THE ECONOMY RECOVERING FASTER
The start of the coalition government came with the promise of sea change in economic policy and of course more democracy and respect of human rights. Now two and half years later it appears the economy is now clearly on the mend and in some aspects the rate of recovery is even confounding economic experts and the responsible government officials as it is surpassing the estimates. Granted we often get our fair share of negative media attention and in light of that it is very difficult for anyone to project a very optimistic outlook for the economy notwithstanding the fact that we have not received the critical funding assistance from the institutions like the IMF and World Bank. In this article we examine the evidence that seem to suggest that the economy seems to be recovering at an explosive pace and with no real foreign direct investment coming our way the only logical explanation would be the increased capacity by businesses operating prior to the formation of this government. In fact after examining this little evidence available it would be easy to understand why business organisations and representatives are against the idea of elections a process which has far reaching consequences on their operations and thus prefer a postponement of polls to a later date. The first piece of evidence comes from the Zimbabwe revenue authority (ZIMRA) which recently announced its first quarter performance as far as revenue collection is concerned. Overall collections surpassed the target by some 11%reaching nearly US$620 million against a target of US$555million and breaking these down further provides what could be confirmation of much faster recovery, faster than predictions made by the IMF and the government. Companies’ taxes which could be used a measure of determining the rate of recovery provides the most compelling proof; against a target of US$25 million total remittances by companies amounted to $60million a positive variance of 72%. It is important to note that this increase is a reflection that many businesses have now returned to profitability a departure from the early days of the coalition government and the dollarization of the economy where results of most public companies showed losses. In turn the return to profitability can be attributed to the increased capacity utilisation and indeed the chairman’s report accompanying the Zimra results acknowledged that. Another piece of evidence obtainable from these results is the increase of individual tax collections which increased by 27%and from these two possible reasons could be proffered, firstly, employers increased salaries of employees significantly and that inevitably led to them contributing more to pay as you earn collections. Alternatively the increasing capacity utilisation meant these companies had to hire more workers meaning more people returned to formal employment. Whatever the main reason behind the increase the bottom line is that both reasons represent positive change in fortunes of the worker the biggest the victim of the economic crisis of the past decade and certainly the future looks upbeat though this optimism is repeatedly tempered by the talk of early elections. Another indicator is the rising production levels in the agricultural which had plummeted due to a number of factors which included the controversial implementation of the land reform, the hyper-inflation environments and the volatile currency which eventually collapsed. Now since the dollarization and the present government the production of tobacco for instance, has been growing particularly now as farmers get paid in American dollars and their expertise with crop has since been improving since the reforms. In 2009 tobacco output was 58 million kilograms and it increased to 123 million last year and now the recent the treasury bulletin has now projected that it will reach 200 million just 10 million shy of its record high it reached in 2001,that is an increase of over 300% in just under 3 years. Another industry that has been providing evidence of faster growth is the mining industry especially now that the world economy is finally out of recession the mineral prices have hit record highs and this time mining companies have really benefited because there are no more surrender requirements or the harsh exchange control regulations that existed during previous the government. According to Frost and Sullivan a consultancy firm, mining output is expected to grow by 47% and it bases its prediction on the better operating environment brought about by the formation of the coalition government. Many are predicting a double digit growth in mining output and again this further supports the assertion that the economy is growing much faster than most people think or believe. Lastly the company results being released by publicly owned companies again show the same trend with the blue chip companies like Delta and Econet posting quite impressive results. Delta Corporation which is the most capitalised stock or the most valued company on the stock exchange with its value surging towards a US$1 billion posted quite solid results. Its revenues grew by 45% while its assets have grown by more than 100% since the inception of this current government. Econet which on the other hand has a market capitalisation half that of Delta posted an impressive a 36% increase in revenues while assets grew by 62% and this again happened under the environment brought about by this government. The chairman’s report accompanying these results underline the importance of the present economic environment and both reports seem to convey an optimistic but cautious outlook. Now we can fairly say that what is happening with these two giants represents the general trend for the rest of the stock exchange listed companies as some of the results have shown meaning the pace of recovery is much faster. There is a strong chance that foreign direct investment which is the missing link in the country’s recovery so far will flow into the economy if political parties sought out the uncertainties surrounding elections and the indigenisation program. There is no doubt investors want to come forward but they are often put off by the constantly changing positions on these two issues hence it is imperative that a common position is adopted that will allay investor fears and help to make for an even faster economic recovery.
Terence Zimwara is an economic consultant contact him 0733406743 or tem2ra@yahoo.com temra-temra.blogspot.com
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