2015.

“The highest number of reported retrenchments were witnessed in Q4 2015 when above 2 300 retrenches were registered. A total of 6 companies were placed under judicial management, while 13 were liquidated during the first quarter of 2016, compared to 11 and 17 respectively, during the same period in 2015.”

Agriculture is seen contracting by 9.9 percent in the face of an El Nino induced drought and weak commodity prices. Tobacco, at 23 percent is Zimbabwe’s second biggest export and is likely to beat last year sales of 198 million kilogrammes.

Gold prices have risen 25 percent this year and bullion has become the largest export with 24 percent of total export proceeds. Zimbabwe sold 10.4 tonnes by end of June, and expects total output to reach 24 tonnes by end of year as output slowly inches towards a peak of 27 tonnes registered in 1999.

But overall mining production is seen lower compared to last year.

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