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Zimbabwe is capable of achieving an upper-middle-income economy by 2030, if it puts its house in order, according to Prof. Gift Mugano, Adjunct Professor of Economics at Durban University of Technology and Executive Director at Africa Economic Development Strategies.
“To achieve Vision 2030, we need economic transformation which results in a paradigm shift of exports from export of raw materials to processed and value-added goods. We also need a shared growth,” he told delegates to the Chartered Governance and Accountancy Institute in Zimbabwe annual conference in Victoria Falls last week.
He said the baseline gross national income (GNI) for an upper-middle-income economy was between US$3,956 and US$12,235. At present, the country’s GNI was US$1,350.
About 70 percent of the country’s current exports were minerals, while 22 percent were agricultural products. That meant that 92 percent of the country’s exports were at present primary products.
Zimbabwe’s imports were dominated by finished goods. He said traditional imports that could be substituted by locally produced goods included fertilisers, pharmaceuticals, steel, cereals, tissues, and paper.
He said the government’s roadmap towards Vision 2030 embraced National Development Strategy 1 (NDS1), to be implemented from 2021 to 2025, and National Development Strategy 2 (NDS2), which was to be implemented from 2026 to 2030.
There were a number of success factors that were preconditions for the successful implementation of NDS1.
Macroeconomic stability was critical for enhancing certainty and confidence in the economy by anchoring the exchange rate and inflation. Prioritised programmes and projects were to be premised on the predictability of the Budget.
Robust economic growth and the transformative thrust of moving up the value chain were premised on the availability of efficient key enablers such as energy, transport, and water.
“Effective implementation of programmes and projects is also dependent on the doing business environment. Swift implementation of ease of doing business reforms, strengthening property rights, upholding the rule of law and combating corruption are key tenets of the NDS1,” he said.
Specific key macroeconomic objectives for the NDS1 period included: achieving an average annual real gross domestic product (GDP) growth rate of at least five percent; maintaining fiscal deficits averaging not more than three percent of GDP or below; achieving and maintaining lower single-digit inflation; increasing international reserves to at least six months import cover by 2025; establishing a market-determined and competitive foreign exchange rate regime; maintaining public and publicly guaranteed external and domestic debt to GDP at below 70 percent of GDP, and maintaining a current account balance of not more than minus three percent of GDP.
Other key objectives included creating at least 760 000 formal jobs over the five-year NDS1 period; improving infrastructure development and investment in energy, water, sanitation, roads, and housing; and accelerating value addition and beneficiation in agriculture and mining.
External factors that had presented stumbling blocks to achieving these objectives included the adverse effects on the global economy of the Covid-19 pandemic, the Russia-Ukraine war and droughts in the 2019-2020 and 2021-2022 farming seasons.
Prof. Mugano said that in a conventional policy-making environment once an economic blueprint had been launched one expected economic agents and all non-state actors to be guided by it.
This had not been the case in Zimbabwe as the last four years had been characterised by numerous statutory instruments and draconian policies which were against economic progress.
He gave examples of this suspension of lending and Ecocash and of companies from the Zimbabwe Stock Exchange, the four percent tax on foreign currency transactions plus a 20 percent retention on domestic exports, as well as a 200 percent interest rate.
He said there had been confusion on the currency position with the Zimbabwe dollar being hurriedly introduced in June 2019 and a return to dollarisation in March 2020. Corruption, he said, had become a menace and become institutionalised.
Macroeconomic indicators that undermined macroeconomic stability included a runaway national budget, worsening national debt, runaway inflation, runaway exchange rates, worsening poverty levels and growth rates that were less than desired.
“The state of the economy, as it stands, is a stumbling block to the attainment of Vision 2030,” he said.
To get back on track, Prof. Mugano suggested the government consider placing industrial policies, market-oriented agricultural policies and trade policies at the centre of NDS1 and NDS2 and turn the Industrial Development Corporation into a development finance institution funded by SDR funds to finance re-industrialisation and value chains development.
He suggested expediting the establishment of a Value for Money Unit. There was a need for government to remove distortions in foreign exchange and gold markets by liberalising the exchange rates.
“The Government of Zimbabwe must place emphasis on the commodity exchange as an effective vehicle for the financing and marketing of agricultural commodities as opposed to the current arrangement where the financing and marketing of agricultural commodities are largely in the hands of the government,” he said.
“Going forward, with respect to infrastructure financing, the government must consider innovative funding models for long-term infrastructure – roads, dams, etc. – such as public‑private partnerships, diaspora bonds and use of pensions funds.
“This will reduce the burden on government whilst at the same time reducing current abuses of government funds, which is fuelling the parallel market rate,” he said.
He suggested robust policy measures to deal with the effects of the Russia/Ukraine crisis, such as ramping up local fertiliser production using SDR funds and further reduction of duty on fuel from 30% to say 20%, as well as a radical approach to dealing with corruption.